Music Unlimited was launched in 2005 as an effort to undercut the subscription music services of the day.
Yahoo began to consolidate its various operations and narrow its focus last year, and the service became a target for elimination.
"Building a great premium music service takes a huge amount of resources and effort, and it was taking energy away from our important main offerings," said Ian Rogers, general manager of Yahoo Music, in a company blog.
"Relatively speaking, a small percentage of [customers] use Yahoo Music Unlimited, yet a large portion of our resources were being poured into the service. It was clear to us that we needed to make a major strategic shift."
Yahoo plans to have all Music Unlimited customer profiles and music collections migrated to Rhapsody as soon as possible.
To support the free offerings, Yahoo has announced the acquisition of FoxyTunes, a toolbar which allows users to control media players through their web browse r.
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