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Yahoo doubles price of online music service

Yahoo Inc. is doubling the price of its online music subscription service for portable MP3 players.
/ Source: The Associated Press

Yahoo Inc. is doubling the price of its online music subscription service for portable MP3 players, ending a short-lived promotion that tried to lure consumers away from Apple Computer Inc.'s market-leading iTunes store.

Effective Nov. 1, Yahoo will charge about $120 annually to download selections from a library of more than 1 million songs and transfer the music to portable players. The Internet powerhouse has been charging just under $60 annually — a price most industry observers predicted wouldn't last when Yahoo entered the market in early May.

Subscribing to the service on a monthly basis will cost $11.99, up from $6.99 under the initial pricing plan. That narrows the gap separating Yahoo's price from similar services offered by Napster Inc. and RealNetworks Inc.

Yahoo, Napster and RealNetworks are all trying to sell the concept of renting digital music instead of buying copies to keep permanently.

The rental approach is supposed to encourage customers to sample different genres and discover new artists because the song selections can be repeatedly changed at no additional cost.

Under the rental model, consumers must pay a recurring fee and synchronize their portable players with the subscription service at least once a month to preserve the music. If the subscription expires, the previously downloaded music becomes unplayable.

Customers at Apple's iTunes store, in contrast, keep all the songs that they buy.

Renters also can't transfer downloaded songs to a compact disc without paying an additional fee. Sunnyvale, Calif.-based Yahoo will continue to charge its subscribers 79 cents to own a song. iTunes charges 99 cents.

Piper Jaffray analyst Gene Munster said Yahoo's low rental prices didn't impress most consumers because the service isn't compatible with Apple's iPod — the ubiquitous device that controls about 75 percent of the market for portable players.

Cupertino, Calif.-based Apple has sold 28 million iPods since 2001, creating a large and loyal audience for its iTunes store.

"About 90 percent of the music store's success has to do with the devices that it works with," Munster said.

Yahoo's price increases should ease some of the competitors facing Los Angeles-based Napster and Seattle-based RealNetworks, said industry analyst Phil Leigh of Inside Digital Media. "Those guys are breathing a sigh of relief now."