Peter Kafka

Recent Posts by Peter Kafka

Yahoo’s Music Outsourcing Continues: CBS Takes Over Radio Offering

Here’s a Yahoo story I can report with certainty: The company is getting out of the Internet radio business, by handing over its Launchcast streaming music service to CBS.

The transition will kick in during the first few months of 2009, says Michael Spiegelman, who heads up Yahoo’s music unit. The two companies will share any ad revenue the service generates.

It’s one of a series of moves Yahoo (YHOO) is making to essentially outsource its music offerings to third parties; earlier this fall the company rolled out a partnership with RealNetworks’ (RNWK) Rhapsody service to provide free streaming music alongside search results.

For CBS (CBS), this represents yet another bet on digital music. The company already boasts 4.5 million monthly users for its Web radio offering, many of whom come from the AOL music service it powers. The Yahoo deal will add another three million users. That’s in addition to the audience that uses, the Web music service it purchased for $280 million in 2007.

CBS boasts that Yahoo users will benefit by getting access to 150 additional radio stations, including actual CBS radio stations like WFAN in New York and WXRT in Chicago, which is nice. Potentially more meaningful: The new service will work on Apple (AAPL) computers and will also support Mozilla’s FireFox browser; Yahoo’s current offering only works on Microsoft’s (MSFT) Internet Explorer.

Other changes: Yahoo will phase out its paid version of Launchcast, which costs up to $3 a month and offers commercial-free programming. And while the current Launchcast player gives listeners the ability to customize their stations by selecting a mix of artists they’re interested in, the new CBS-powered player will offer a “much more programmed radio experience,” Spiegelman says. About two-thirds of Yahoo’s users end up selecting preprogrammed stations, anyway, he says.

A few years ago, this move would have had more meaning for the digital music world because Yahoo was one of the biggest players in the industry. But like other areas of Yahoo’s content business, the music group has scaled down both internally and externally: It has lost a series of executives, it has sold off its music subscription business to RealNetworks, and users who once turned to it for digital songs and videos have migrated to other parts of the Web.