Yahoo is buying online jukebox provider MusicMatch as it seeks to broaden its appeal to the rapidly growing audience for music downloads.
Yahoo is hoping to double its music audience
The deal, worth $160m (£89m), will see Yahoo compete with Apple and Napster in the highly lucrative digital music market.
MusicMatch has a catalogue of 700,000 songs available in 10 languages.
Users can download songs individually or pay a monthly subscription fee for unlimited listening over the net.
Interacting with music
There are currently around 225,000 subscribers to MusicMatch's unlimited access service.
Yahoo expects its music audience to climb from today's 12.9 million listeners to around 23.9 million as the acquisition completes at the end of the year.
"This really rounds out everything we do in music," said Dave Goldberg, general manager of Yahoo's music division.
"We want to offer users a way to interact with digital music in any way that they want," he added.
Digital music sales are expected to grow sharply in the near future.
Music downloads are anticipated to jump from $158m in 2004 to $803m in 2009 according to analysts.
A host of companies and services are trying to tap into this lucrative market which is currently dominated by Apple's iTunes music store.
One of the more recent entrants was Microsoft, which launched its own music download service in the US two weeks ago.