[UPDATE at bottom of post]
A new subscription music service from Yahoo!, set to launch on Wednesday of this week, is a different project from the music search engine discussed here recently, and holds the promise (threat?) of shaking the online music industry significantly. Reportedly planned as a monthly-fee service similar to Rhapsody, but with less expensive subscription and song-purchase prices, the Yahoo! service will be the first online since Apple's iTMS launched by a company with a large preexisting user base. And Yahoo!'s base or 300-million users dwarfs that of Apple. Just as Apple provided a tipping point that brought millions of people to online purchases of music files in the a-la-carte model, Yahoo! could enlighten millions of consumers about the value of music subscriptions.

Few people pundits and analysts disagree about the superior value of subscriptions over a-la-carte. But the subscription model has been excruciatingly slow to gain traction in the mass marketplace. Part of its sluggish acceptance can be attributed to the sheer newness of the model in a marketplasce that has sold music as incremental product chunks for decades. In addition, portability (and lack of it) is a factor when iPods are driving penetration of digital music into people's daily lives.

Yahoo! could wield tremendous clout in its endorsement of the subscription model (which, by the way, in addition to providing good consumer value, is also a more lucrative business model—though not without its own dangers and difficulties). On the other hand, AOL has been down this path with its subscription offering that, while attaining some success within the AOL firewall, has done nothing to dig a firmer foothold for the model in the large market. By the way, the B2B service developer MusicNet, builder of the AOL system, is behind the Yahoo! offering as well. MusicNet's involvement could portend badly; the company's consumer offering in 2002 was one of the most disastrous product launches in my experience, and the AOL service, which started with the second generation of MusicNet, was wretched also.

Yahoo!'s reported pricing ($6.99 a month or $60 per year, plus 79 cents per burned track) undercuts Rhapsody significantly. It would be difficult to match Rhapsody's beautiful and thoughtful interface, but the shaky release of Rhapsody 3.0 and that program's complexity do open a door of opportunity for Yahoo!. If the service is Web-based, chances are good the look-and-feel will be as undistinguished as other Yahoo! HTML products. Functionality, depth of catalogue, and heavy promotion will probably tell the story. Watch this space for reviews.

UPDATE:
* The service will include a desktop music management client, but the subscription portion will be managed in a Web-based interface.
* Simultaneous with the release of Yahoo! Music Unlimited will be a price reduction in Yahoo!-owned MusicMatch On Demand service.