NEW YORK (CNNfn) - Myplay.com would be a small, yet potentially valuable, addition to Yahoo!'s chorus of online communities if Yahoo! follows through on a reported pursuit of the Internet music company, analysts said Thursday.|
Yahoo! Inc. (YHOO: Research, Estimates), a $580 million leader in the Web media arena, is working on a deal to buy Redwood City, Calif.-based Myplay Inc., in a pact that could be worth about $200 million, the Wall Street Journal reported on Thursday.
Myplay's Web site, a so-called "music locker," lets users compile copies of their CDs and songs downloaded from the Internet, create playlists, and share their music with others.
"It complements what Yahoo! is attempting to build on the convergence media side pretty nicely," said Derek Brown, analyst at W.R. Hambrecht & Co. in San Francisco.
Representatives for both companies refused to comment on Thursday afternoon.
The deal would beef up Yahoo's music offerings, a popular hobby for consumers that is strategically critical because of its tendency toward "stickiness"; meaning loyal Web users, compelled by the content, stay on the site longer. For portals such as Yahoo!, that means users will see more ads and perhaps purchase more products.
Some 49 million unique users visited some part of Yahoo!'s system of sites in April, according to Web research firm Media Metrix. The company doesn't break out data for individual sections and communities, where users share information about everything from individual home pages to investment portfolios.
Scooping up Myplay, or any other music community site, would extend Yahoo!'s presence in the crowded music arena. Yahoo! already operates Yahoo! Digital, which lets Web surfers listen to popular music and download songs to a user's computer.
Yahoo! Digital gets its muscle from Yahoo! Broadcast, a leading Web media programmer, which has multimedia content that ranges from artists' information to streaming radio and video programs.
Myplay's MP3 trading community features, while mildly similar to Yahoo! Digital's offerings, would improve that of Yahoo! Broadcast, which Yahoo! built from its 1999 acquisition of Broadcast.com for $5 billion.
Yahoo!'s rivals, such as America Online and Lycos also have music strategy, as do other companies offering technology and content, such as Microsoft (MSFT: Research, Estimates) and RealNetworks (RNWK: Research, Estimates).
With enthusiasts downloading millions of music files on the Web each month, music has become one to the Internet's most popular hobbies. But it's also a very litigious topic, thanks to sites that, some say, aid in the piracy and theft of copyrighted music.
Myplay has so far escaped the fate of rival MP3.com, which is being sued by the recording industry for its My.Mp3.com service, which allows users to listen to their private music collection over any computer.
Myplay urges its customers to upload their own music into "music lockers" using software that "rips" songs from CDs, transforms them into MP3 format, and digitally ships them to a storage space at Myplay.com. Though no legal agreement exists between Myplay and the recording industry, industry watchers say the music companies have smiled on the system.
The company has previously said it discussed the locker system with the Recording Industry Association of America (RIAA), the music industry's lobbying group, before launching its service.
Myplay also has been in talks with record labels about getting licenses to store copyrighted music, though no agreements have yet been announced.
Not so of Mp3.com, which, the recording industry says, violated artists copyrights by making its own copies of songs and asking consumers only if they have a physical copy of a CD or have purchased a disc online.
The RIAA also sued embattled song swapping company Napster Inc. saying its system also encourages piracy.
Myplay has tried to align itself with deep-pocket companies, such as Yahoo! and Yahoo!'s rival AOL; which is set to acquire CNNfn parent company Time Warner. The company has a deal with AOL, which provides users of AOL's Winamp and Spinner units with virtual music lockers.
Shares of Yahoo! rose 7, or about 6 percent, to close at 120-1/16 on Thursday.