Yahoo joins music downloads battle

A CUT-THROAT entry by Yahoo into the subscription-based music download arena dominated by Apple Computer's iMusic has sent the shares of other rivals Napster and RealNetworks into freefall.

Yahoo launched its subscription service at a third the price Napster charges. For $60 (£32) a year, subscribers will get access to a million songs.

The services is so far available only in the US but a British version is on the way.

Napster shares were down almost 27% at $4.65 while RealNetworks fell 21% to $5.76 and Apple closed at $35.61, down 2.2% after earlier falling as low as $33.11. Yahoo's shares finished up 2.4% at $34.88.

Gene Munster, an analyst at Piper Jaffray, believes Yahoo is now a true believer in the music download phenomenon and is trying to make up for lost time with its aggressive pricing.

'Bottom line, Yahoo realised that this is the music distribution avenue for the next 20 years and will spend money in the next one to six months to make up for lost ground,' he said.

Napster chairman Chris Gorog reckons that Yahoo will have to increase prices within months and believes consumers will not tolerate the amount of advertising that he says come with the new service.