Yahoo Gets Into The Groove

Buyers beware.

That is the message Internet portal giant Yahoo is
sending the millions who are plunking down big bucks to own downloaded
music. The search firm believes it has seen the future and, for the most
part, it isn’t buy-to-own.

Instead, the San Jose-based company today launched an online music
subscription service that enables users to download songs onto portable MP3
players for $60 per year, or $6.99 monthly, undercutting current music
subscription leaders’ pricing.

In contrast, Los Angeles-based Napster and Seattle-based RealNetworks
both charge $14.95 per month, or $180 annually.

The move immediately positions Yahoo, which has an estimated 100 million
site visitors per month, as a player to challenge the services offered by
RealNetworks and Napster. Both of those market leaders charge as much as 60
percent more for their online music services. The entrance of Yahoo to the
subscription market is also seen as a challenge to Apple’s iTunes, which has pioneered today’s conventional method of
owning songs, instead of renting them.

“We are committed to being at the forefront of the rapidly growing online
music segment,” Lloyd Braun, head of the Yahoo Media Group, said in a
statement. “Yahoo Music Unlimited draws on the best of Yahoo to provide
personalization and community features unlike anything else in the

Yahoo will offer the tracks in the WMA format and Windows Media Digital
Rights Management 10 (WM DRM 10). This support will enable subscription
tracks to be transferred to any portable device that supports DRM technology.

“From premium radio to an entirely on-demand experience, Yahoo Music
Unlimited has assembled all the key elements to fulfill consumers’ needs,”
Dave Goldberg, vice president and general manager of Yahoo Music, said.

Analysts estimate the online subscription services will surpass buy-to-own
music by 2009.

RealNetworks says it currently has more than 1 million subscribers,
while Napster claims 410,000 subscribers.

The news was greeted by the street negatively, with RealNetworks’ stock
plunging nearly 22 percent in trading on the NASDAQ, while shares of Napster
dropped 32 percent. Apple also felt the heat, as its shares dropped 7 percent.

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