Yahoo! Takes Center Stage With Music

Yahoo!(YHOO Quote) has entered the business of selling music online -- and the businesses involved in selling music online are reeling from the news.

Yahoo! took the wraps off a beta version of a new service, called Music Unlimited, that lets subscribers play songs from a catalog that's a million songs deep, transfer tracks onto portable digital-music players and share music via Yahoo! Messenger. New subscribers will be charged $6.99 a month for the service, or at a rate of $4.99, if they sign up for a full year.

Yahoo!'s stock was little changed on the announcement, down less than a percent to $33.82. But the stocks of companies much more dependent on online-music sales suffered as Yahoo! elbowed its way into their core market. RealNetworks(RNWK Quote) was down 21% to $5.79, and Napster(NAPS Quote) was down 32% to $4.32. Apple(AAPL Quote), which has been trying to parlay the success of its ubiquitous iPods into steady music sales, was down 6% to $34.40.

Of course, it's no surprise that Yahoo! would push into selling music, or that it would copy the model of blending subscription with a pay-per-download option with its own frills. What sets Yahoo!'s version apart -- and what's bad news for others already selling music online -- is the way Yahoo! has bolstered its offering with other pieces of its content empire.

Ramping its Music Unlimited service up into an immediate threat to Rhapsody, Napster and iTunes is a piece of cake for Yahoo! Not only has it built up strong relationships with the top music labels with the music videos it already offers, but it's past acquisitions of Internet-radio station LaunchCast and music player MusicMatch allow it to roll out a fully developed product.