Yahoo to launch new flagship music service

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Mediacode in December 2003. It later spent $160 million to purchase Musicmatch, one of the most well-established MP3 software companies, which also offers its own 99-cent download store and a monthly subscription service.

More recently, sources said Yahoo is developing its own audio search engine aimed at finding downloadable songs and music data around the Net.

"People are much more likely to react and be receptive to music recommendations that come from friends and contacts."

--Mike McGuire, analyst, GartnerG2

Despite the string of purchases, the company has been working to build its own subscription service along with wholesaler MusicNet. That is the service slated to launch this week.

Like other recent entries from Napster and RealNetworks, Yahoo's service will be based in part on Microsoft's Janus technology, which allows music from monthly subscription plans to be transferred onto some compatible MP3 players. Those songs will not work with Apple's iPod, which does not support Microsoft's technology.

Sources say the service will also be tied into the Yahoo Messenger service, allowing subscribers to chat and share playlists with each other while they're on the computer. Some elements of the service may be aimed particularly at teenagers, who avidly use online social tools to explore new music, with a pitch to parents indicating that Yahoo Music is a safe, legal way to share music, sources noted.

Other subscription services also have moved toward community tools, though without the built-in base of the Yahoo audience. Napster allows subscribers to browse each other's playlists, while RealNetworks has integrated playlist blogging tools into its Rhapsody service. Yahoo's own Musicmatch offers a "send to a friend" feature, which lets even non-subscribers listen temporarily to songs on shared playlists.

Analysts say Yahoo has the potential to make a splash in the market, particularly if it uses the instant messaging link to full advantage. It will face the same hurdle as its predecessors in explaining monthly subscriptions to customers largely familiar with iTunes' 99-cent downloads, however.

"People are much more likely to react and be receptive to music recommendations that come from friends and contacts," said GartnerG2 analyst Mike McGuire, cautioning that he had not seen the service. "But in the end it's going to come down to the offering, and whether they can create that compelling marketing message that explains why paying for access is better than paying for downloads."

Yahoo has pushed back its planned launch dates in the past, and sources cautioned that the expected Wednesday release could also be delayed at the last minute. The release is likely to be a beta, rather than a final version.