The Net giant launched a deep-discount music service in hopes of capturing a slice of the online music market, now dominated by Apple Computer. Yahoo's service is built in large part around a monthly subscription plan similar to those offered by Napster and RealNetworks, which allow customers to put the music onto their portable devices. However, Yahoo is deeply undercutting those rivals' prices, offering initial monthly subscriptions for just $6.99. Napster and RealNetworks both charge close to $15 for their portable subscription plans.
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.
The new music service is likely to kick off a price war that could put rivals in a painful squeeze.
"It is going to put pressure" on Napster and RealNetworks, said GartnerG2 analyst Mike McGuire. "But it all depends on how long Yahoo can keep running this introductory pricing."
Whatever the outcome, the price war is likely to draw attention to the subscription music model, which has languished in the shadow of Apple's 99-cent iTunes download store.
While Yahoo aims to take a bite out of Apple's music territory, iTunes looks to be morphing into a multimedia download shop. The latest update, which Apple released earlier this week, comes with new features for the music store and updated QuickTime video support, leading to speculation that the update is paving the way for Apple to sell music videos or longer film downloads alongside its singles and album business.