Yahoo has launched Music Unlimited, an online music subscription service which dramatically undercuts its competitors' prices.

The web portal offers unlimited access to a music library with over one million songs for $6.99 per month or $60 per year. Users can transfer tracks from their PC to portable devices or share music with friends through Yahoo Messenger.

Napster and RealNetworks, two of the largest providers of subscription music services, charge about $15 per month for similar offerings. Stock prices for both companies plummeted on the Yahoo news.

"We are committed to being at the forefront of the rapidly growing online music segment," said Lloyd Braun, head of the Yahoo Media Group.

Users will keep access to their music libraries as long as they pay the subscription fee, but lose the right to listen to their music once they cancel the service.

Yahoo has also started selling songs for $0.99 each, a price similar to Apple's iTunes Music Store. Apple has the largest online music store, but does not offer any all-you-can-eat subscription plans. Instead it charges per song or album.

The Yahoo service uses Microsoft's WMA format and Windows Media Digital Rights Management 10. This means that iPod owners will not be able to use the service as the music player does not support tracks in the Microsoft format.

Yahoo Music Unlimited is officially in beta and is currently only available to consumers in the US. The company confirmed that the pricing model is introductory, signalling possible hikes in the future.

In related news, Napster posted a net loss of $24.3m on Wednesday for the quarter ending 31 March, a 370 per cent year-over-year increase. The company saw revenues from its subscription service increase by 188 per cent.