Yahoo is wading into the online music game with a
$160 million cash deal to acquire music software provider Musicmatch.
The purchase places the online media/portal company in direct competition with players such as Apple’s iTunes, Microsoft’s MSN Entertainment, Real Player from RealNetworks , Wal-Mart
and Napster in an increasingly crowded online music market.
Terry Semel, chairman and chief executive officer, said in a statement that other moves are ahead too. “This acquisition is one of several product innovations and new initiatives in which Yahoo! will invest to build our music portfolio this year and in the future.”
The San Diego-based Musicmatch, which was founded in 1997, was among the earlier entries in the digital music management software sector. Its Musicmatch Jukebox software allows consumers to play, burn, download, discover, and organize their digital music. Last fall, the company jumped into the paid download market with a download service with more than 700,000 tracks at 99 cents per song.
The pay-as-you-go store, which also sells full albums for $9.99, is similar to the success Apple has found with its iTunes music download service. In order to differentiate, however, Musicmatch touted its service as free of “complex, restrictive usage rules.”
At the time, Musicmatch said its on demand streaming music subscription service would allow users unlimited access the 700,000-song library from any computer as well as legal music sharing through its “Send to a Friend” feature.
Yahoo, citing online research firm Neilsen//NetRatings, expects the Musicmatch purchase to increase its reach from its estimated 12.9 million users of the Yahoo music section to an estimated 23 million listeners. Prior to the deal, music purchases in the Yahoo music section consisted of search results for purchasing CDs online.
David Goldberg, vice president and general manager of the portal’s music division, said the acquisition would give Yahoo a strong position in the digital music business, in both ad-supported media, such as radio and music videos, and on-demand distribution, with subscriptions and downloads.
JupiterResearch recently forecast that sales of digital music would hit $270 million in 2004, more than double from last year, with sales of online music expected to hit $1.7 billion by 2009.
