Yahoo! Snaps Up Musicmatch

In a deal worth approximately $160 million, Yahoo will acquire Musicmatch, adding the company to the growing ranks of portals with major digital music offerings.

The company’s acquisition by Yahoo comes immediately in the wake of MSN’s launch of a digital music service two weeks ago. Both portals are eager to play in the space where Apple’s iTunes has had such extraordinary success, but they have some catching up to do. The iTunes service boasts 100 million downloads already, and has already launched internationally.

Yahoo has already aggregated quite a large music audience through its LAUNCH music destination. That audience will almost double from 12.9 million to 23 million following its purchase of Musicmatch, according to August numbers from Nielsen//NetRatings. LAUNCH offers music-related content, streaming audio and music videos. Musicmatch provides streaming audio of more than 900,000 songs and more than 200 pre-programmed stations. It also has an a la carte song download service, which offers access to more than 700,000 tracks.

A Yahoo spokesperson said the company has not yet determined the degree to which Musicmatch will be integrated into the LAUNCH platform.

Yahoo said it would continue with Musicmatch’s strategy of offering both ad-supported and paid access to music and Web radio streams. The firm will also likely use Musicmatch’s interface to cross-promote its other properties. Song giveaways, such as those undertaken between Pepsi and iTunes, among others, are another possible model.

In a separate announcement today, Yahoo said it would promote the Austin City Limits Music Festival with three days of Webcasts on LAUNCH. The deal was struck with event sponsor SBC Communications.

“The combination of our strengths will help us execute on our vision of providing music fans the best and broadest suite of music products and services, from discovery to distribution to music management,” said David Goldberg, VP and general manager of music for Yahoo “This acquisition also gives Yahoo a strong position in the digital music business, in both ad-supported media, such as radio and music videos, and on-demand distribution, with subscriptions and downloads.”

Yahoo also recently entered a licensing deal to attach the Yahoo brand to certain consumer electronics products. While the company would neither confirm nor deny that a Yahoo branded music player is a part of the acquisition strategy, it did leave the door open for such a gadget integration.

“We realize music is going to be enjoyed best by consumers if they have the ability to access it however, whenever and through whatever mechanism possible,” Yahoo’s spokesperson said. “To the extent that new devices will be embraced to help people enjoy music, we certainly will be on the forefront of making that happen.”

Musicmatch’s digital music service is offered through a downloadable player, called Jukebox. Founded in 1997, the company offers online listening, downloads and software to organize music.

“By combining assets with LAUNCH, we believe that Musicmatch will have an even stronger position to take advantage of the rapidly growing digital music segment,” said Dennis Mudd, CEO and founder of Musicmatch.

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