Yahoo! Inc., owner of the world’s most-visited Internet site, will buy Musicmatch Inc. for $160 million to offer music downloads and digital music software in competition with Apple Computer Inc. and Microsoft Corp.

Musicmatch allows consumers to download and buy songs from the Web, store music from compact discs on their computers, and transfer music to CDs or digital music players. Adding Musicmatch’s subscribers will expand the audience of Yahoo’s Launch music Web site 78% to 23 million, the company said.

Yahoo’s chief executive, Terry Semel, 61, is adding new subscription services for consumers to diversify revenue and get people to spend more time on Yahoo Web sites. By offering music downloads, Yahoo is moving into a market dominated by Apple’s iTunes service. Microsoft opened an online music store September 2 and other companies may follow.

“Really, it’s a defensive benefit” for Yahoo to own Musicmatch, said a fund manager with Dreyfus Corp. in New York, Mark Herskovitz. “People who want this service are going to go looking for it. A lot of the people who are using the service at other places are also Yahoo subscribers. This is a way of making sure people aren’t going to leave your site.”

Dreyfus owns about 2.2 million Yahoo shares, he said.

“It’s a good deal for both” Yahoo and Musicmatch, said an analyst at Jupiter Research in New York, David Card. “Musicmatch is a good company with little chance of being lost in the crowd.”

Yahoo’s Launch Web site streams songs and music videos, offers news about music and sells CDs and cell phone ring tones. In the past, it’s also provided a link to Roxio Inc.’s Napster Web site, which sells music downloads.

Other companies that sell downloads include Real Networks Inc. through its Rhapsody service, Wal-Mart Stores Inc., and Sony Corp.

Competitors likely to enter the market include Amazon.com Inc. and Viacom Inc.’s MTV cable television networks, said an analyst with Inside Digital Media in Tampa, Fla., Philip Leigh. Amazon.com spokeswoman Patty Smith and MTV spokeswoman Jeanine Smartt didn’t immediately return phone calls seeking comment.

The companies are trying to take a piece of a growing market.

The American online music business, including monthly subscriptions and downloading of songs, will expand to $1.7 billion by 2009 from about $100 million last year, Mr. Card said.

Musicmatch was founded in 1997 by Dennis Mudd, his wife Pamela Evans, and their partner, Jim Smith. The San Diego-based company sells songs for 99 cents each and its Jukebox software helps consumers download music and organize their song collection.

Among its services is also the Musicmatch Radio network, which offers access to more than 900,000 songs and more than 200 preprogrammed radio stations, Yahoo said.

Closely held Musicmatch competes with Time Warner Inc.’s America Online unit, which allows subscribers to download songs using MusicNet@AOL for $8.95 a month, and to copy them to a CD for 99 cents each. MusicNet@AOL has 260,000 paying customers, said spokeswoman Ann Burkart.

Rhapsody offers a $9.95 a month service that provides access to downloadable songs, online radio stations and the ability to copy songs for 79 cents each.

“Music has been moving to the Web extremely rapidly,” Yahoo’s chief operating officer, Daniel Rosensweig, said in an interview. “We think that it will accelerate and this (purchase) will put Yahoo in the lead of the largest music destination on the Web.”

Mr. Rosensweig declined to make sales or earnings forecasts. “We have been the largest destination for music on the Web already,” he said. “This doubles the size of our audience.”

The transaction is expected to be completed by the fourth quarter, the companies said.

Yahoo last week began testing a service that searches for travel bargains and provides links to hotel and airline booking Web sites.

Last month it started testing a redesigned service to help consumers search for more information about local businesses.