Yahoo Shells Out $160 Million for MusicMatch
Apple’s iTunes Music Store may be the current 800-pound gorilla of the online music industry (as far as paid downloads are concerned), but now Yahoo – possibly the most visited site on the Internet – is getting into the fray, paying $160 million in cash for MusicMatch, a Windows-only online music service.
Yahoo already offers a free online streaming audio service called LAUNCHcast; it works with Windows and (badly) with Mac OS 9; Mac OS X has never been supported. LAUNCHcast features user-defined stations with major label artists as well as independent artists from places like GarageBand.com.
By acquiring MusicMatch, Yahoo gets an online music service with:
A 700,000 song catalog (compare to 1 million songs for iTunes, 500,000 for the preview of MSN Music, and 700,000 for Rhapsody and Real Music Store)
Songs for sale at $0.99
An $8 per month subscription online radio service that lets customers listen to any song in the MusicMatch library
MusicMatch Jukebox, a highly regarded jukebox application for Windows that supports many portable digital music players, but not the iPod. One of the key things about MusicMatch Jukebox is that it makes it trivially easy to purchase a song you hear via one of its stations.
MusicMatch is privately held, but it has about 170 employees and its annual revenue is estimated at about $50 million. MusicMatch’s all-you-can-eat music service has about 250,000 subscribers. Yahoo expects the acquisition to increase its online music audience from about 13 million people to nearly 24 million people by the end of the year.
I see a few take-away points from the acquisition. One is that Yahoo isn’t so much trying to compete with Apple’s iTunes Music Store as trying to get a leg up on other Internet entry points – Google, MSN, AOL – by offering both digital music downloads and a streaming music service.
The second is that, if Apple wants to keep the iTunes Music Store vital, it needs to offer some sort of online streaming audio service (for free and/or on a paid subscription model) and make it simple for users to purchase tracks they hear on the streams.
Third, if Apple wants to keep innovating with the iPod (and justify its never-declining sticker price!) it may have to look back to the days of transistor radios. Remember, Apple was the company that brought wireless networking to the masses, and recently shipped wireless music to stereo systems via AirPort Express. Can the day really be that far off when iPods sport wireless technology and are capable of tuning in online audio streams from your base station – or from hotspots in your neighborhood, your school, and your favorite coffee shop?