We hear that Yahoo (YHOO) has tried to sell its music subscription service, which lets users listen to all the music they’d like for $9 monthly fee. So far, no takers: The company was chatting with RealNetworks (RNWK), which has its own Rhapsody service (recently merged with MTV’s Urge sub service), but talks fell through.
This wouldn’t be a shock – Jerry Yang has already talked about moving away from Yahoo Music’s slow-to-no growth “premium” service and focusing on its free, ad-supported site, which remains a valuable asset with some 25M uniques.
So what could the subscription service fetch? Yahoo doesn’t break out numbers, but we’re told it’s modestly profitable and has 500,000 to 600,000 subscribers. Call it 550,000. Rival music subscription service Napster (NAPS) had 750,000 subs at last count, and now sports a market cap of all of $90 million, making each sub worth $120. At that valuation, Yahoo’s service could fetch $66 million. A more optimistic (or cynical) observer suggests that the market is particularly unhappy with NAPS management, and that Yahoo could fetch $200 per sub, or $110 million.
The bigger question: Why would anyone want to buy a music subscription service? With Yahoo out of the market, there are only two strategic buyers: NAPS and RNWK. And as we’ve said many times, subscription services sound great on paper, and have a small, passionate user base, but have yet to catch on with the general public.
There’s a long list of action items that could help improve the services’ prospects: Getting better rates from the music labels, working out nagging technical and copyright problems that still dog the services, etc. But it may just be that consumers either want to pay for individual songs, a la Apple’s iTunes model, or pay nothing at all.
See Also: Napster: Needs a New Business Model
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