Yahoo! Music Store?

CNET reports that Yahoo! is looking seriously into creating its own online digital music store:

According to knowledgeable sources, Yahoo bought music software developer Mediacode in December to help create a digital jukebox and media player–the key components in many music download services. The Mediacode team includes two founding members of Nullsoft, which created the popular Winamp music player and is now owned by AOL.

In addition, Yahoo also has begun kicking the tires of online music services as it rethinks its strategy, which hinges on streaming media, not downloads. For example, Yahoo has held discussions with Musicmatch, one of the largest Internet music services, in what could be a prelude to acquisition talks, according to sources familiar with the meetings.

….Jumping into music downloads would be a switch from Yahoo’s past music strategy, which has focused on streaming audio and video through Launch, a subsidiary that it bought for $12 million in 2001. Yahoo also distributes Roxio’s Napster music service, which lets customers buy music downloads and sign up for subscriptions.

Launch depends on advertising to support a free version of its service, as well as subscription fees for a premium version. Yahoo does not report financial results for Launch, but sources familiar with the figures said the site is about break even.

….Yahoo’s management also is starting to see the value of a more comprehensive strategy, if only to defend against its own users defecting to rival offerings, sources said. “Theoretically, if you don’t have it, they will go elsewhere,” said a source familiar with Yahoo’s plans.