Cingular Inks Music-Download Deals With XM, Napster, Yahoo

NEW YORK – Cingular Wireless plans to team-up with XM Satellite Radio Holdings Inc (XMSR) and Web music subscription services Napster Inc., and Yahoo Inc. (YHOO), to let its customers play songs on their cell phones, people familiar with the matter said on Wednesday.

[Cingular Wireless confirmed the four-way deal later Wednesday.]

The move by Cingular, jointly owned by AT&T Inc (T) and BellSouth Corp (BLS), follows the launch of a virtual wireless music store by rival Sprint Nextel Corp (S) last year, and Verizon Wireless, owned by Verizon Communications (VZ) and Vodafone Group Plc (VOD), early this year.

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Wireless providers have been gearing up to deliver everything from videos to music on cell phones, aiming to profit from growing demand for portable digital music players like Apple Computer Inc.'s (AAPL) iPod.

Cingular will let consumers transfer music from their computer to their phone from services such as Yahoo and Napster as well as Web-based music channels from satellite radio firm XM, people familiar with the matter said.

Yahoo's music service is called Music Unlimited. Dimensional Associates Inc runs eMusic.

Sprint and Verizon Wireless let customers download songs over the air while they are on the go and also let them transfer songs from their computer to their phone.

Because Cingular is coming to the market later than its rivals, analysts said it made sense for them to ally with subscription services to give consumers a wider choice.

"It would be a different approach to what Sprint and Verizon are doing, which is welcome because as the third one to enter the market they need to show differentiation," said Ovum analyst Roger Entner.

Some analysts had expected Cingular to sell a new music phone — the "iPhone" — that Apple is widely anticipated to launch next year.

Cingular last year started selling a Motorola (MOT) phone compatible with Apple's music store, but the device was overshadowed by the launch of the iPod Nano.

But Cingular's adoption of rival music services pits it against Apple's iTunes and could complicate any new partnership between the two.

As a result, Apple might first seek to sell its music phone in Europe rather than the United States, Entner said.

"Now [Cingular is] betting on a partnership with Napster, Yahoo and others that are much more dependent on it," said Entner. "It doesn't close the door [to Apple] but it strengthens Cingular's negotiating position."

An Apple representative declined comment.

Cingular representative Mark Siegel said Cingular's relationship with Apple "is a strong and important one."

Sprint said its customers have bought 8 million songs since it launched its music store around this time last year.