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MS bids for Yahoo!; Launchcast could get new owner

Posted on: 02/01/2008

From today’s New York Times: In a bold move to counter Google’s online pre-eminence, Microsoft said Friday that it had made an unsolicited offer to buy Yahoo for about $44.6 billion in a mix of cash and stock.

If consummated, the deal would redraw the competitive landscape in Internet consumer services, where both Microsoft and Yahoo have both struggled to compete with Google…

Microsoft said the combination of the two companies would create efficiencies that would save approximately $1 billion annually. The software giant also said that it has an integration plan to include employees of both companies and intends to offer incentives to retain Yahoo employees…

Despite their heavy investments in online services, both Yahoo and Microsoft have watched Google extend its dominance over Internet search and the lucrative online advertising business that goes along with it.

In recent months, Yahoo has struggled to develop a plan to turn around the company under [Yahoo! CEO Jerry] Yang, its co-founder, who was appointed chief executive amid growing shareholder dissatisfaction last June…

Microsoft, like Yahoo, has faced an uphill battle against Google. The company invested heavily to build its own search engine and advertising technology… Microsoft’s online services unit has been growing, but remains unprofitable

On Thursday night, Yahoo announced that [Terry S.] Semel, its nonexecutive chairman and former chief executive, was leaving the board. Under Mr. Semel, a long-time Hollywood studio executive who ran Yahoo from 2001 to 2007, the company became more focused on its advertising and media businesses, but was unable to keep up with Google’s
challenge in Web search and advertising and with the rise of social networking sites such as MySpace and Facebook.

Read the New York Times’ coverage online here.

As suggested in the headline, a Redmond takeover of Yahoo! would likely give Microsoft ownership of one of the industry’s leading online radio properties, Launchcast.

Yahoo! assembled its online music service through purchases of Broadcast.com (a well-documented $4 billion acquisitionin 2000), the then-independent “music recommendation” webcast LAUNCH (June 2001), and (in October, 2004) webcaster MusicMatch.

In the latest (November, 2007) Arbitron/comScore webcast ratings (here), Yahoo Music/Launchcast is the Cume leader Mo-Su 6a-12M (second only to Clear Channel Mo-Fr 6a-7p) and trails only AOL Radio in Average Quarter Hour audience (both dayparts).

Microsoft’s best-known contributions to Internet radio are its Windows Media player and server, and the Windows Media Guide. Its history as a Net radio content provider (under MSN) is more mixed.

MSN spent at least $65 million to acquire MongoMusic and use its technology to create sets of stations as “sounds like” or “mood” stations. In a later controversial move, they created “Sounds Like” radio, which mimicked the playlists and positioning of major market broadcast stations (“If you like Q101 in Chicago, you’ll love the commercial-free ‘Chicago101’ channel,” for instance). (more here). 2003 saw the launch of Radio Plus, a subscription-based service. Finally, in November, 2006, MSN relaunched its radio service, now powered by Pandora (here). MSN Radio no longer appears in the Arbitron/comScore ratings.

With Yahoo!‘s recent announced round of 1,000 lay-offs and significant cutbacks in some services, many in the industry were already wondering about the music division’s future. Absorbtion by Microsoft would likely mean there’s one less major player in the field. — KH & PM

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