Yahoo! Enters Download Market With Musicmatch Buy

Yahoo! is buying Musicmatch Inc., a San Diego-based digital music service, for approximately $160 million in cash.

Yahoo! is buying Musicmatch Inc., a San Diego-based digital music service, for approximately $160 million in cash. Upon completion of the deal, Musicmatch will become a wholly-owned subsidiary of Yahoo! The transaction is expected to close in the fourth quarter of 2004.

The acquisition gives Yahoo! -- a company long interested in the digital music business -- a download solution to keep up with the likes of AOL, Microsoft's MSN and Apple Computer.

"Yahoo! is committed to being a major player in digital music," Terry Semel, chairman/CEO of Yahoo! Inc., says in a statement.

He notes that the deal is one of "several product innovations and new initiatives" the company intends to pursue to build its portfolio of music assets. Yahoo! already operates a subscription radio offering of its own under its Launch franchise.

Owen Seitel, partner and founder of Idell, Berman & Seitel, a San Francisco-based entertainment law firm, says that Musicmatch must now clear "consent for assignment" agreements with each of its business partners. Seitel mentions Hewlett-Packard, Dell and Gateway, which bundle Musicmatch software on PC desktops, as the company's more visible partners.

"Whenever a company is sold to a third party, the caveat is such that the buyer cannot be in direct competition with these providers," says Seitel. "Typically, right now, the legal teams are in the process of combing through all those agreements."

Musicmatch, founded in 1997, has evolved from a specialist in music-management software to a provider of Internet radio programming and on-demand subscription content and digital downloads.

The Musicmatch Music Store, launched last year, offers á la carte purchasing of more than 700,000 tracks.

Yahoo says the deal will almost double its radio listener base to over 23 million monthly Internet users.

Jupiter research estimates that sales from music subscriptions will grow from $113 million this year to $890 million in 2009, while downloads are anticipated to reach $803 million in 2009, compared to $158 million in 2004.


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