San Francisco — Another Internet radio fatality due to escalating royalty fees for airing music online. Yahoo’s Launchcast streaming radio service, once considered one of the titans in the streaming music space, is planning to transfer control to CBS Corp.’s webcasting network in a move driven by dramatically higher fees for airing music online.
Yahoo’s radio channel, called Launchcast, will combine with CBS beginning in February.
Under a deal very much similar to that between CBS Radio and Launchast rival AOL Radio, CBS Radio is taking over all advertising-sales operations, licensing and technology decisions for the Launchcast service. That includes replacing the Launchcast desktop music player with a co-branded one provided by CBS.
As part of the deal, CBS will also pay all royalties associated with the 150 or so Launchcast channels, according to the Associated Press. In total, the handover will bring CBS Radio’s webcast portfolio up to roughly 300 stations in total.
In the meantime, Yahoo’s job in its own music streaming process will be cut-down to programming tunes from CBS’s streaming catalog — the same 1.3-million song catalog that powers AOL Radio and CBS’s own offerings including Last.fm and the recently-launched Play.it.
Yahoo’s withdrawal from running a standalone service, announced Wednesday, makes it the second major Web site this year to flee the rising royalty rates by hitching its radio operations to CBS. AOL Radio, owned by Time Warner Inc., hooked up with CBS in June.
“Launchcast Radio stations have increased sizably and loyal following and we are thrilled to expose them to an ever greater depth of content offerings,” said CBS Radio digital media and integrated marketing president David Goodman.
“Partnering with Yahoo assures advertisers will be able to reach the greatest possible audience as we leverage our local and national sales force, as well as TargetSpot, to create distinctive campaigns and one of kind integrated opportunities.”
The move is the most recent in an ongoing project from Yahoo to improve its business and trim many of its operations in the midst of a rough 2008.
Yahoo Music head Michael Spiegelman singled out more expensive royalty payments, under the most recent Copyright Royalty Board rate structure, as key to the decision.
“A lot of the economics around Internet radio have changed quite considerably in the last year,” he said. “We want to be able to continue to offer Internet radio to our users, but it is pretty clear we had to make some big changes to the product to do so. The options are that we could either reduce the features or scale back functionally and limit listening, or go with a partner with the scale of monetization to continue to operate in a sustainable fashion.”
Yahoo, he continued, will carry on to program its own music channels, and will focus on developing open platforms that allow Yahoo users to embed music in community and social applications, including its Instant Messaging product.
The shift broadens Yahoo’s retrenchment from online music. The company earlier this year shut-down a music downloading service and transferred its music subscription service to RealNetworks Inc.’s Rhapsody.
Much of Internet radio’s appeal originates from its ability to offer a more eclectic selection of music than terrestrial radio. So Launchcast’s annexation into a traditional radio network saddened the founder of a rival Internet service, Pandora Media Inc.
“It is a real disgrace because Yahoo was such a pioneer in this field,” said Tim Westergren, who now serves as Pandora’s chief strategy officer nearly nine years after he started the company. “It should serve as a cautionary tale of what can happen when copyright holders want too much money.”
On the plus side, the combination also will broadens Launchcast’s audience by enabling users to listen to the service through the Firefox and Safari Web browsers for the first time. Launchcast’s player has worked only with Microsoft Corp.’s Internet Explorer. Collectively, those users represent about 22 percent of the Internet radio listening market.
Yahoo shares closed unchanged Wednesday at $11.50 while CBS shares rose 90 cents, or 14 percent, to finish at $7.31.