HP considered Napster deal before Apple’s iTunes; Napster ‘is losing money, top executives’

“It was a breakthrough deal that would have put the Napster kitty on millions of Hewlett-Packard computers. But in the days leading up to Napster’s re-launch in late October, HP suddenly — and without explanation — returned Napster’s $250,000 check and canceled the agreement to install a link to Napster’s online music service on its computers. Worse, in January HP announced a surprise partnership with Napster rival Apple Computer to feature the iTunes Music store on HP computers and sell Hewlett-Packard branded iPod music players,” Dawn C. Chmielewski reports for The Mercury News.

“Neither HP nor Napster’s parent company, Roxio, would comment on the soured deal, whose details were confirmed by sources familiar with the agreement. But its collapse was one of several setbacks since the reintroduction of Napster, the pioneering song-swapping renegade, as a paid music service,” Chmielewski reports.

“Napster is losing money, and top executives have left the company, including its president, chief financial officer, vice president of programming and head of corporate communications as well a key board member. On Wednesday, Roxio began laying off people at its Napster division. A Roxio spokeswoman said the company was ‘eliminating redundancies in the organization’ but declined to say how many people lost their jobs,” Chmielewski reports. “Alex Luke, the long-time vice president of music programming, who left shortly after the service’s launch to join the rival Apple service.”

“And while Napster can legitimately claim it’s the second most popular online music service, information provided by insiders at two of the major music labels shows it sells only about a quarter the number of downloads from their artists as Apple’s market-leading iTunes store. Napster refused to release download figures… Napster has attracted about 90,000 subscribers in its first two months — ranking it fourth, behind RealNetworks’ Rhapsody service, America Online’s MusicNet and MusicMatch,” Chmielewski reports.

Full article here.

23 Comments

  1. This doesn’t surprise me. Napster was losing money based on their business model: “subscription”. Not to mention a superior software to compete with: iTunes. And leaving the choice of ugly MP3 player’s up to the consumer….even if HP made a Package deal with an MP3 player and Napster….some of those Windows users might not have been happy with the player in the package deal. iTunes/iPod package was a better deal and a better package and had more viability to succeed in the marketplace. A no brainer.

  2. The dropoff of the # of Online Music services is about to begin. Those who dont have deep pockets (Microsoft?) or an alternative source of income (iPod) will realize there is no money to be made in Online music itself. Whne they close their doors maybe we will see actual numbers of how many songs they sold with people testing their services and realizing they suck. Apple just need to get overseas first as well and they will become the 900 pound gorilla.

  3. What do they expect when they utilize a name so closely associated with illegal downloading? I would like to see someone buy the Enron name and relaunch cuz the name is so well known ” width=”19″ height=”19″ alt=”wink” style=”border:0;” />

  4. Losing the HP deal to Apple will end up being Napster’s death knell. I’d be willing to bet that they will have already gone belly up by this time next year. They’ll also be lucky if Napster doesn’t sink the entire company of Roxio. As was mentioned earlier, it would be nice to see Apple scoop up the Toast application in the aftermath though.

  5. I have to say this, people. Reading through most of your posts the language is exactly the way people used to talk about Apple. Don’t write either Napster or Roxio off until they go under, for all you know they are about to pull their own iMac out of the hat.

  6. Hey, I sorta feel sorry for the guys. Yaknow, people losing jobs, families destroyed, all that.
    What I would like to see is those analysts come crawling and admitting what a bunch of clueless idiots they were when they talked about Napster “threatening” or even unseating the iTMS at the top of the pile.

  7. Good point Dave….

    I agree, we shouldn’t start writing Napster/Roxio’s epitaph just yet. I imagine they must have done a business plan before embarking on this – and considered ‘worst-case scenarios’.

    A couple of things stick out in this piece: the writer claims that Napster’s the ‘second-most popular music download service’… and yet they can only manage 25% of iTMS downloads. “An estimated 12% share of the download market, compared to Apple’s 56%”. What the hell does that say about the others – how deep are their pockets? And second: “… its [the deal’s] collapse was one of several setbacks since the reintroduction of Napster… “. What were the others I wonder? Hmm, losing $15m in the first two months certainly didn’t get it off to an auspicious start…. and major boardroom losses will set alarm bells ringing soon enough on NASDAQ.

  8. I’m pulling for Roxio. Looks like Napster was a bad decision for them, but the company has always been a great Mac supporter through Toast. No comparison to Easy CD Creator. And I’d rather it not come to Apple buying and producing Toast … that program has always had great support for burning non-Apple format disks — how well would Apple continue to support those aspects of Toast if they bought the program?

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