Yahoo cuts deal for custom CDs

The deal comes as Yahoo is attempting to jump-start its online music strategy to catch rivals such as America Online, Microsoft and Lycos.

AOL has Net radio station Spinner and MP3 player Winamp. Lycos is partnering with BMG Entertainment to sell and distribute 100 songs and albums via downloads from Lycos' Web site. And Microsoft's Windowsmedia.com site is the No. 2 ranked music destination on the Web, according to online research firm PC Data.

Under Tuesday's deal, Yahoo's shopping portal will offer people songs from Imix's collection of more than 200,000 tracks from record labels that include BMG and Sony Music Group. Customers can choose up to 70 minutes of music for around $1 per song. They can choose an art design and a title for each CD and have a disc shipped for $2.50.

The deal comes as companies focusing on commercial music downloads struggle to find their footing in a slippery market that has been dominated by free alternatives such as Napster.

While all of the major record labels have unveiled music download initiatives, none of them have gone beyond the experimental phase. Other models, such as streaming subscription services, have begun to gather momentum.

Companies banking on the download model are already feeling the pressure. Last month, for example, secure-download service provider Supertracks laid off a third of its staff, citing continued reluctance by major labels to fully endorse music downloads.

Analysts said that attracting people to Yahoo and Imix's service depends upon the catalog of music that Imix has available.

"I think a lot of the adoption of these kinds of custom CD services is going to live and die by the music selection," Forrester Research analyst Eric Scheirer said. "The first time that a consumer goes to Imix and expects to find a particular song (and) can't find it there, I think Imix is going to lose that customer."

Connecticut-based Imix provides music in genres including jazz, alternative, country and rock oldies. But analysts said that the problem with the selection is that it doesn't provide contemporary music that includes Top 40 songs for which people would be willing to pay.

Yahoo and Imix's service will have to compete with the selection of music that file-swapping service Napster offers for free.

"The real appeal of Napster is that I could go there and I can get whatever music I want to and I can make my mixes of not only the most popular music, but also things that have special meaning and special appeal to me," Scheirer said.

Rob Solomon, director of production at Yahoo Shopping, said that while the Napster service caters to a younger demographic, Yahoo's service will appeal to people who don't have an MP3 player but are used to CDs.

"We think that mass customization is going to be a pretty interesting theme over the next year or two and...this (deal) is a perfect marriage of Internet technology and music and entertainment," Solomon said. "We think that people will gravitate toward customizing CDs...It's something that people did in the past when they had a party; they'd create a party tape, and this is just a really high-tech way to do it."

Analysts said that the keys to the success of the offering will be pricing and the creation of a broad range of related services tailored to individuals' interests, such as information on upcoming music tours or artist biographies.

"In order for any Web site (to charge) for downloads or CDs, they have to do it cheaply...(and offer) a value-added experience," Gartner analyst P.J. McNealy said. "The challenge is to present an experience that's...compelling" for the consumer.