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Yahoo boosts prices on music service

Promotional pricing ends for part of Yahoo's cut-rate digital music plan, easing pressure on rivals.

Yahoo is boosting the cost of a key part of its digital music subscription service, after launching it six months ago with a price tag startlingly lower than rival offerings.

The company sent an e-mail message to subscribers late Thursday night saying the cost of its portable subscription service--the plan that lets listeners download an unlimited amount of music per month and transfer it to compatible portable devices--would effectively double at the end of the month.

The decision reduces some of the pressure on rivals such as Napster and RealNetworks, which had seen their $15 a month services dramatically undercut by Yahoo's initial $6.99 a month offer. Yahoo said it would raise its monthly price for the portable subscriptions to about $12 as of Nov. 1.

Yahoo declined to give specific reasons for the price hike and said in a statement that it remained "committed to offering our customers the most competitive pricing possible for digital music." It previously had said its initial pricing for the service was a temporary promotional offer.

The release of Yahoo's cut-rate subscription service shook up the market considerably last spring, but actual effects on that market have been harder to judge.

Yahoo has not released subscriber figures, and on its recent earnings call executives said only that they were "pleased with the growth rate" of the service.

RealNetworks has said in its own previous earnings calls that Yahoo's pricing had no appreciable impact on its growth. Company Senior Vice President Dan Sheeran said Friday that Yahoo's announcement was "very much consistent with what we expected."

Analyst firm Oppenheimer upgraded RealNetworks from a "neutral" to a "buy" recommendation on the news.

In its e-mail to subscribers Thursday night, Yahoo stressed that only the price for portable subscriptions was changing, to $11.99 per month, or $9.99 per month for customers who sign up for a year of service. Subscribers who have already locked in a $4.99 per month discounted annual fee, which is still available through November, will keep that price until next year.

Subscribers who want only to listen to music on their computers, without taking it to a portable device, can keep the $6.99 monthly fee, or the $4.99 per month annual discounted cost.