Yahoo! Bolsters Music Service With Purchase

NEW YORK Yahoo! said today that it plans to acquire Musicmatch, a 7-year-old music software and services company, for about $160 million in cash.

The purchase, expected to close in the fourth quarter, is meant to strengthen the Sunnyvale, Calif., portal’s position in the digital music business in ad-supported media, such as radio and music videos, and on-demand distribution, with subscriptions and downloads. Musicmatch will complement Launch, a 10-year-old music service that was bought by Yahoo! in June 2001.

Rivals America Online and Microsoft’s MSN also have music offerings, with the latter introducing a downloadable song service earlier this month [IQ Daily Briefing, Sept. 1].

San Diego-based Musicmatch markets software that allows consumers to play, burn, download and organize music collections; a radio network that gives users free and premium streaming access to more than 900,000 songs and 200 pre-programmed stations; and an a la carte song download service with more than 700,000 tracks.

As to whether any of Musicmatch’s 170 staffers will be cut following the deal’s completion, a Yahoo! representative said, “Yahoo! would be evaluating Musicmatch’s current employee structure and will make decisions based upon what is best for both companies upon the close of the acquisition. We are very excited about the caliber of the Musicmatch team and look forward to integrating them into our overall team.”

Musicmatch CEO Dennis Mudd’s post-acquisition role and the viability of retaining the service’s name are still being determined, the rep said.