Hot off the Press - Digital Media News
Tuesday, September 14, 2004

Yahoo buys Musicmatch web music retailer

Yahoo has announced it was buying digital music group Musicmatch for about US$160 million in cash, in a move aimed at boosting the Internet portal's online music offerings.

"Yahoo is committed to being a major player in digital music," said Terry Semel, Yahoo chairman and chief executive officer.

"This combination bolsters our strategy to capture the largest audience of consumers as they make the shift to digital music and supports Yahoo's goal to give consumers the greatest choice, control and flexibility in how they interact with their music."

Investors applauded the deal. Yahoo's shares surged more than 4 percent, or $1.33, to $33.20 in Tuesday's trading on the Nasdaq Stock Market.

Yahoo has been widely expected to launch a new service for online music downloads aimed at competing directly against Apple's iTunes, Roxio and others, notably the recently launched online store from Microsoft.

Musicmatch will provide Yahoo with two features that it doesn't currently offer — an online music store that sells individual songs for 99 cents apiece and a popular software program, Musicmatch's digital jukebox, available in 10 languages that helps manage digital music on computer desktops. An $8-per-month subscription services that lets




customers listen to any song in the library at any time on the Internet. Currently, about 225,000 subscribers pay for this unlimited listening access service.

Originally founded in 1997, Musicmatch, which has about 170 employees, developed music management technology, including its Jukebox software, which has also been used as a MP3 player manager on a personal computer by companies such as Dell and also allows consumers to purchase digital music online.

Most recently, the company introduced an on-demand streaming music subscription service, providing access to more than 700,000 songs.

The combination will increase Yahoo's music reach from 12.9 million to an estimated 23 million listeners.

Digital music is becoming a big business in its own right. Sales from online music subscriptions and song downloading is expected to soar during the next five years, rising from an estimated $271 million this year to $1.7 billion in 2009, according to Jupiter Research.

The Musicmatch deal also gives Yahoo another potentially powerful weapon in its intensifying battle with other popular Web sites, such as Google, Microsoft Corp.'s MSN and AOL, that have become major Internet entry points.

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