Yahoo Shutters Music Service

Highlighting the shift toward free, ad-supported music online, Yahoo announced Monday it was shutting down its subscription music service and redirecting its customers to Real Networks' Rhapsody service.

The move wasn't a huge surprise, given recent rumors Yahoo might launch a free new music service and the company's own public statements that it was de-emphasizing its Yahoo Music Unlimited subscription service.

"The fact of the matter is that building a great premium music service takes a huge amount of resources and effort, and it was taking energy away from our important main offerings, music.yahoo.com, music videos, and LaunchCast Radio," wrote Ian Rogers, general manager of Yahoo Music, in a post Monday on the company blog.

Since coming in as GM last year, Rogers has championed the goal of creating a more open environment within Yahoo Music where users can easily recommend and share music and otherwise interact with each other and the site. To that end, Yahoo also announced the acquisition of FoxyTunes, a plug-in that lets users control any of 30 different media players including iTunes and Pandora from their browser.

With iTunes dominating paid downloads, a group of free, ad-supported music services has emerged recently as a legal alternative including CBS' Last.fm, Spiralfrog, imeem and Qtrax--if it actually ends up nailing down licensing agreements with the major labels. As the Web's top music site, with some 25 million monthly visitors, Yahoo Music certainly doesn't want to lose ground to an array of new competitors.

"From an advertising perspective, Yahoo Music has been a good property for big brands like Nissan and Pepsi," said Edward Montes, executive vice president and managing director, North America, at Media Contacts, the interactive arm of Havas' MPG. Before joining the agency in 2004, Montes had served as director of special projects for Yahoo's media, entertainment, information, and finance groups.

He noted that during his Yahoo tenure there was often tension within Yahoo Music over how much ad inventory should be dedicated to promoting the subscription service and how much given over to brand advertising. Presumably, any remaining tension would now be gone, freeing Yahoo to boost ad sales efforts for the site.

Of course, the looming possibility of a Microsoft takeover of Yahoo adds a question mark to any long-term plans the latter has for redefining its music offering. Microsoft in 2006 launched its Zune music service and player to compete with the iPod. The service offers both a la carte downloads and a $14.99 monthly "Zune Pass" subscription.

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