Yahoo! dealing to buy music firm Myplay

The $200M acquisition would provide Yahoo! a bigger presence in the online music market.

Yahoo! Inc. is in negotiations to buy Myplay Inc., a closely watched Internet music service, people familiar with the matter said.

The price, assuming a deal is completed, likely will be about $200 million, one person said. Yahoo! (yhoo) and Myplay officials declined to comment.

Myplay is a closely held company in Redwood City, Calif., that has attracted attention for a digital system that appears to be acceptable to record companies concerned about the issue of piracy on the Internet. Myplay offers consumers what it calls a "virtual" locker, allowing them to store computerized copies of their compact disks on the company's Web site. Consumers also can create playlists of songs that other consumers can listen to.

Yahoo!, a Santa Clara, Calif., Web portal, has been looking at ways to expand its involvement in online music. In recent months it has had talks with Sony Corp.'s Sony Music Entertainment and Seagram Co.'s Universal Music Group about music initiatives, according to people familiar with the situation, although those two companies decided to launch their own subscription service together.

Myplay also has been in talks with record labels about getting licenses to store copyrighted music, though it has announced no agreements yet. The company has a deal with Internet-service provider America Online Inc. (aol), of Dulles, Va., to provide users of AOL's Winamp and Spinner units with virtual music lockers. The people close to the matter said the relationship with AOL, a direct rival of Yahoo!, could complicate the latest talks.

Though growing quickly, Myplay's service hasn't received anywhere near the publicity of rivals Napster Inc. or Inc., in part because those two companies are involved in high-stakes litigation with big record labels. Myplay's need to get increased financial resources and greater clout with the labels is believed to be one reason for the negotiations with Yahoo!, the people familiar with the matter said.

Myplay was founded last year by David Pakman and Douglas Camplejohn, who met while both were working at Apple Computer Inc. The company last week announced that it had received $18 million in a round of venture-capital funding led by Vulcan Ventures Inc., the investment company of Paul Allen, a co-founder of Microsoft Corp.

Mylene Mangalindan and Martin Peers contributed to this article.


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