Yahoo buys online firm Musicmatch

Wed., Sept. 15, 2004

Associated Press

SAN FRANCISCO – Yahoo Inc. is buying online jukebox provider Musicmatch Inc. for $160 million in a deal designed to broaden the Internet giant’s appeal among the growing audience of consumers who buy songs off the Web.

The all-cash acquisition, announced Tuesday, gives Sunnyvale-based Yahoo a major drawing card as it competes against the likes of Apple Computer Inc., RealNetworks Inc. and Napster in the rapidly growing field of digital music management.

“This really rounds out everything we do in music,” Dave Goldberg, general manager of Yahoo’s music division, said Tuesday. “We want to offer users a way to interact with digital music in any way that they want.”

Investors applauded the deal. Yahoo’s shares surged more than 5 percent, or $1.67, to $33.54 during Tuesday’s trading on Nasdaq. San Diego-based Musicmatch will provide Yahoo with two features that it doesn’t currently offer – an online music store that sells individual songs for 99 cents apiece and a popular software program that helps manage digital music on computer desktops.

Musicmatch’s digital jukebox, available in 10 languages, includes 700,000 songs. Besides letting consumers download songs a la carte, Musicmatch sells an $8-per-month subscription service that lets customers listen to any song in the library at any time on the Internet. About 225,000 subscribers pay for Musicmatch’s unlimited access service.

Privately held Musicmatch doesn’t disclose its financial results, but digital music industry analyst Phil Leigh estimated the company has annual revenue of about $50 million.

By linking the digital download service to its streaming radio service, Musicmatch has become particularly effective in spurring impulse purchases on the Internet, said Leigh, who runs a market research firm called Inside Digital Media.

Musicmatch’s music management software also is a crucial component in the deal, Leigh said, because so many consumers are transferring songs from their existing CD collections to personal computers and other digital devices.

Yahoo’s musical hub right now is an online radio service that’s offered for free. The company expects its music audience to climb from about 12.9 million listeners today to 23.9 million after the Musicmatch acquisition is completed during the final three months of the year.

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Yahoo buys online firm Musicmatch

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