Yahoo takes on iTunes with new music service

Community, music-sharing are key in new subscription plan that deeply undercuts rivals' prices.

Yahoo plans to launch a new flagship music service on Wednesday, in hopes of capturing a slice of the online music market now dominated by Apple Computer.

As earlier reported, the service is built in large part around a monthly subscription plan similar to those now offered by Napster and RealNetworks, which allow customers to take music onto their portable devices. However, Yahoo is deeply undercutting those rivals' prices, offering initial monthly subscriptions for just $6.99, compared with nearly $15.

Yahoo also has spent considerable time building links to its other products, such as its popular instant messaging application, with the aim of making community and legal music-sharing among subscribers a core part of the service.


What's new:
Yahoo plans to launch an early version of a new music service on Wednesday in an effort to take on Apple's iTunes.

Bottom line:
Song-sharing and the community aspect of the Web giant's new subscription plan are key--and could change the market dynamics of the online music business.

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Record label executives who have seen the service, which is in part based on wholesaler MusicNet's technology, say the community aspect in particular shows a promising evolution for the online music business.

"They've unpacked the opportunities and social aspects of the peer-to-peer environment, taken the best aspects away from that, and put them back into their environment," said one top record label executive familiar with recent versions of the service, who asked not to be named.

Yahoo's entry could help change market dynamics that have tipped overwhelmingly toward Apple, which controls about 70 percent of both the MP3 player market and the digital song download market.

Yahoo has a nearly unparalleled reach, with more than 300 million users worldwide, and has already developed a loyal base of listeners who use its Launch music video and Web radio service. Indeed, record label executives say Launch can already be as important as traditional radio when debuting a new album.

Much will depend on the marketing muscle put behind the service, however. Other giants, including Sony, Virgin Digital and Microsoft, have launched their own iTunes competitors, and none have so far gained substantial traction in the market.

Apple's iTunes, by contrast, has sold more than 400 million songs in the two years it has been in operation. On Tuesday, it opened four new stores--in Denmark, Norway, Sweden and Switzerland--bringing its presence to 19 total countries around the world.

Yahoo has already dedicated substantial resources to its music business, however.

The Web portal bought a small digital music company called

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