Yahoo! Buys Musicmatch for $160 Million

[James Fee]

<div class='os_post_top_link'><a href='http://news.com.com/Yahoo+to+buy+Musicmatch+for+%24160+million/2100-1027_3-5365619.html?tag=nefd.top' target='_blank'>http://news.com.com/Yahoo+to+buy+Musicmatch+for+%24160+million/2100-1027_3-5365619.html?tag=nefd.top</a><br /><br /></div>"<i>The Sunnyvale, Calif.-based company said the buyout would help it expand its presence in the simmering online music space, where Apple Computer's iTunes service has proven the segment's potential by selling over 125 million songs, typically at 99 cents apiece. Founded in 1997, Musicmatch markets digital music software, dubbed Jukebox, and maintains a download service that boasts over 225,000 subscribers. Included in those numbers are customers of Musicmatch On Demand, a subscription service that offers streaming music, and the company's online music download store. Musicmatch, which is based in San Diego, says that approximately 700,000 songs are available through its online catalog. "Yahoo is committed to being a major player in digital music," Terry Semel, chief executive of Yahoo said in a statement. "This combination bolsters our strategy to capture the largest audience of consumers as they make the shift to digital music." </i>"<br /><br />Taking a page from Google, Yahoo has gone out and bought Musicmatch. We have all been reading about possible suiters for Musicmatch (Sony, AOL, Microsoft) during the past few months, but none were able to to complete the deal. Yahoo has now vaulted into the limelight of online music sales, and the combination of Musicmatch and <a href="http://launch.yahoo.com/">LAUNCH</a> should strengthen Musicmatch. <br /><br />Will Napster be able to go it alone now or are they the next company to be purchased?

[Felix Torres]

Depends on Napster's aspirations, I guess...
And who needs them.
For now Napster seems to be determined to go it alone and leverage off their name recognition and installed subscription base to grow on their own, which means anybody buying them is going to have to pay through the nose.
And don't see any real candidates out there.

Of the hardware vendors, only Apple sees a need to run their own music distribution system at all costs. All the other players, from Samsung to Creative to Thomson to China, Inc, are quite content to simply sell hardware and stay out of the music distribution business.

MSN is doing the inhouse thing and Yahoo, the last big unalighed player, just lined up with Musicmatch. Add Launch and Sonique to the mix and they're covered.

On the music side of the deal, AOL seems content with their current approach, so that takes them out of the running, and of the four big music labels, three have shown no interest in the retail side of digital music, which only SONY has attempted, with CONNECT.

So, I'm thinking, the real question at this point isn't so much "whither Napster" as "wither SONY?".

They are a major player in both music and CE, yet their digital strategy is the most disjointed and disfunctional of any player on *either* side of the equation.

Not sure how much traction ATRAC has in Japan, but in the west it is clearly a very distant fourth (fifth? Does Ogg actually have more penetration?) in the market.

So they have a massive catalog of content (especially now that they've bought MGM's library) and they have excellent hardware design capabilities, yet they have no viable online distribution strategy. At some point, they'll have to provide native support for another format on their hardware, especially as online music distribution becomes a real business, rather than a technology demo.

And their options just got clipped: Musicmatch was the last significant player available at a reasonable price. And Napster is a WMA shop; at this point licensing WMA and retooling CONNECT as a WMP Plug-in would be cheaper and faster to market.

So far, their all-in-house approach has produced an unusuable online application and they seem to have turned down Apple's offer to front for them by selling ATRAC music through iTunes.

Which suggests that *maybe* they're starting to rethink ATRAC.

If they are committed to their own online distribution, they then have two choices: license WMA (snowball's chance in the Amazon?) or license Harmony from Real.

Of course, they could always step in in the ongoing Apple-Apple Corps dispute and offer to buy and rename the offending products. Or, mount a hostile takeover of Apple and then spin off the Mac division. But that would be a *very* expensive way to go. I'm not holding my breath.

Thing is, the clock is ticking.
Sony has to do something and soon.

[Montego]

Sony has to do something and soon.

Agreed. I got into digital music about 4 years ago starting with Sony Minidisc. I didn't have any type of MP3 collection, and so ATRAC was never an issue with me. Now as Sony begins rolling out the new 1gig Hi-MD players and discs, I've noticed many minidisc veterans are shying away because Sony still refuses to allow MP3 as another format for playback, and the same holds true for the new Sony Hardrive players. Sony just doesn't seem to "get it" that the U.S. market has different needs and wants from the Asian and European markets where minidisc is still a major player.

And yes, the Sony Connect service sucks. I paid $9.99 for an album and it transferred just fine to my minidisc player, BUT when I wanted to transfer the same album from Connect to burn a CD I get a message that licensing does not allow me to burn a CD of the album I purchased. What the hell is up with that? No more Connect for me when I can buy the same CD for $7.00 used from Amazon and rip directly to my minidisc, or anything else I want.

I've gone back to Rhapsody where I can listen to any full CD I want (no 30 second snippets like on Connect), or even stream it directly from Rhapsody to my Netgear wireless media player hooked up to my stereo. Again though, that is a problem in another way because no wireless streaming media deivces that I am aware of stream ATRAC, so I'm stuck with MP3 and ATRAC copies of the same music. Sony would certainly make my life easier if I could use MP3 on my minidsic players and get rid of the ATRAC files.

I really think a lot of the stuff about Sony that is ticking everyone off is that the Entertainment Division seems to be calling the shots of what their Electronics division is allowed to do , and it is just too damn restrictive for the consumer. I still love and use my minidisc players all of the time, but Sony needs to get their act together and look around to see what the rest of the world is up to.

[Felix Torres]

http://news.com.com/Yahoo%27s+long+and+winding+music+road/2100-1027_3-5366276.html?tag=nefd.lede

Some background and speculation on what comes next.