Yahoo, Launch Media Close to Deal, Sources Say

Online powerhouse Yahoo Inc. is close to acquiring Santa Monica-based Launch Media Inc., a popular but financially strapped online music company, sources said.

Terms of the deal, which could be announced as early as today, were not available. Spokespersons for Launch and Yahoo could not be reached for comment.

Buying Launch would give Yahoo access to the large library of music videos that Launch has licensed from record labels, as well as a steady stream of music reviews and news from the company’s staff. These resources could add breadth to Yahoo’s latest Webcasting initiative, dubbed Yahoo Broadcast.

Launch’s personalized radio service recently drew a lawsuit by Universal Music Group, Sony, EMI and BMG, who accused Launch of operating an interactive service without the necessary licenses. Launch is expected to announce today that it has reached a settlement with Universal, an important step toward resolving the dispute.

Despite backers that included Sony Music, AOL Time Warner, Microsoft Corp. and Intel Corp., Launch has struggled this year to raise additional money and lift its stock above $1 per share. Launch recently raised $2 million from an unidentified media company, but well short of the $5 million it sought to sustain the company through the next two quarters.