Wired Blogger Analyzes the Yahoo-Musicmatch Fiasco

yahoo2.jpgMore on Yahoo’s decision to shut down Musicmatch: On Wired’s Listening Post blog, Eliot Van Buskirk asks why Yahoo would have paid $160 million for Musicmatch back in 2004, “only to let it let the assets they acquired stagnate as they focused on the (largely duplicative) Yahoo Music Engine/Unlimited,” according to an insider close to the situation.

In fact, all Yahoo did after the acquisition is relocate a few Musicmatch employees and then revise their own Yahoo Music Store two years later.

While picking up an additional 225,000 music subscribers could have been part of the reason, Buskirk thinks that there’s more to the story. He theorizes that it was more about Yahoo getting out of paying MP3 codec licensing fees.

Here’s his take: “Thomson Multimedia, which owned 20% of Musicmatch (starting in April 1999), administers the licensing fees for the MP3 codec. Musicmatch was able to offer free MP3 ripping before any other large-scale application because it didn’t have to pay the fees. Could Yahoo’s purchase of Musicmatch involved some sort of inoculation against having to pay Thomson licensing fees for the MP3 codec?”

It’s an intriguing idea; tech companies have certainly been bought, sold, and dissolved for less.

Why Did Yahoo Pay $160 Million for Musicmatch? [Listening Post]