After Yahoo Inc. acquired Santa Monica-based Launch Media in 2001, the streaming radio service that also offered music videos took a back seat to higher-profile Yahoo services.
“If you were an active user of Launch, it was clear that you were on Yahoo,” said David Goldberg, founder of Launch and now vice president and general manager of Yahoo Music. “But for the casual user, it might not have been that clear.”
But in the wake of Apple Computer Inc.’s success with iTunes the company reported users downloaded more than 250 million songs at 99 cents per song last year and the emergence of music download services like Los Angeles-based Napster Inc., Yahoo is now playing catch-up.
Earlier this month, Yahoo re-branded the Launch music site to become Yahoo!Music in an effort to funnel more users to its music properties.
The marketing effort comes at a time when Yahoo is flexing its entertainment muscle in Los Angeles. Last month, the Sunnyvale-based Internet concern agreed to lease 250,000 square feet of space in Santa Monica’s Colorado Center to consolidate its burgeoning entertainment business that will create original content, in the form of streaming media and recorded music. Yahoo also signed an exclusive deal with JibJab Media Inc., the creator of animated short political spoofs.
In the music arena, last October Yahoo paid $120 million for San Diego-based MusicMatch, a direct competitor in the music download business to iTunes, Napster and RealNetworks Inc.
At the time, MusicMatch boasted 225,000 subscribers for its monthly music-downloading service, each paying varying rates under different plans. The site also allows users to buy individual songs for 99 cents a piece, as iTunes does.
Goldberg said MusicMatch’s subscriber numbers have increased since its acquisition, but would not disclose by how much.
Napster reported 270,000 paying subscribers at the end of 2004, and RealNetworks announced 700,000 subscribers to its Rhapsody subscription music service for 2004.
The MusicMatch service isn’t part of the Yahoo!Music site yet. “We plan to integrate that more fully, we just haven’t done it yet,” Goldberg said. He called the rebranding part of step one in bringing MusicMatch into the Yahoo fold.
Yahoo!Music currently offers a free Internet radio service called Launchcast, plus a subscription service called Launchcastplus, which offers commercial-free radio and song-skipping capabilities. Goldberg declined to release subscription figures for the Yahoo!Music properties, instead citing the 25 million visitors per month to all of Yahoo’s entertainment sites.
“Yahoo could be the 800-pound gorilla in this space if they really choose to be,” said Christopher Rowen, media technology analyst who covers Napster and RealNetworks for SunTrust Robinson Humphrey Capital Markets. “Up until now, they’ve been a very quiet service.”
The challenge will be converting visitors into paid users.
“We’ve done very well in delivering free content to users. A lot of what we do is attract users to the free site and expect them to move into the paid site,” Goldberg said. “We have a lot more users in the free version.”
A few months after its 2001 purchase of Launch, Yahoo laid off 50 Launch employees, or almost 30 percent of its work force. The current Launch operation will move across the street to Yahoo’s new Colorado Center offices.
For now, MusicMatch’s staff Goldberg didn’t say how many there were will remain in San Diego and Orlando, Fla.
Rowen said that for all the excitement in the music download sector, “it just doesn’t seem to be a huge focus for them right now.”
He pointed out that Napster’s revenue forecast for 2006 is about $212 million. “What is $200 million compared to Yahoo’s $3.6 billion annual revenue?” Rowen said. “Online and subscription music could be a home run for Yahoo, but it could still be too small a market for them.”
