As Internet giants step into the crowded online music arena, some are banking on a new weapon to help attack market leader Apple Computer: instant messaging.
Yahoo last week acquired digital music service Musicmatch for $160 million in cash in a move that adds a multimedia player, a digital music store and a subscription service to the company's arsenal. Despite the acquisition, Yahoo is on track to launch its own music service, music industry sources said, and eventually combine it with Musicmatch.
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Yahoo, Microsoft and other Internet giants are banking on their online chat software to help push music downloads--and shout down iTunes.
Tapping further into digital music illustrates IM's transformation over the years from a simple text chatting tool to a control panel for multimedia applications.
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Yahoo's plans are still sketchy, but sources close to the company say instant messaging will play a key role. While the popular IM software already lets people listen to online radio, new versions will let people share and interact with one another's digital playlists.
"The whole advantage that (Yahoo) has is using its broad reach to push products and integrate them," said one source familiar with the plan who spoke under the condition of anonymity.
A Yahoo representative declined to comment for this story.
Microsoft has publicly acknowledged similar interests in tying its MSN Music online store into MSN Messenger. In a press conference last month, MSN's corporate vice president Yusuf Mehdi described a scenario in which two IM chatters could listen to each other's playlists and then buy the songs if they wished.
Without any fanfare, MSN has already begun toying with playlist sharing. The latest MSN Messenger, version 6.2, contains a link to a test application called ThreeDegrees. Among other features, the software lets a person share a playlist with other members in a private group.
Microsoft's Mehdi said eventual MSN Music features on IM will stem from ThreeDegrees development. A Microsoft representative declined to comment further on music integration in Messenger, but offered a glimpse of how ThreeDegrees is being used.
"It's a research product to test IM features," the representative said.
America Online has not talked publicly about its future online music plans. Its latest AOL Instant Messenger, version 5.9, includes a button to a Netscape-branded online radio stream.
Spreading the gospel
For the Web portals, diving into the online music market means playing catch-up to Apple's iTunes, currently the market leader. To do that, the portals will tap every possible advantage, such as promotion across highly trafficked online areas and weaving services into applications like IM.
|How long are you on IM?|
Although MSN's instant-messaging service commands the largest U.S. audience of the top three, its users are apparently the least chatty.
|Average usage stats in August|
|IM application ||Unique users (millions) ||Time chatting (hh:mm:ss)|
|MSN Messenger||28.6 ||1:27:30|
|AOL Instant Messenger||27.6 ||4:59:09|
|Yahoo Messenger||18.1 ||2:48:21|
Instant messaging ranks with e-mail and Web surfing as one of the most popular activities on the Internet. Studies show that IM users are loyal and stay connected for hours at a time.
For users at home and at work in August, MSN Messenger led the pack with 28.6 million unique users, followed by the once-dominant AIM with 27.6 million, according to Nielsen/NetRatings. Yahoo trailed at 18.1 million, the research firm said.
MSN users spent an hour and a half using IM every time they launched the software. AIM users spent five hours per session, and Yahoo Messenger users typically logged on for about two hours and 50 minutes, Nielsen/NetRatings said.
Combining IM and music make further sense because people develop strong attachments to songs.
"Music is one of those deeply emotional and personal things," said Mike McGuire, an analyst at GartnerG2. "We all exchange information when we get interested in news stories, but not at the depth of discovering music."
The birth of a platform
The addition of digital music features illustrates IM's transformation over the years from a simple text-based chatting tool to a control panel for multimedia applications.
AOL, MSN and Yahoo have added dozens of bells and whistles into their technologies to broaden IM's appeal. Current versions of Yahoo Messenger, MSN Messenger and AIM let people play games, share photos, listen to Net radio stations, communicate through Webcams, and send text messages to cell phones.
This is a contrast from IM's simpler, text-based roots. Popularized by AIM in the mid-1990s, instant messaging became a way for people to communicate with friends, families and business contacts in real time.
Microsoft made a noisy entry into the field in 1999. When MSN Messenger launched, it let users communicate directly with AIM screen names. After months of AOL blocks and MSN workarounds, the companies retreated into their separate corners, but it set a nasty precedent for messaging.
Yahoo, MSN and AOL have since maintained a steady peace. But under the surface, the companies are waging a cold war-style arms race for control of valuable real estate on the PC desktop.
Microsoft is taking full advantage of its Windows monopoly to grow MSN Music. The music store is already available in its Windows Media Player 10, and MSN Messenger is next on the list.
"Here they've got this asset; it's got millions of users," Matt Rosoff, an analyst at Directions on Microsoft, said about MSN Messenger. "One thing that Microsoft can do to build a digital media platform is link different services together. You use your big assets to point consumers to new services you're offering."
Watching anxiously from the sidelines
The marriage between IM and music is not without its hurdles. Record labels have quietly expressed dissatisfaction over services that let people trade or even stream songs to each other. IM slips dangerously close to the land of peer to peer, record industry executives say.
In a sense, Apple's iTunes program already allows this, letting people who are on the same internal network browse each other's playlists and stream music. But label executives privately say this was supposed to be for home use, not for use by entire school dorms or offices--and certainly not used for downloading music, as is allowed by unauthorized hacks like OurTunes. The record labels have pushed Apple to put tighter restrictions on this practice, music industry sources say.
Label executives say that people who are part of the same subscription service can listen to each other's playlists without a problem, because they're all already paying for rights to the same music. But allowing one IM user to browse another person's playlist and stream music without paying for it could become problematic.
"If I'm streaming my collection to someone else, and no one's getting compensated for it, that's not OK," said one label executive, who asked not to be named.