part06CT - PART 6-CRITICAL THINKING CASE YAHOO! MUSIC...

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PART 6-CRITICAL THINKING CASE YAHOO! MUSIC UNLIMITED’S AGGRESSIVE PRICING In May 2005, Yahoo! Inc. introduced its Music Unlimited service for a low introductory price of $60 for a year’s subscription or $7 for a month. For this fee, subscribers would receive unlimited listening access to a library of more than one million tracks. Subscribers who wanted to own a song, instead of just renting it, would pay 79 cents a song. A free seven-day trial of the service was included in the introductory offer. At the time of the introduction, there were two product segments in the marketplace: the pay-per-download segment and the subscription services segment. Probably the best-known pay-per-download segment was Apple’s iTunes, which charged 99 cents for a music download. Analysts believed that iTunes was the leading download service because of its relationship to the iPod. Although the average iPod owner purchased only around 25 songs, there were over 17 million iPod owners in 2005, and that number was expected to increase by another 5 million in 2006. Yahoo Music Unlimited’s competitors in the subscription services market were RealNetworks’ Rhapsody and Napster. They charged about $10 a month for basic subscription and $15 a month for a portability subscription.
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