Yahoo will acquire the digital music software and services provider Musicmatch in a cash deal valued at $160m (£90m).
Musicmatch features a streaming music subscription service, On Demand, and last September launched its own music download service, Musicmatch Downloads.
The company, founded in 1997, also offers the Windows software that ships with Apple Computer's iPod music player, as well as Musicmatch Jukebox software, for users to play, burn onto CD, download and organise a digital music collection.
Yahoo said it is committed to fashioning itself as a "major player in digital music".
The Musicmatch acquisition will allow the company to extend its music service from 12.9 million listeners to an estimated 23 million listeners, based in large part on the numbers for Musicmatch's online radio network. Musicmatch also claims to have over 225,000 subscribers to its music services.
Yahoo added that it plans to offer several product innovations and new initiatives by the end of this year as it continues to expand its digital music business, though it did not offer any details.
Along with Apple, Musicmatch competes against several similar services offered by Napster and RealNetworks' Rhapsody.
Laura Rohde writes for IDG News Service