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Buying Music on the internet

Yahoo! is throwing its hat into the ring in the increasingly crowded music-downloading business. The Internet darling announced yesterday it will snap up Musicmatch for $160 million in cash.

The acquisition makes Yahoo!, which runs the most popular Web site, a legitimate contender in the online music market, analysts said.

With Musicmatch, Yahoo! will get software for playing digital music and a 99-cent music download service with more than 700,000 tracks.

Yahoo's current music site, called Launch, allows visitors to listen to songs online but doesn't offer a downloading option. The company has partnered with MusicNet, a venture between four record companies, to develop an online music store and subscription service with launch in the fourth quarter, according to sources.

Adding Musicmatch to the mix will expand Yahoo's Launch audience from 12.9 million to 23 million, according to Nielsen//NetRatings.  "You could get people more interested in sticking with Yahoo!," said Kevin Lee, CEO of Did-It, an online search marketing firm.

"Music is such a popular form of entertainment and it's an area that especially captures young people." The acquisition also prevents Musicmatch from falling into the hands of a competitor. Yahoo! is the latest big-name company seeking to shake up a market dominated by Apple's iTunes Music Store.

Microsoft's MSN began offering an online music service that will compete head-on with Apple and others. "This acquisition also gives Yahoo! a strong position in the digital-music business, in both ad-supported media, such as radio and music videos, and on-demand distribution, with subscriptions and downloads," said David Goldberg, Yahoo's vice president and general manager of music. Still, heavyweights such as Sony and Wal-Mart haven't so much as made a dent since launching their music-downloading services. iTunes continues to dominate the market. The company has sold more than 125 million songs since it started last year and has captured more than 70 percent of the legal market for music downloads.

Musicmatch said it sells 1.5 million downloads a month.

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 is expected to join the competition in selling online music as soon, according to the Wall Street Journal.

Music tracks sold through their site will likely be priced below the 99 cents per song and $9.99 per album now found on other music sites.

The service is expected to launch with about 200,000 tracks and emphasize music categories like pop country music that may be a low priority for competitors but are among Wal-Mart customers' favorites.

The world's largest retailer accounts for almost 20 percent of U.S. music sales and has a wealth of data on what its customers like. A spokeswoman for the company refused to comment on whether an online music sales effort is near, but did say, "There's no question digital music delivery is an exciting and growing area."

Movie Rentals on the internet

Wal-Mart to End Movie Rentals Via the Internet

Wal-Mart Stores Inc., in an new-venture setback for the nation's largest retailer, said it will shutter its online movie-rental business and turn over its subscribers to rival Netflix Inc.

Wal-Mart, Netflix and Blockbuster Inc. have been in a battle for online movie renters, chopping monthly subscriptions to as low as $15 from $22 a year ago. With Wal-Mart giving up the online rental business, which it entered in June 2003, no money will change hands, but Netflix agreed to promote sales of DVDs on Walmart.com to its customers.

The exit is a black eye for Wal-Mart's expansion into new businesses and highlights the difficulties of so-called big-box retailers pursuing online rentals.

"We've had a nice rental business, but it was a free-standing business and there was no natural integration point" with Wal-Mart stores, said John Fleming, Wal-Mart executive vice president and chief marketing officer.

Circuit City Inc. has shied away from rentals, while Best Buy Co. resells subscriptions to Netflix.

In a sign of continuing competition, Dallas-based Blockbuster responded to the deal by offering incentives including a free movie and reduced-rate subscriptions to switch to its service. Randy Hargrove, a Blockbuster spokesman, said Blockbuster's offer to Netflix/Wal-Mart subscribers is further evidence that "we plan to continue to compete aggressively" for the online rental market.

Netflix has some three million subscribers compared, with less than one million subscribers for Blockbuster and Wal-Mart's estimated 300,000.

Netflix Chief Executive Reed Hastings declined to say whether Netflix is working with other competitors on deals similar to the Wal-Mart pact, though he said the agreement was nonexclusive.

Microsoft's Gates: iPod Success Unlikely To Last  See the latest IPOD and MP3 PLAYERS here.

LOS ANGELES -- Apple Computer Inc. (AAPL) has ridden high on a wave of success with its wildly popular iPod digital music player, but that ride might not last for the long haul, according to Bill Gates, chairman and chief software architect of Microsoft Corp. (MSFT).

"I don't think the success of the iPod can continue in the long term, as good as Apple may be," Gates was quoted as telling German newspaper Frankfurter Allgemeine Zeitung in an interview.

Gates, who co-founded Microsoft, drew a parallel with Apple's fortunes in the market for personal computers, telling the paper that "Apple was once extremely strong with its Macintosh computer and graphic user interface - like the iPod today - then lost its position."

Apple, based in Cupertino, Calif., has recently seen its success closely linked to the success of its iPod music players.

To be sure, the company last month said strong demand for its iPods helped drive up its quarterly revenue by 70%. The music players accounted for just over $1 billion in sales, or more than 30% of the company's total fiscal second-quarter revenue.

Meanwhile, Apple earlier this week said it had sold more than 400 million songs through its iTunes digital music service that works along with its iPods.

However, several subscription-based services are taking square aim at Apple's iTunes.

Yahoo Inc. (YHOO) has caused a stir by unveiling plans to enter the online music-subscription market with a new service that costs less than half of what some rivals are charging.

Also, mobile telephone makers are looking to cash in on the hot market for digital music players, offering telephones with built-in music players and features allowing users to download music directly to their handsets.

While Gates said he doesn't expect stand-alone digital music players to become extinct, he said he would point "quite clearly" to the mobile phone as the future device of choice as a portable music player.