Yahoo! Acquiring Launch Media

The urge to merge continues apace in the online music space as Yahoo Inc. said it has agreed to acquire Launch Media Inc., which offers an array of music and music-related editorial content, in a $12 million cash deal.

Yahoo, moving to bolster its entertainment offerings, said it will acquire all of Launch’s outstanding shares at 92 cents per share.

Santa Monica, Calif.-based Launch’s stock price soared 32 cents in early trading, as it had closed yesterday at 58 cents a share. Clearly Yahoo got a bargain; Launch’s 52-week high is is $9.25 a share.

Meanwhile, just in time to be acquired, Launch said that it has settled major aspects of a copyright infringement suit brought by Universal Music Group and other major record labels in connection with its Internet radio service.

The acquisition deal today follows a wave of activity in the online music arena, prompted in part by all the lawsuits that crippled Napster, opening the door for more potential profitability in Internet music distribution. In fact, a RealNetworks announcement last April that it would form an online music subscription service in conjunction with AOL Time Warner, Bertelsmann AG and Emi Group opened the doors to consolidation as companies scrambled not to be left behind.

MusicNet’s and Duet’s wheelings and dealings, for instance, have all the makings of a nuclear arms race. Some of the other recent deals include Vivendi Universal’s acquisition of MP3.com, Universal’s devouring of EMusic.com and Loudeye’s recent deals with MSN and others.

For its part, Santa Clara, Calif.-based Yahoo said today’s move is part of its “commitment to provide online music fans with the most compelling and comprehensive music experience.”

Yahoo said Launch’s services will complement its current entertainment offerings, including Yahoo Music, Yahoo Broadcast and Yahoo Radio, by giving Yahoo users access to on-demand music videos, exclusive artist features and music news covering all genres. In addition, consumers will have the ability to experience streaming music stations with audio and video content tailored to their entertainment tastes.

Launch’s co-founders co-founders, CEO David Goldberg and President Bob Roback, will remain with the company following the acquisition.

As to the copyright settlement with Universal Music Group, Launch will make an unspecified payment for past performances, and has entered into a non-exclusive license with UMG for use of UMG-controlled recordings in LAUNCHcast, its Internet radio service.

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