Yahoo! sings Duet's tunes
Published: 05 Apr 2001 16:20 BST
Web giant Yahoo! unveiled a partnership on Thursday with Duet, a joint venture between Universal Music Group and Sony Music Entertainment, to launch an online music-subscription service on its site by the summer.
The announcement is the latest in a series of deals this week attempting to push online music into new territory--making Web consumers pay. Now that the courts have forced the maverick Napster to restrict its file-sharing service of copyrighted songs, the labels have quickly created businesses centred on selling digital music on the Web.
The Yahoo!-Duet deal is significant in part because it sets up rival alliances of Internet and record-label heavyweights. Earlier this week, RealNetworks, AOL Time Warner's Warner Music Group, EMI Recorded Music and Bertelsmann's BMG Entertainment banded together to form a new subsidiary called MusicNet, which will create a subscription service as well. AOL Time Warner's America Online division will offer MusicNet's service to its members by summer.
Executives behind Duet and MusicNet have stated their intention to offer music from as many labels as possible. But no one has given strict assurances that MusicNet and Duet will work together, which could bode poorly for the labels.
"Neither of them will stand alone with a half catalogue available," said Aram Sinnreich, an analyst at Jupiter Research.
The growth of online music in the post-Napster world continues to hinge on the record labels, owners of copyrights to songs filling their extensive libraries. The labels have reformatted a fraction of their song vaults for downloads and have delved into ways to sell them online.
On Wednesday, for example, MTVi and RioPort said they would begin selling songs and albums from all five major labels via downloads.
Despite the flurry of partnerships, legislators have charged the labels with heel dragging. The Senate this week convened a hearing featuring testimonies by recording artists, record executives and online music executives to determine what extent the labels will let music grow on the Internet.
But the real challenge still lies with consumers, who up to now have been swept up by the full-blown accessibility of Napster. The big question is whether they will readily exchange free for fee.
Yahoo! would benefit greatly if the subscription service took off. The company has been under tremendous fire because of slipping revenues from cutbacks in online advertising spending. The company has been trying to introduce more "premium" services that charge visitors fees for access.
Adding a subscription service would help Yahoo! grow its non-advertising revenues which, in the eyes of Wall Street, would be a huge benefit for the company.
In morning trading, shares of Yahoo! surged as much as 26 percent before settling to a 19 percent gain of $2.38 to $14.81.
Investors rallied after Lehman Brothers analyst Holly Becker published a note that indicated the ripe opportunity to buy Yahoo! shares at their current low price.
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