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2HRS2GO: MyPlay.com not a sure play

    So Yahoo (Nasdaq: YHOO) reportedly wants to buy privately-held MyPlay.com. Maybe someday I'll understand all the hubbub about online music businesses, but it still seems overblown to me.



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    Strictly speaking, MyPlay.com isn't a distribution channel, but rather a digital storage service. You get a virtual music "locker" with three GB of space for music files that you upload from CDs or hard drives, or add from MyPlay.com's selection of free tracks. You can listen to other MyPlay.com users' files on webcasts.

    The idea is to create a service that makes everybody happy. Users can organize their digital music easily and listen to it from any computer with Internet access. Record companies get the distribution without the fear of music piracy, because MyPlay.com users share music through streaming media, which doesn't present the convenient storage possibilities of MP3.

    (Someone could record the audio output of the PC, but that's not the same thing as downloading a high quality MPEG file)

    MyPlay.com also features other copyright protections, such as the inability to feature more than three tracks from one CD, or four tracks from one artist. Listeners can't skip from track to track to zero in on their favorites -- they have to put up with the whole playlist, even if it includes, say, out-of-tune monks chanting in Sanskrit underwater mixed in with those Led Zeppelin tunes you wanted to hear.

    Other House Rules (read: Terms of Service) prohibit "any User Content that (i) is harassing ... obscene, profane, sexually oriented ... inaccurate, or otherwise objectionable, or (ii) encourages conduct that constitute a criminal offense, give rise to civil liability..."

    Considering that the vast majority of popular music since 1960 could fit one or more of those definitions -- nearly everything on Led Zep's first three albums falls under varying degrees of "sexually oriented", which is probably one reason why the music has stood up so well over the decades -- it would seem MyPlay.com users would be strictly limited to pre-WWII tunes and the latest recordings of Gregorian chants. And much of the jazz from the 1930s and ཤs would be questionable.

    MyPlay.com's overseers apparently don't enforce the Content rule too strictly, judging by the playlists available.

    Investors in MyPlay.com include Paul Allen, whose record of profitable Internet investments is rather slim. Allen joined in the latest venture round, which raised $18 million. MyPlay.com formally launched last October after getting $5 million in venture funding.

    MyPlay.com strikes me as yet another Web content company that was created solely to be acquired, since the chances of making a profit seem remote. The company's revenue comes mostly from -- surprise, surprise -- advertising and marketing agreements.

    In other words, it's the same business model that so far has produced consistent profits for exactly two publicly-traded online content companies, Yahoo and Lycos (Nasdaq: LCOS).

    (Don't lump America Online (NYSE: AOL) in there, since it's as much an ISP as a content provider).

    No one has proven the Interet+music=PROFIT theory, because the entire consumer appeal of digital online music lies in the formula of Internet+music=FREE.

    MyPlay.com's music is free, but only in a limited sense. Unlike Napster -- which also lets you share music files and organize a music library, albeit only on a single PC -- MyPlay.com restricts your ability to find music and download it.

    That's why MyPlay.com enjoys some support from the music industry, which in turn makes it more appealing to Yahoo. Unlike MP3.com (Nasdaq: MPPP), which created its copyright-protecting music system without consulting the industry, MyPlay.com lined up some big names, like Dreamworks.

    Unfortunately for MyPlay.com and other music sites, limitations won't win over users who have come to appreciate Napster and Gnutella and all the copyright violations that come with them. Legal protections may exist, but it's hardly realistic to punish every person who downloads a music file. After all, prohibition didn't work either.

    Perhaps Yahoo hopes it will work for digital music, since the company apparently is willing to issue $200 million in stock to buy an online music component. Given Yahoo's market cap, $200 million isn't much risk. And paired with Yahoo's portal muscle, MyPlay.com just might draw enough users to pay for itself.

    But Yahoo might do well to keep its expectations low. 22GO>