Yahoo’s low-cost music service already hurts rivals

SAN FRANCISCO — Yahoo Inc.’s steeply discounted foray into online music subscriptions struck a sour note Wednesday with the shareholders of Napster Inc. and RealNetworks Inc. — the owners of the rival services that stand to lose the most from the new competitive threat.

Napster’s shares plunged $1.70, or 26.8 percent, to close at $4.65 on the Nasdaq Stock Market, where RealNetworks’ shares fell $1.54, or 21.1 percent, to $5.76.

Yahoo’s entrance into the music downloading business even hurt Apple Computer Inc., which runs the dominant online music store with more than 400 million songs sold since it opened two years ago.

Wednesday’s stock market reaction reflected a wide belief that Yahoo’s music subscription service, introduced Wednesday, will force Napster and RealNetworks to either lower their prices or risk losing subscribers.

In an effort to make up for lost time in the booming digital music market, Yahoo is offering consumers unlimited access to a library of 1 million songs for as little as $4.99 per month, or about $60 annually.