| | Yahoo to Unveil Music Store...
By KEVIN J. DELANEY
Staff Reporter of THE WALL STREET JOURNAL
May 10, 2005 4:57 p.m.
Yahoo Inc. on Wednesday plans to roll out an aggressively-priced online music service, in a bold move to undercut rivals and win consumers over to a music subscription model in which they rent songs rather than buying them outright.
The new service, dubbed Yahoo Music Unlimited, will give individuals unlimited access to over a million music tracks for $6.99 a month, or, alternatively, for $60 a year. The service, which also lets users transfer the songs to select portable MP3-format music players, is priced far below rivals' services: RealNetworks Inc., for example, charges $179 a year for its comparable subscription service.
Yahoo says the low price is designed to win users to the subscription music model, which allows consumers to play downloaded music and "streamed" tracks whenever they want -- as long as they keep paying for the service. Such songs become unplayable when consumers let their subscriptions expire. Yahoo's million-song library is competitive in size with rivals' and includes a limited number of exclusive tracks.
The Sunnyvale, Calif., Internet company's latest move could spur further expansion of the online music business, which is fast-growing but still accounts for only about 2% or less of total music sales, according to analyst estimates. With about 100 million U.S. users of its Web site each month, Yahoo brings an audience and marketing muscle to online music that few rivals can match.
"It's a hugely aggressive move, a shot in the arm to the subscription notion," says David Card, an analyst at Jupiter Research. He predicts subscription revenue will be larger than downloads within a few years, from roughly equal shares today.
The biggest online music service, Apple Computer Inc. 's iTunes, doesn't offer subscriptions, instead charging users per song or album download. Apple has previously been critical of the subscription model, but services from Yahoo, RealNetworks, Napster Inc. and others could eventually pressure it to release its own offering.
Music services generally prefer subscriptions because they can be more profitable than charging per-download, though some analysts question whether Yahoo can make money at the $60 annual subscription level. Napster, for example, charges $14.95 a month for a music subscription service that can work with a portable player and $9.95 a month without the portability option.
Yahoo Music General Manager David Goldberg says its service will be profitable with its pricing, though the company could eventually raise its fees. He declines to provide details, but says Yahoo pays music labels royalties linked to its revenue and subscriber numbers for the service.
Mr. Goldberg concedes that consumers need incentives, such as low pricing, to get them to take a closer look at the subscription model, which he says few understand today. "We look at subscriptions as a way to get people to pay a little something for digital music as opposed to ripping their own CDs or stealing music," Mr. Goldberg says.
Beyond pricing, Yahoo is offering links to its other services, such as instant messaging, and giving users extensive ability to share their music. Yahoo says its service, which includes free software similar to Apple's iTunes jukebox, will allow subscribers to see what songs friends have on their computers, and listen to their friends' tracks if the tracks are part of Yahoo's catalog. Rival services let users share music playlists, but individuals can't always hear the songs unless they own them.
Yahoo's subscription service works with select portable MP3 players that use Microsoft Inc.'s digital-music format. It currently works with about 10 devices, including Dell's DJ player and Creative Technology Ltd.'s Zen Micro. Owners of those and some other compatible devices will have to install new software on them to be able to use Yahoo's subscription service and Yahoo expects more upcoming models to have built-in compatibility. The subscription service does not work with Apple's iPod, by far the top selling digital music player.
The move underscores Yahoo's push to step up its game in music. Yahoo last year spent $160 million to acquire MusicMatch Inc., which offers song and album downloads and a nonportable subscription service. Yahoo on Wednesday will lower the price of MusicMatch's subscription service to match its new offering and says it plans to merge the two services by an unspecified date. But it hasn't entirely been smooth sailing. Yahoo had originally planned to introduce its new service by March; the company says it ran into complications making sure the service would work with a variety of MP3 players.
Mr. Goldberg says Yahoo's features build on the social aspects of listening to and discovering music through tie-ins with other Yahoo services. A future link, for example, might allow players on its online game site to listen to the same music as friends they are playing with.
Yahoo Music users will also be able to buy tracks under the traditional download model, with fees of 79 cents per song for Music Unlimited subscribers and 99 cents for nonsubscribers.
Write to Kevin J. Delaney at kevin.delaney@wsj.com |
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