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Yahoo Readies For Price War Against iTunes, Napster and Rhapsody
May 11, 2005
Thomas Mennecke
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It appears that Yahoo is the first digital music distributor to truly rock the online boat. Yahoo announced on Tuesday the unveiling of their new online music service - Yahoo Music. Much like Napster and Rhapsody, people are encouraged to rent rather than own music. However, much like iTunes, the option to buy is also available.

From just reading the first paragraph, one may think, "well this is just another music service, what's so new about this?"

While Yahoo may be just another music service, there is one very staggering difference that may rock the industry approved music world. Unlike Rhapsody and Napster that charge $14.99 a month for their "Rhapsody/Napster to go" program, Yahoo will on charge $6.99 a month for virtually the same catalog of music.

According to Yahoo's press release, the total cost per year will hover around $60.00.

"That's a sharp discount from Los Angeles-based Napster and Seattle-based Real Networks Inc., which both charge $14.95 per month, or just under $180 annually, for similar services."

Yahoo openly admits they are pursing a different sales approach than Apple's iTunes. iTunes' approach to online music is one of ownership, rather than rental. Although all four services have the option to buy, iTunes has not jumped on the rental bandwagon. Yahoo, like Rhapsody and Napster, hope that different sales tactics will penetrate iTunes 70% market share armor.

Yahoo's rental service is contingent on the monthly renewal of the service. One must sycronize their WMA-compatible MP3 player on a monthly interval in order for their music to remain intact. The iPod is not compatible with Yahoo's service.

If Yahoo cannot crack iTunes with its rental program, it cleverly designed a backup tactic that may draw some of Apple's market. Yahoo also has instituted a payment option for its entire catalog of music. However, instead of music selling at the standard price of $0.99 per track, individual songs will sell for $0.79 - approximately 20% lower than all major competitors.

Yahoo's service sets the stage for a likely price war with Real Networks and Napster, predicted digital music industry analyst Phil Leigh. "About the only thing that would prevent a price war at this point is if Yahoo's software (for downloading songs) performs badly," said Leigh, who runs a market research firm called Inside Digital Media.

Yahoo's new music service was given a boost by its recent purchase of MusicMatch, one of the music industry's first attempts at online music distribution. Under Yahoo's direction, it has managed to turn the struggling MusicMatch service from an inside joke to a legitimate threat to iTunes' domination of the online music market.

This story is filed in these Slyck News categories
Authorized Music Store :: Other

You can read Yahoo's press release here.

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