Monday, February 04, 2008

RealNetworks (NASDAQ:RNWK): Thoughts on the Yahoo deal.

- It looks like RealNetworks (NASDAQ:RNWK) has struck a major deal with Yahoo! this morning:

Internet media company Yahoo Inc said on Monday its music service will now be handled by Rhapsody America, an on-demand subscription service run by RealNetworks Inc and Viacom Inc.

Yahoo, which previously said it would replace its in-house built Yahoo! Music Unlimited service, said it would migrate customers to Rhapsody over the coming months, while allowing subscribers to access their music library from a new Rhapsody account.

The strategic partnership was announced after Microsoft Corp made a $44.6 billion bid on Friday to take over Yahoo. It raises questions about whether RealNetworks and Yahoo will be able to execute their new partnership if Microsoft succeeds in buying Yahoo.

Like Microsoft, RealNetworks sees the value of a partnership with Yahoo as a way to get in front of more than 23 million monthly Internet users. "This really works to make Rhapsody much more available to a much wider audience," said Sheeran, a senior vice president at RealNetworks.

Yahoo Music's monthly subscribers, who currently pay around $9 a month will eventually have to pay around $12.99 a month for Rhapsody when their existing contracts expire. (VIA REUTERS)

Notablecalls: RNWK has currently something like 2.7 million subscribers. The Yahoo deal would bring in 20 million more. The margins would not be as good (cut to YahooSoft) but still, this may be a major breakthrough for RNWK.

Yahoo Music's was once thought of as the Rhapsody killers but now it looks like fate had other plans.

I expect to see a strong upside reaction in RNWK stock today and in the coming days.

Btw, I can't believe Briefing missed the news. Is it just me or are these guys asleep at the wheel lately?

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