Napster’s ‘iPodlessness’ doesn’t bode well for its future

“Even though its Super Bowl ads were among the more forgettable pitches Sunday night, a new and not-so-naughty Napster is definitely back. Last night, the company behind the brand that ushered in the era of illegal music downloads reported a fiscal third-quarter profit of $0.36 a share on $12.1 million in revenue,” Rick Aristotle Munarriz writes for The Motley Fool. “Granted, the profit was strictly due to the one-time gain the company recorded after it sold off its Roxio computer software business to Sonic Solutions back in December. Napster actually lost more money in its continuing namesake digital music business — $16.9 million — than it produced in subscription revenue.”

Munarriz writes, “You may be ready to shake your head at the company’s decision to blow through about a month and change of its revenue to run a pair of ads during the big football game. But before you do, let’s give the company and its reinvention process some credit. It closed out December with 270,000 subscribers, and its portable ‘Napster To Go’ service that launched earlier this month is bound to draw fans of the digital-music buffet who like to take their streams with them. RealNetworks’ Rhapsody service, in contrast, is cheaper but still PC-shackled.”

“Since Apple Computer and Microsoft seem satisfied with selling songs individually or as a part of full albums, Napster’s portable smorgasbord may give it an edge — as long as folks are willing to ditch their iPods. That’s a major hurdle. Apple’s iTunes download store is successful because it’s the one source of legal iPod tunes — and Napster’s feast isn’t compatible with the iPod palate,” Munarriz writes. “While Napster’s service is compatible with many of the other portable MP3 players, like those from Dell Computer and Creative, you try telling Veruca Salt that she can’t have an iPod now, daddy.”

Full article here.

MacDailyNews Take: Munarriz wites that Napster, “the brand that earned notoriety playing it naughty with illegal file swapping, deserves a chance to see what it can do when it plays nice.” Whatever. No matter how you look at it, Napster’s “iPodlessness” doesn’t bode well for its future and trying to tell people that an iPod will cost them $10,000 to fill up isn’t going to help. People aren’t generally that stupid. Perhaps they should have tried to use Apple’s iPod photo 60GB as a base and then they could’ve advertised that it would cost you $15,000 to fill your iPod with iTunes instead?

Related MacDailyNews articles:
Napster reports earnings of $12.8 million for quarter – February 09, 2005
Apple iTunes sees over 170-percent jump in traffic post-Super Bowl vs. Napster’s 30-percent increase – February 08, 2005
Pepsi’s iTunes Super Bowl ads place poorly in Ad Meter ranking; Napster ad places dead last – February 07, 2005
$10,000 to fill an iPod? Napster’s going to end up with egg on their face – February 04, 2005

19 Comments

  1. I wonder what is the KEY number of subscribers they need to break even. Obviously 250,000 is not it. Can Napster do the math. $15/month for 250,000 = $3.75 million = makes a $16 million in losses. I estimate they need about 1,316,667 subscribers to break even. Thats a 5 fold increase to break even!! Good Luck

  2. “Napaster To Go”? What new about this? A subscription is a subscription is a subscription. Doesn’t matter much past that basic premiss. It’s great that they have a catchy title for it.. but how often will they need to change said title to make it seem more than it is?

  3. “Apple’s iTunes download store is successful because it’s the one source of legal iPod tunes.” – You do not need an iPod if you don’t already have music, which you probably have on cd and can rip. or, i suppose, you might want the ipod as a small protable disk. either way, itms isn’t your only choice available to fill up that iPod. it is simply one option available to you when you absolutely must have ‘this is spinal tap’ right this second.

  4. Like the rest here, I wouldn’t use a subscription service either.

    However, there is some segment of the population that it’s pretty perfect for. These are the type of people I look at quizically when they say they went to see NSync, actually enjoy listening to a single radio station, and dislike buying CDs because “they all only have one good song” (because they like pop artists, who are marketed based on only a hit or two). Some of those people would gladly pay the price of a CD a month to get whatever pop crap is out there for that month. The beautiful part for the provider is it’s a guaranteed income source each month. Obviously, the issue is how many of those people exist? I suspect most of them are satisfied to just listen to the radio.

    I don’t understand why Apple couldn’t offer a simlar service as an option or why that would be bad. If Napster could license it, I’m sure Apple could as well. It may only be a small part of their business, but even if it only grows to half a million, that is still $5 mill a month in revenue and half a million iPods sold.

  5. “Rick Aristotle Munarriz writes for The Motley Fool. “…the profit was strictly due to the one-time gain the company recorded after it sold off its Roxio computer software business to Sonic Solutions back in December. Napster actually lost more money in its continuing namesake digital music business — $16.9 million — than it produced in subscription revenue.”

    Ouch.

    Newsflash to Chris Gorog (btw, this is Eco. 101): You want income to be GREATER than expenses. That way, you know, your ‘biggest brand in digital music’ company will be able to stay in business for a little while longer.

    Keep this up and Napster will be going the way of Buymusic.com.

    Hmm. On second thought, see ya later, Chris.

  6. I think Apple needs to do a little more to enlighten people on the radio feature within iTunes. You can browse all kind of genres and here all kinds of music , for free. Certainly it’s not on-demand like a subscription model is, but it allows people to sample music for free and then pay to purchase tracks.

  7. Has it occurred to anyone else that once Napster has built their subscriber base, they may need to raise the monthly fee a little to cover increased expenses. Then in a month or two, raise them again and so on. Once subscribers have a fair amount of music downloaded they won’t want to give it up so they’ll be forced to keep paying more and more each month. Just look at your cable tv bills for the last year and you’ll see a great example of how to do it.

  8. That $10,000 to fill up your iPod add was only aimed at 60% of iPod users. You know, the ones that use Windows. They thought that Windows users would fall for their line of bullshit because they, you know, use Windows already and they have already fallen for the biggest line of bullshit in the known universe. Besides their service only works with Windows.

    To sum up, if you are hoping to catch a lot of mentally challenged suckers you aim for the 95% who have already proven themselves worthy of your time and effort.

  9. 1) Try stopping the subscription and see if the credit card charges stop. Good luck if you try it out.

    2) The stock will tank when someone discloses how many of those subscribers aren’t really bona fide subscribers, or when the accountants get outed. Good luck if you’re a shareholder.

    3) the brand that earned notoriety playing it naughty with illegal file swapping, deserves a chance to see what it can do when it plays nice
    — The brand deserves what? It’s just a name for chrissakes.

  10. I posted that Apple should BUY Sirius on MDN, months ago, with some of the increased value of Apple stock. That was before the big run-up in Sirius. A subscription streaming service via satellite would be the perfect answer to any WMA-Janus subscription model.
    Steve Jobs is “not interested” according to current reports. He also was “not interested” in flash memory iPods this time last year, even as they were developing the iPod Shuffle. Apple does not advertise it’s intentions, so take what you are hearing with a grain of salt.

  11. Y’know, I have my doubts as to whether this system will work well. We’re talking multiple different PCs and multiple different portable players. Getting hardware to work with a PC can already be a chore. I expect a lot of angry subscribers who find their music deactivated due to some glitch.

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