Yahoo to fight it out with Amazon in the MP3 arena

We recently reported on a rumor that Yahoo plans to lay off hundreds of its staff as part of a restructuring endeavor. This restructuring is expected to see the Web company reduce its focus on some of its services, including premium music. However, as Ars Technica reports, another rumor has emerged suggesting Yahoo's music service is far from being doomed.

Word is that Yahoo plans to compete head-on with Amazon by offering music from the "big four" record labels in MP3 format with no digital rights management protection. Ars says the rumor originates from two anonymous record company executives who spilled the beans to the Associated Press earlier this week. Yahoo is reportedly in "preliminary talks" with major labels over MP3 music sales, and it plans to launch a DRM-free service "this year."

As Ars points out, Yahoo has the potential to dethrone Amazon MP3's status as the only online music store to offer music from all four major labels in MP3 format. Other services are either too focused on indie music (like eMusic) or just too small to strike a deal with the big four. Apple could turn around and offer MP3 music on the iTunes Store, but the iPod maker has so far stuck with the AAC format, even for existing DRM-free tracks.

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