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Yahoo! Could Hammer Google, Completely Disrupt Music Industry

NEW YORK (TheStreet) -- As I lamented in The Stupidity of the Music Industry Is Absolutely Stunning, record labels and other cogs of the music industrial complex continue to put their fate in the hands of companies with what are almost always different and sometimes competing interests. We've seen it with Apple (AAPL - Get Report). We're seeing it with Pandora (P - Get Report). And we'll continue to witness technology companies exploit opportunity the music industry leaves on the table -- often at the music industry's expense.

Along with Google (GOOG - Get Report), Yahoo! (YHOO - Get Report) has the best opportunity to create fresh (and maximize existing) opportunities.

With focus on Google, I explained -- in detail -- what a Google or Yahoo! buyout of Pandora could look like in April's Google or Yahoo! Buying Pandora Makes a Ton of Sense. In this article, I consider Yahoo! specifically.

For background you really must read the above-linked article as well as my ongoing narrative with respect to Yahoo!'s visionary foray into live concert streaming. You can link to several of those stories in Wednesday's piece where I defend Yahoo! CEO Marissa Mayer. Granted that's a fair bit of reading, but I put a ton of work into researching and understanding this space. Standard hit-and-run jobs simply cannot do the subject matter justice. And, simply put, if you don't understand it, you don't completely understand Yahoo!

That said, with or without seeing the background, a buzzword that makes me cringe absolutely does apply here -- synergy. There's so much synergy between what Yahoo! can do via its search business, live concert streaming on Yahoo! Screen and a well-integrated Pandora it's mind blowing.

Right now, with respect to music, Yahoo! Search is not all it could be even when it (sort of) is).

Consider the following juxtaposition.

When I search for "Taylor Swift" I get this:

When I search for "Dave Matthews Band" I get this:

The Taylor Swift search is weak. It turns up news results and attendant links that go everywhere but to Yahoo! Down the page you get to Yahoo! Screen for Taylor Swift videos, but they're Vevo videos only accessible through Screen because of a partnership between the two companies.

Meantime, the DMB search winds up potentially more lucrative for Yahoo! because I can link to this -- an archived video from the concert Yahoo! Screen live streamed last month in Jacksonville as part of its deal with Live Nation (LYV - Get Report):

Imagine how Yahoo! -- if it goes nuts to the struts on this -- can make its search more satisfying/all-encompassing for the user and more lucrative for itself with a buyout of Pandora. For starters, Yahoo! could ixnay the Download from iTunes button that sits at the bottom lefthand corner just out of view in the screenshot above. Yahoo! could insert something like Play Dave Matthews Band Radio on Pandora. That would look fantastic on the right sidebar of the original search results page where it could replace the Wikipedia description and link with the offer to fire up DMB Radio or other artists DMB fans likely have an affinity for.

The more control Yahoo! has over distribution, the better job it can do monetizing in various directions. Or, better yet, not missing out on monetization opportunities and, in the process, ensure that people associate the content they're seeing with the Yahoo! brand. We're already seeing Yahoo! build this ecosystem out. I have shown examples as well as opportunities in this article related specifically to search, but here's another nice illustration culled from Yahoo!'s homepage Thursday morning:

In this case, no longer is a Yahoo! news/general interest story at its homepage merely a throwaway click. It delivers more bang for Yahoo!'s buck as well the visitor's time. When you click through you get the story about One Republic's frontman, but you also see a promo to watch the band live on Yahoo! Screen Sunday, August 10th, alongside several relevant video opportunities. Of course, they're mostly still via or in conjunction with Vevo, which makes you wonder why Yahoo! isn't in on the bidding to buy Vevo (or maybe it is!?).

In any event, it doesn't take a scientist who specializes in rockets to figure out the massive potential here. Even if that scientist includes bashing Marissa Mayer on his or her curriculum vitae. Music is an incredibly lucrative area. One that people search for constantly using seeds such as (insert artist here) tickets, songs, videos, lyrics -- you name it. It's one of the few areas in our world that's not -- surprisingly -- over-saturated and hyper-exploited. Google can't even seem to get its plans together for a Spotify-like streaming music service. And, when it does, I highly doubt it will be as well integrated as what I describe here.

Bottom line -- Mayer should look long and hard at acquisitions in this broad space. Pandora. Vevo. Ticketfly. They all make sense. Much more sense than spending all that money for Tumblr only to access mobile users. These other platforms not only have the user base, but immediate and obvious (though not that obvious because others have yet to meaningfully go there) integration opportunities that will produce revenue while taking significant steps to build Yahoo!'s brand.

--Written by Rocco Pendola in Santa Monica, Calif.

Rocco Pendola writes for TheStreet. He lives in Santa Monica. Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.


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