Yahoo! Subscription Service Faces Tough Road vs. Apple’s iTMS

Yahoo! has a good online subscription music model, but it will not be easy for it to unseat the undisputed leader in Appleis iTunes Music Store (iTMS), an analysis by Business Week columnist Peter Burrows concludes.

Mr. Burrows said Yahoo! faces a tough battle with its Music Unlimited service and that it wonit overtake Apple "overnight.

"Changing consumer behavior -- renting, not buying music -- will take some doing," he wrote. "Also, itis hard to make money on new types of subscriptions that allow folks to download tunes to portable players, at least at Yahoo-like prices...Since (Apple) makes nearly all of its music profits from the iPod, it has little incentive to create a subscription service -- or to make iPods compatible with those that exist. Simply put, thereis not enough demand."

Can anyone make money selling subscriptions at Yahoois attractive price? Mr. Burrows believes the cons outweigh the pros and that Yahoo! might be forced to raise its subscription rates at some point.

Many music execs believe Yahoo is charging too little and could get consumers hooked on unsustainably low prices," he wrote. "If downloads havenit changed the way most people get music, perhaps subscriptions will. Yahoo and MSN are counting on it. But theyive got a long way to go before they give Apple CEO Steve Jobs a reason to turn up the volume.

Mr. Burrows also acknowledged the long-running rumor that Microsoft is on the verge of launching a similar service to Yahoois and is "waiting for the right moment to strike with its own low-cost introductory offer."

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