Yahoo takes $160 million music lesson
Yahoo said today it would buy Musicmatch, one of the oldest digital music companies around, for $160 million. We reported last February that they were in talks, but at that point Yahoo also was looking to build its own software. It seems they've settled down on a strategy at last.
Other folks in the digital music business say $160 million is a lot of money (although Musicmatch had previously been asking much more). RealNetworks bought Listen.com's streaming media subscription service for just $36 million a year and a half ago, after all. Musicmatch also has downloads and a popular jukebox ?? but Yahoo itself concedes that selling music singles is a low margin business.
Look to see the service integrated with Yahoo's broadband access services, and maybe even things like its instant messenger application. Certainly look for links to its Launch streaming music and video site. The only way this makes sense financially is if Yahoo sees Musicmatch helping other businesses as well as music (a little like Microsoft's download store is about protecting Windows, and Apple's iTunes is about selling iPods).
According to Jupiter, music subscriptions are expected to be an $890 million business by 2009. Yahoo must assume it can get a big piece of that.
RealNetworks and Napster can't be happy about this, although they knew Yahoo was ultimately going to get in the business somehow. They're the ones that are betting their companies on subscription services. Having Yahoo as a rival is going to make things a lot more difficult.
