Yahoo Sticks to $5 Music Service

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 player.

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 portability.

"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 Inc..

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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Michele Gershberg
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