Music subscription on Yahoo

The new service lets individuals play tunes from a catalog of more than one million songs.

Yahoo Inc on Tuesday said it was launching a new online music subscription service, aggressively competing against current providers such as Apple Computer Inc, RealNetworks Inc.'s Rhapsody and Napster Inc with lower pricing.

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Yahoo said it was offering the service, beginning May 11, in a trial version with an introductory price of $4.99 per month for an annual subscription, or $6.99 on a monthly basis.

The new service, called Yahoo Music Unlimited, lets individuals play tunes from a catalog of more than one million songs, transfer tracks to portable devices and share music with friends through Yahoo! Messenger.

Rivals Napster and Rhapsody provide subscribers unlimited streams on demand and other features for about $9.99 a month and both recently added portability, charging users about $15 a month for subscriptions including that feature.

Yahoo Music General Manager David Goldberg said the company could eventually raise its prices. "We're not saying it's the price forever, but we're assuming it's the price throughout the Beta (trial) period, which is an undetermined amount of time," he told Reuters.

"Yahoo's clearly putting big pricing pressure on folks like Real and Napster. Neither have the advertising leverage that Yahoo has, so this has the potential to be highly disruptive to any digital music subscription service, particularly Napster since its a pure-play digital music company," said PJ McNealy, an analyst with American Technology Research.

The shares of Real and Napster fell in after hours trading on iNet. Real's stock fell nearly 11 percent or about 80 cents to $6.50 after closing at $7.30 on Nasdaq. Napster fell about 15 percent, or $1 to $5.35 after-hours after closing on Nasdaq at $6.35.

Napster could not be reached for comment.

RealNetworks last month unveiled a free version of its service, offering users 25 songs streamed on demand, Internet radio and other features in hopes of luring consumers to its other fee-based services.

"We just started giving away music for free on Rhapsody and there's more movement to give consumers affordable access to music. Yahoo's jumping into the subscription market is a complete validation for RealNetworks," said a Real spokesman.

By linking the service to its instant messaging application, analysts said Yahoo is aiming to make legal music- sharing among subscribers a focus of its offerings.

Yahoo's service also enables fans to buy downloads, listen to commercial-free Internet radio stations and access their subscription service from any Internet-connected computer.

The subscription service is the latest push by the Sunnyvale, Calif-based Web giant to bolster its music properties under the newly rebranded Yahoo! Music division in hopes of capitalizing on the growing market for online music now led by Apple Computer Inc. with its a la carte music purchasing service and popular iPods.

Yahoo last September bought San Diego-based Musicmatch, which offers the popular Musicmatch Jukebox, online radio stations and a song download service, for $160 million.

Yahoo is also reportedly developing a search engine for finding downloadable songs and music data from across the Internet, which it plans to introduce within the next couple of months. Company officials declined to comment.