Yahoo! Launches Music Subscription Service

Yahoo! this week announced the immediate availability of its new online music subscription service, Yahoo! Music Unlimited. The entrance of the online services giant into the music subscription service market was widely expected, but the low initial price of that service--just one-third the cost of similar services from rivals--surprised analysts and onlookers. It also sent shock waves that were felt by rivals Apple, Napster, and RealNetworks.

"We are committed to being at the forefront of the rapidly growing online music segment," said Lloyd Braun, who heads the Yahoo! Media Group. "Yahoo! Music Unlimited draws on the best of Yahoo! to provide personalization and community features unlike anything else in the marketplace."

Yahoo! Music Unlimited is currently available in beta form, and the front-end application is clean if a bit buggy. The service, like that of competitors, allows subscribers to access over 1 million songs, which can be downloaded and played back on PCs and Windows Media Player 10-compatible portable devices. Songs downloaded from Yahoo! Music Unlimited are among the highest quality on the market: The company offers songs in 192 Kbps Windows Media Audio (WMA) format.

What really sets Yahoo! Music Unlimited apart from the competition, however, is the cost. Subscribers will pay just $6.99 a month, or $60 for an entire year, which works out to be about $5.00 a month. Similar services from Napster and RealNetworks--Napster To Go and Rhapsody, respectively--cost three times that amount. However, it's likely that Yahoo's pricing is introductory and that the company will raise prices over time.

Until that happens, Yahoo! is clearly making waves. Stock in both Napster and RealNetworks plummeted yesterday after the Yahoo! service was announced, and stock in Apple Computer--which offers the break-even iTunes Music Store sans a subscription services--fell 2.2 percent as well.

Yahoo! Music Unlimited appears to build on technology from MusicMatch, which Yahoo! purchased last year. Currently, Yahoo!'s new service and a similar MusicMatch service (MusicMatch On Demand) will be offered separately, but the two services will likely be combined over time. Yahoo! lowered prices at MusicMatch On Demand to match (ahem) the prices at Yahoo! Music Unlimited.