Music Unlimited No More
Yahoo Aims to End Subscription Service, Promote Rhapsody
By NICK WINGFIELD for Wall St. Journal
February 4, 2008; Page B2

Yahoo Inc., as it ponders a takeover offer from Microsoft Corp., plans
to shutter an online music service that charged users a flat monthly fee
to access a vast library of songs.

In place of that service, Yahoo, Sunnyvale, Calif., has cut a deal to
use its online audience to promote Rhapsody, a rival subscription music
service jointly owned by RealNetworks Inc. and Viacom Inc.’s MTV. Yahoo
said it will migrate existing Yahoo Music Unlimited subscribers — the
number of which it didn’t disclose — to Rhapsody accounts in the coming
months.

The music deal was struck before Microsoft’s disclosure of its $44.6
billion takeover offer for Yahoo on Friday. Financial terms weren’t
disclosed.

Yahoo’s move is part of a broader retrenchment by the company in
categories in which it hasn’t found much success, such as podcasting.
Last week, Yahoo issued a tepid financial forecast for the year and
announced plans to lay off 1,000 of its 14,300 employees.

The Internet company made a big splash when it entered the subscription
music business nearly three years ago with an aggressively priced
service designed to be a compelling alternative to Apple Inc.’s iTunes
store. Yahoo Music Unlimited, now priced at $8.99 a month, let users
listen to an unlimited amount of music as long as they remained paying
subscribers.

While many music and technology executives believe subscription music
services hold promise, such services haven’t yet found a mass audience,
in part because of technical restrictions that complicated listening to
songs away from personal computers.

Ian Rogers, vice president of video and media applications at Yahoo,
said the company decided to discontinue its own subscription service in
part because of the expensive effort it would have to make to ensure
that the service could work with a wide range of electronic devices.
Rhapsody is increasingly integrating its service with cellphones and
home-entertainment devices such as TiVo digital video recorders.

“We’re not investing in a lot of the killer features that are the icing
on the cake,” said Mr. Rogers.

Rob Glaser, chief executive of Seattle-based RealNetworks, said the
exposure that Rhapsody will get on Yahoo — one of the top music
destinations on the Web with its large library of music videos, radio
stations and other content — will help introduce the service to a wider
audience. “They’re going to be among our most important partners,” Mr.
Glaser said.

RealNetworks has 2.75 million subscribers to various music services,
including Rhapsody.

Yahoo executives said the company intends to pursue a more “open” music
strategy, in which it will provide music-related services that are
accessible to Internet users as they visit blogs and other independent
Web sites.

Write to Nick Wingfield at nick.wingfield@wsj.com1f