Jamming to Yahoo!

Most people associate Yahoo! (Nasdaq: YHOO) with online searches, free email, or job-hunting services. Now it's time to add online music subscriptions to its growing list of sticky offerings.

Today, the company is launching its Yahoo! Music Unlimited plan, which will allow streaming and downloading of its catalog of major-label tracks at an introductory rate of just $6.99 a month -- or $60 annually for those who choose to prepay.

That sound of chattering teeth on brittle fingernails you're hearing is coming from Napster (Nasdaq: NAPS) and RealNetworks' (Nasdaq: RNWK) Rhapsody. Both have unlimited digital-music plans at higher price points, and both stocks tumbled last night on fears that either a price war is brewing or that Yahoo! will focus more on swiping market share than on educating the market on the merits of unlimited digital-subscription plans.

Unlike Apple Computer (Nasdaq: AAPL), which has been selling tracks on an a la carte basis for its popular portable iPod devices, these aural buffets allow a user to check out as many new tunes as they want -- as long as they remain active subscribers.

You shouldn't sell Yahoo! short on its chances here. In tying its offering to its Yahoo! Instant Messenger service, the company will be able to spread the word about the service virally as friends introduce new music to one another.

It also will have an easier time getting noticed than the competition, in large part because of its 300 million users worldwide. Yahoo!'s music site is already populated with hit music videos since joining Google (Nasdaq: GOOG) in collecting video content. That move was a way to take advantage of the growing base of users with high-speed broadband connectivity. In other words, music fans are already making Yahoo! a regular stop during their daily surfing habits -- to say nothing of thrifty teens who have been won over by Yahoo!'s free email accounts.

Are thrifty teens a bad target audience? Not really. Did you hear the one about parents being singled out litigiously when their children gave in to illegal music downloads? I know more than a few would be willing to pay $60 a year to keep junior honest.

That's why I like Yahoo!'s chances here.

Some recent digital music headlines in the key of C-sharp:

• Napster raised its revenue targets after seeing a surge in popularity of its Napster-To-Go service.
• RealNetworks turned in its first profitable quarter in years thanks to digital music.
• Yahoo! also had a great March quarter before it worked on its singing voice.

Talk about the company's latest moves in our Yahoo! discussion board.

Longtime Fool contributor Rick Munarriz plays various musical instruments -- including the calculator. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.