Yahoo! Saves the Music

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Sony (NYSE: SNE) BMG, EMI, Warner Music Group (NYSE: WMG), and Vivendi Universal should send a thank-you note to Yahoo! (Nasdaq: YHOO). Those Yahooligans are in discussions to launch the music industry's best chance to wipe out piracy.

Allegro ma non tanto
No, Yahoo! isn't hiring a massive legal team or working on advanced content snooping or filtering technology. Those are traditional weapons in the war against armies of anonymous swashbucklers, and they have failed time and again.

Instead, the company wants to distribute music as easy-to-use and DRM-free MP3 files, available for free download with the blessing of the record companies. In return for truly free music, all you'd have to do would be to endure a few advertisements and possibly sign in with a Yahoo ID.

Visionaries have been asking for this since time immemorial. Yahoo! was champing at the bit a year ago. That was weeks after Apple (Nasdaq: AAPL) CEO Steve Jobs played variations on the same theme, which later became DRM-free downloads in his iTunes music store -- at a premium price. Heartened by the commotion, Amazon.com (Nasdaq: AMZN) rolled out a similar MP3 downloading service -- and the game was on. Mighty Wal-Mart (NYSE: WMT) joined the fray, too.

All those baby steps cleared up one very important issue: The labels learned that the lack of DRM wouldn't really increase illegal file sharing -- you can get an unencumbered file right off any old CD, so the piracy instigators just have to work a bit harder to get around most DRM implementations anyway. But they also didn't make much of a dent in the unauthorized downloading activity, because the criminal method was still cheaper, and in many cases easier.

Intermezzo: adagio
You have to fight fire with fire, and beat the pirates at their own game. Right now, the legal download services are fighting an uphill battle because a pirated file can move freely between cell phones, computers, iPods, and any other gadget that supports simple MP3 playback. And trying new music is so much easier when you can do it for free.

Half of the battle is already won thanks to the MP3 tactics reverberating around Download Canyon. An ad-supported service would knock the pirates' other peg leg out, leaving no support for downloading music the illicit way anymore.

Some enlightened media executives have promised to treat piracy like any other competitor, beating it with the tools of the trade -- service, selection, and price. Wrap it up in a pleasant user experience akin to the user-friendly iTunes store, and you're onto something.

Finale: Alla breve
If Yahoo! opens the floodgates and spends a couple of quarters' effort on perfecting its offering, others will surely follow. Competing media sellers like Amazon and subscription-based services like Napster (Nasdaq: NAPS) may be first in line while the studios figure out how to set up a free music store that can make money off converted pirates.

Yes, they will start as skeptics, but dollars and cents will always win them over. And it doesn't take much advertising revenue to keep the wheels of commerce rolling. After all, the publishers will get to blast ads at eyeballs that used to go elsewhere and give nothing back. Something is better than nothing; ergo, the model will work.

For Yahoo!, as the first mover in this wholesale revolution, it will do wonders for flagging user grabs and visit counts. Until the nickel drops in everyone else's slots, the pirate killer can also make plenty of money for the company itself. There is more to being in the vanguard than just a badge of honor.

So let me thank Yahoo! right here and now, in case both consumers and record labels forget to later. It could go down in history as the midwife of a music industry reborn.

Further Foolishness:

• Last.fm's Stand Against Satellite Radio
• Music for the Masses
• "Rock Band" Leads Us Into a Brave New World
• We're All Thieves to the RIAA.