Yahoo's pricing strategy is healthy for the future of Online Music Business

This price cut might put some short-term pressures on their competition: Napster and Real Networks have to follow suit, to stay competitive.

Oyster Bay, NY - May 11, 2005 - Just ten days ago, ABI Research published an "ABI Insight" titled, "Online Music and Movie Service Providers: Are They at the Bottom of The Distribution Food Chain? What is Their Future?"

In that Insight, we suggested that the present prices of $9.99 and $14.99 for subscriptions for PC and portable music downloads are way too high, and that content providers need to lower their prices by at least 20%.

Our opinion was vindicated today, as Yahoo did just that.

This price cut might put some short -term pressures on their competition: Napster and Real Networks have to follow suit, to stay competitive. While pricing across all providers will start to even out over time, the real advantage for Yahoo - - their real differentiator against Napster's early lead - - would be their 9 million email and matchmaking services subscribers. So, Yahoo has basically joined Real Networks and AOL in the big leagues of the online music industry.

Microsoft should have gotten its act together by now to take advantage of its MSN and Hotmail subscriber base, but still could turn up at the table very soon.

MusicNet wins big over its rival LoudEye

While the focus in the market has been on the retail service providers, this is really a big win for MusicNet, the wholesale music distributor that provides the backend infrastructure and content to Yahoo. Baker Capital, which owns MusicNet is sitting on a gravy train that could benefit from the booming online music business, not just in the US, but also in other parts of the world. If Baker Capital offers MusicNet as a public company, its growth potential will magnify in the coming months. On the other hand, LoudEye's stock price has dropped by over 50% in the past four months, signaling trouble within the company's operations following their recent high profile acquisitions - - another validation of the importance of successful IT and operational governance following M&A activities.

Journalists and other representatives of the media are invited to contact ABI Research to learn more about this significant development and to discuss its implications with our industry analysts.

Please call Beth Schechner at +1 -516 -624 -2542, or email

For more information about ABI Research visit

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