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Clash of the Tech Titans

By Russ Walker
washingtonpost.com Staff Writer
Wednesday, September 15, 2004; 9:47 AM

The Internet's biggest players are preparing for all-out war, adding new weapons to their arsenals in hopes that they can offer the best full suite of digital services to future Net users.

Two news items from yesterday highlight this digital arms race: Yahoo plunked down cash to buy Musicmatch, and Amazon.com unveiled a more-developed version of its A9 search engine.

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In writing about the Yahoo acquisition, USA Today stressed the martial theme, writing: "The digital music wars rumbled again Tuesday, when Yahoo, the Internet's most visited Web site, bought music software company Musicmatch for $160 million." The newspaper reminded its readers high-up that this is just the latest maneuver in a campaign involving the biggest name brands in tech: "The last few weeks have seen a flurry of music deals and moves by Microsoft, RealNetworks, America Online, and Roxio's Napster aimed at stealing business from industry leader Apple Computer."
USA Today: Yahoo Buys Musicmatch for $160 Million

So what advantage does Musicmatch offer Yahoo? CNET's News.com offered up a lengthy analysis piece answering that question. Excerpt: "A giant in the online radio business, Yahoo has been slow to follow Apple Computer and others into digital music sales or subscriptions. ... The acquisition will take some time to be integrated with Yahoo's other music products, such as Launchcast. But it will give the company a solid platform from which to take on increasingly powerful rivals such as Microsoft, Apple and Sony." The Wall Street Journal backed up that thought: "Analysts said the acquisition makes Yahoo a serious contender in online music. 'The real strength of Musicmatch is their software, which really links into the primary activity people have in digital music, taking their existing CDs and putting them on their computers,' said Phil Leigh, analyst at research firm Inside Digital Media in Tampa, Fla."
News.com: Yahoo's Long and Winding Music Road
The Wall Street Journal: Yahoo Agrees to Buy Musicmatch to Take On Apple and Microsoft (Subscription required)

"Yahoo, already one of the Web's busiest destinations, believes the addition of San Diego's Musicmatch will expand its current online music audience of 12.9 million unique monthly users to an estimated 23 million," the San Francisco Chronicle reported. The Chronicle, like many other newspapers, noted that Musicmatch currently boasts 700,000 song titles in its library and 225,000 subscribers.

The Chronicle and the New York Times were the only two news organizations that stressed the iPod issue. Sure, Musicmatch is a great acquisition, but will it really help when so many consumers say they already own or are planning to buy Apple's trendy portable music device? Here's the Chronicle's reporting: "Gene Munster, senior research analyst for PiperJaffray, said the deal shouldn't pose a short-term threat to the iTunes Music Store, which has about 70 percent of the music downloads market, because Apple still has something that Yahoo doesn't -- iPod digital music players. A recent PiperJaffray survey showed most consumers who bought music online owned or wanted to buy an iPod, the only digital audio player designed to work directly with songs purchased through the iTunes Music Store."
San Francisco Chronicle: Yahoo to Enter Music Fray

The New York Times quoted Inside Digital Media's Phil Leigh, who pointed out that Musicmatch "had a significant flaw because its songs cannot be played on Apple's iPod devices, by far the most popular portable music players. 'Of the tracks people are paying to download,' Mr. Leigh said, 'the majority of them are going on iPods.'" However, Yahoo Chief Operating Officer Dan Rosensweig countered, saying "that by next year, non-Apple music players will represent the majority of the market, making compatibility with the iPod less crucial."
The New York Times: Yahoo to Buy Online Music Seller for $160 Million (Registration required)

The News.com piece referenced above also made the important observation that "the only giant left on the sidelines with Tuesday's announcement is Amazon.com, which offers some free digital downloads on its site but has not announced any plans to sell digital music. The e-commerce giant has repeatedly said it would not comment on its music plans, if any." But maybe not for long, according to the ever-quotable Phil Leigh, who offered up this prediction for the San Jose Mercury News: "'I would think Amazon, MTV and Google would be likely suspects to get involved now,' [said Leigh]. 'The marketplace is getting incredibly legitimate.'"
The San Jose Mercury News: Yahoo Boosts Music Portal (Registration required)

Search and Remember

Amazon.com's much-anticipated release of its A9.com search service didn't get nearly as much attention in the press as Yahoo-Musicmatch, but it's arguably the more important story. Here we have the biggest online retailer in the world taking direct aim at the likes of Yahoo, Microsoft and Ask Jeeves. Notice that Google wasn't mentioned there. That's because Google is providing search technology for A9 -- at least for now.

News.com did a good job of unraveling the Google-Amazon relationship: "Under the hood, A9 is powered by technology from Google and Amazon's Alexa subsidiary, and it draws on reference information from GuruNet and the Internet Movie Database, among other sources. It also displays Google-sponsored ad listings. Amazon's relationship with Google mirrors one that Google forged with Yahoo during the late 1990s -- a relationship of 'coopetition,' some industry watchers say. Amazon and Google are cooperating within a technology partnership, but they are also competing for Web surfers' allegiance."
News.com: Amazon Powers Up Internet Search Engine

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