The race to rival the controversial online music site Napster took another step forward yesterday when internet concern Yahoo! joined Duet, the online music service created by Vivendi Universal and Sony Music Entertainment, two of the world's largest recording groups.
The move comes days after AOL Time Warner, Bertelsmann, EMI and RealNetworks announced the formation of a digital music venture, MusicNet.
Napster is attempting to comply with a court order designed to stop the swapping of copyright music. It has set up filters to block access to disputed material . But the music industry claims the filter is not effective enough and is threatening further legal action.
Shares in Yahoo!, which have lost more than 90% of their value over the past year, rose 23% to $15 yesterday as analysts welcomed evidence that it would earn more revenue from regular subscribers. More than 80% of the company's revenues are derived from the cyclical advertising market.
Under the non-exclusive pact announced yesterday, Yahoo! will market Duet's online subscription service to its 185m monthly users. French-based Vivendi and Japan's Sony corporation represent two of the biggest music companies in the world with artists such as Jennifer Lopez and Elton John.
Music analysts believe that all five recording companies owned by the big media groups will eventually license their music to several subscriptionservices, allowing those services compete for users.
Eric Scheirer, an analyst at Forrester Research, said: "These announcement - all coming as a flurry on top of each other - legitimate the thought that the digital music market is taking shape in a fairly healthy way versus a single label service.
"The prospect that we see, in a year or two, is that of many different music services innovating and outcompeting each other, and that's a great music opportunity."
Jean-Marie Messier, chairman and chief executive of Vivendi, said: "The number of consumers seeking music online is large and growing, and we want consumers to have legitimate access to all their favourite artists and songs. We hope that other major music companies and independent music companies will join Duet."
The flurry of deals comes as Napster has struggled to block copyrighted work from its system following its defeat in a landmark legal ruling earlier this year. The company has also announced plans for a new subscription service with Bertelsmann this summer, infuriating many of its 50m-plus members who had downloaded songs free under the old service.
Both Duet and MusicNet hope to have introduced their new fee-paying services by this summer.
Duet's subscription service will let users compile personal playlists and share them with other Duet members. The service is expected to start with streaming music and plans downloads later.
Shares in the California-based group have plummeted amid concerns over the future of the internet in general and a management vacuum in particular. Yahoo! shook the market last month when it warned that its first-quarter results would fall well short of already lowered Wall Street estimates.
