TAIWAN: Yahoo-Kimo Inc to abandon its music download business

Music download business shuts down after bleak sales returns

Taipei Times
Wednesday, March 7, 2007

By Jessie Ho

Yahoo-Kimo Inc, one of the nation's largest Internet portals, announced that as part of an adjustment in strategy it would stop providing online music and downloading on its music site.

The company also said it had teamed up with KKBOX, another online music operator run by Skysoft Co, to provide the service to local music lovers.

Starting on March 27, exactly one year after the launch of Yahoo-Kimo Music, subscribers will no longer be able to access the service, Yahoo-Kimo said in a statement released on Monday.

Inaugurated on March 15 last year, Yahoo-Kimo Music started charging users on March 27 after a free trial period.

"We decided to re-focus on our core-businesses ... despite the shutdown, we are still optimistic about the online music market," said Dennis Yang, director of Yahoo-Kimo's entertainment business service.

Yahoo-Kimo's core businesses include an Internet portal, an online community and online advertising, Yang said.

The Yahoo-Kimo Music site will become an information-based portal providing news about the music industry, Yahoo-Kimo public relations supervisor Ruu Wu said in a telephone interview yesterday.

The new site, which was launched yesterday, will include ads for and links to KKBOX to help guide users, she said.

Despite Yahoo-Kimo's attributing the termination of its music download segment to a reorientation of its operational strategy, it is widely acknowledged that the gloomy market outlook caused by rampant online piracy was the major reason for the search giant's decision to drop out of the online music market.

Yahoo-Kimo Music registered close to 600,000 downloads of its software during the free trial period, but secured only a small number of paid subscribers after the period, Wu said, refusing to provide membership figures as well as the deficit incurred from the business.

This situation was not without precedent.

IBIZ Entertainment Technology Corp, the nation's first legal online music store, was launched in November 2003 but closed in May 2004 as it was facing a crushing deficit.

The market was then led by peer-to-peer (P2P) operators Kuro and Ezpeer, which allowed users to swap music files via their site without the authorization of record labels. As the two sites provided unlimited music swapping at NT$99 per month, they rapidly attracted a large number of members -- more than 600,000 in total.

The two P2P operators became legal sites last year, but traffic plunged significantly as customers were reluctant to pay for online music, said Robin Lee, secretary-general of the International Federation of the Phonographic Industry (IFPI) Taiwan.

IFPI statistics for Taiwan showed that music sales on material platforms -- including singles and albums -- tumbled 34 percent to NT$1.93 billion from 2005.

This drop did not signify a rise in digital sales, however, Lee said. Despite the crackdown on illegal music sites, Taiwanese users are still able to access free music from illegal sites in China, he said.