Web giant pulls plug on Music Unlimited…
“As Yahoo continues to overhaul the focus of its music business, the company will move its online music subscription customers in the coming months to Rhapsody America…”
“Yahoo is taking dramatic action to resolve problems with Yahoo Music Unlimited, its premium subscription service.”
Yahoo’s change in music offerings comes as Microsoft tries to acquire the company for $44.6 billion.
In a posting to Yahoo’s music-related blog on Monday, Ian C. Rogers, general manager of Yahoo Music, said that every month about 25 million people visit Yahoo for music-related information. But few of those visitors sign up for the premium service.
Rogers said the music service took resources away from other objectives. That includes music.yahoo.com, the company’s music video site, and Launchcast Radio, which allows users to create their own “stations.”
“The fact of the matter is that building a great premium music service takes a huge amount of resources and effort,” Rogers wrote, “and it was taking energy away from our important main offerings. Relatively speaking, a small percentage of visitors use Yahoo Music Unlimited, yet a large portion of our resources were being poured into this service. It was clear to us that we needed to make a major strategic shift.”
“It was not an easy decision,” he said. “We are huge fans of Yahoo Music Unlimited and those customers include many of our most loyal and valuable.”
“It sounds to me like what Yahoo is doing is giving up on the subscription side of the business,” said Philip Leigh, host of Inside Digital Media. “They do videos, but as far as music, per se, they want to concentrate on selling downloadable files.” It is a sensible move now that all the major record labels have agreed to sell music that is free of digital rights management technology, he noted.
“Yahoo will shut down its Music Unlimited service and divert subscribers to Rhapsody, a digital music venture of MTV Networks and RealNetworks.”
Rogers continued, Yahoo is discontinuing Music Unlimited and transferring its subscribers to Real Networks’ Rhapsody music-subscription service.
Yahoo Music Unlimited subscribers will be able to migrate easily to Rhapsody, and sometime this year music.yahoo.com will integrate with Rhapsody, allowing customers to use music.yahoo.com, as well as Rhapsody, with no increase in price. The service will work with PCs, Macs, Firefox, Safari, TiVo, and Sonos, Rogers said.
“We sincerely apologize for any hassle and thank you for joining us in the Yahoo Music Unlimited run,” he said. “It was a wild ride for all of us.”
Subscribers will be able to transfer their music catalog and will continue paying the same price ($9 per month) that they currently pay for Music Unlimited. But once their current contract expires, Music Unlimited subscribers will be charged the same as existing Rhapsody subscribers ($12.99 per month).
However, RealNetworks has only signed up 2.7 million subscribers, a fraction of the online music audience. Even with the addition of Yahoo’s Music Unlimited subscribers, it is not clear that Rhapsody will have the critical mass of listeners needed to sustain subscription-based music on the Internet.
Susan Kevorkian of IDC commented, “The Windows Media Technologies-based subscription model has real merit, but has been a tough sell to consumers. Any company in this space needs to invest in being there for the long haul, and Yahoo was not prepared to do that given its other challenges.”
She added, “This announcement is not likely to affect Microsoft’s offer but it does add uncertainty to a Yahoo-branded music strategy. If the deal goes through, Microsoft will need to carefully consider any further strategic changes to its media services to avoid alienating consumers.”
The closing of Music Unlimited now leaves just three music-subscription services on the Internet: Rhapsody, Napster and Microsoft’s Zune Pass.
An intriguing element to this announcement is that RealNetworks and Microsoft have their own complicated history. Founded by Rob Glaser, a former Microsoft employee, RealNetworks sued Microsoft a decade ago for antitrust violations. After eight years of expensive litigation, Microsoft settled by paying Real Networks $761 million.
Besides transferring Yahoo subscribers to Rhapsody’s music-subscription service, Rogers assured Yahoo music fans that the company is not lessening its support for online music. “Au contraire,” Rogers said. “It is a major strategy shift, but we are still investing in our music business, as evidenced by my second bit of news: our acquisition of FoxyTunes.”
FoxyTunes is a plug-in for Internet browsers, including FireFox and Internet Explorer, which developed a plug-in that enables users to control more than 30 music players. FoxyTunes also allows users to locate lyrics, videos, biographies and other information, based on what is currently playing in a user’s media player.
“Financial terms of the deal were not disclosed, neither Rogers nor Yahoo revealed how much the company paid for FoxyTunes.”