TELECOM Digest OnLine - Sorted: Yahoo Sticks to $5 Music Service

Yahoo Sticks to $5 Music Service

Michele Gershberg (
Thu, 18 Aug 2005 11:05:14 -0500

By Michele Gershberg

Whether you prefer hard rockers or accordion-pumping folk singers,
Yahoo Inc. will stick with an aggressively low $5 monthly fee in the
first major marketing push for its online music service.

After an introductory roll-out in May, Yahoo on Thursday said it would
keep its music download subscription priced well below those of
competitors, such as RealNetworks Inc.'s Rhapsody and Napster Inc., in
an effort to become "the standard online music service."

Yahoo Music Unlimited offers more than 1 million songs, allowing
listeners to move tracks to portable music players and share them with
other subscribers on its messenger platform.

Trial subscriptions were launched at $4.99 per month for an annual
commitment, or $6.99 on a monthly basis, and analysts had wondered
whether Yahoo would raise the price with its full-scale launch.

Yahoo Inc. Chief Marketing Officer Cammie Dunaway said the music
service had so far attracted subscribers through public relations
efforts and word of mouth. The new Yahoo Music campaign will be the
online media company's most aggressive push this year, she said.

"It's exciting to see what happens now that we really start marketing
it," Dunaway told Reuters. "We're certainly looking to expand the
subscription (music) market and think that this pricing is one great
way to do it."

Pixellated characters representing rock band Green Day and rapper
Missy Elliott bounce and bop in the Yahoo Music online ads, with
viewers able to move the "Mini-Pop" stars onscreen. The ads were
created by agencies Soho Square and OgilvyOne, San Francisco.

The campaign debuts on August 28 during the MTV Video Music Awards
with the tagline "Over A Million Songs - 5 Bucks A Month - This Is
Huge." One television commercial shows an animated spaceship beaming
up favorite musicians, then pulverizing a lederhosen-clad accordion

Commercials will air on MTV and Comedy Central. Yahoo has also planned
ads in a new video game from Midway Games Inc., and other
nontraditional campaign efforts.


Yahoo's price strategy could heap more pressure on music download
rivals. Napster and Rhapsody provide subscribers unlimited streams on
demand and other features for about $10 a month, or about $15 with

"There will probably be room for some price differences, but if Yahoo
stays at a lower price, coupled with its broad marketing reach, it
would be tough for the other guys," said Christopher Rowen of Suntrust
Robinson Humphrey.

Rowen rates Napster shares at "buy" and Real Networks at "neutral."
Both companies' shares tumbled after Yahoo introduced its music
service in May, as did the stock of online music leader Apple Computer

Napster has an estimated 400,000 subscribers to its service, while
Real Networks has nearly 1.2 million for Rhapsody. Yahoo would not
disclose subscriber numbers.

Rowen said online music subscription had yet to boom as listeners are
focused on copying their own music collections to portable devices,
but he noted it would take off once they look to music downloads as
their primary source for fresh songs.

"Five years down the road, subscription will be the dominant model,"
he said.

Copyright 2005 Reuters Limited.

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