Yahoo Kills Music Service, Shunts Users to Rhapsody

Yahoo Inc. will cease operating its online music subscription service and switch its customers to RealNetworks Inc.'s Rhapsody music service as part of a new deal between the companies that calls for Yahoo to promote Rhapsody on its site.

Terms of the deal, to be formally announced Monday, were not disclosed. The move is part of Yahoo's overhaul of its online music offerings.

"People want to have music and consume it in lots of different forms and across different devices and platforms and we want to have a play in as many of those as we can," said Scott Moore, Yahoo's head of media.

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Moore said the partnership would allow Yahoo to focus its energies more on free, ad-supported music and other media offerings.

Yahoo Music Unlimited lets users download an unlimited number of tracks that are playable as long as their plan is active.

Under the Yahoo-RealNetworks partnership, subscribers to Yahoo Music Unlimited will be shifted to the Rhapsody service sometime in the first half of this year.

Yahoo subscribers' music library and payment plans will remain the same for a limited time after the switch, but those wishing to remain on Rhapsody eventually will be required to sign up at Rhapsody's rates.

Yahoo's subscription rates range from $5.99 a month, if users pay for a full year in advance, or $8.99 a month. Rhapsody memberships start at $12.99 a month.

Yahoo executives declined to say how many subscribers their music service has. Rhapsody has 2.75 million subscribers worldwide, including customers signed up for its premium radio and mobile music services.

Sunnyvale, Calif.-based Yahoo has been hurt by sliding profits and a new management team is trying to turn the company around. Last week, it received an unsolicited $44.6 billion offer from Microsoft Corp.

As part of its deal with RealNetworks, Yahoo will integrate Rhapsody into its online music portal, something both companies hope will translate into new Rhapsody subscribers.

"They are our subscription partner going forward and there's money to be made for both of us in that," Moore said.

The two companies also intend to collaborate on other digital music services, including offering music downloads, the companies said.

In addition to its music subscription service, Yahoo offers free streaming audio, music videos, Web radio. It also operates a premium Internet radio service.

The company's management said last fall it had begun to de-emphasize its subscription model in favor of an advertising-supported music service.

The Internet pioneer also planned to announce Monday that it had acquired FoxyTunes, a browser plug-in that offers — among other features — online searches for music, lyrics and other content tied to media playing on a computer. It also recently launched a Web-based media player.

Moore said the company is still working out the details of upcoming changes to its music offerings, but noted music downloads and ad-supported music would play a role.

"We already have a very significant streaming ad-supported business and that's something that I'm particularly interested in continuing to expand," Moore said. "In terms of downloads, that's another area where I'm not quite ready to talk about yet, but we're very interested and we're exploring our opportunities."

Both Yahoo and Rhapsody have previously offered a limited number of tracks in the MP3 format.