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UPDATE: Yahoo Eyeing Online Music Service

LOS ANGELES (AP) – Yahoo Inc., is in early discussions with major record labels over offering unprotected MP3s either for sale or for free as part of an ad-supported service, two record company executives familiar with the talks said Wednesday.

The talks, held as recently as last month, were preliminary because Yahoo is still working out the details, said the executives, who requested anonymity because of the discussions were confidential.

Yahoo hopes to launch the service this year, they said.

Universal Music Group, Sony BMG Music Entertainment, Warner Music Group Corp., and EMI Group PLC have in recent months begun licensing their music for sale as MP3 files online through retailers like

Unlike music files that come with copy protections embedded, MP3 files are compatible with most portable music devices, including Apple Inc.'s market-leading iPod media players, Microsoft Corp.'s Zune and mobile phones that play music.

Carrie Davis, a spokeswoman for Sunnyvale, Calif.-based Yahoo, said the company has often said it wants to offer music without copy protections and the subject has been part of its ongoing talks with record labels.

But Davis denied that discussions with record labels on the matter have stepped up in recent weeks or that anything is imminent.

Representatives for the labels declined to comment.

Yahoo offers free streaming audio, music videos, Web radio. It also operates a music subscription service and a premium Internet radio service.

The company's management said last fall it had begun to de-emphasize its subscription model in favor of an advertising-supported music service. Yahoo also expanded it online music pages by adding song lyrics.

The Internet pioneer recently announced plans for a multiyear restructuring plan that calls for the elimination of some of its existing areas of business.

Last fall, the company inked a licensing deal for user-created video content with Sony BMG that calls for the record company to receive a share of advertising revenue.

Sony BMG is a joint venture of Sony Corp. and Bertelsmann AG.

Yahoo shares rose 9 cents to close at $20.01 Wednesday.