Napster is a joke

“Napster has been high-profile since it ran two ads during this year’s Super Bowl. The subscriber base — business word-fog for who’s buying the music downloads — has blasted from an end-of-year 270,000 subscribers to 410,000 now, a 53% increase — and 56,000 are university students, a coveted customer base among marketers,” W.D. Crotty writes for The Motley Fool.

MacDailyNews Take: Please see this February 07, 2005 article regarding Napster’s ad that placed dead last in Super Bowl Ad Meter rankings. So, Napster added just 84,000 subscribers if you don’t count the 56,000 students that didn’t choose Napster, but had it chosen for them by ignorant colleges and universities. 9 out of 10 of those stupid students also have iPods. How many of these schools are going to renew after they figure out they roped themselves to a service that doesn’t work with their students’ players of choice?

“Napster’s CEO says he believes Napster is the fastest-growing music subscription service. It needs to be, because there’s a lot of competing going on out there. From Apple, the current king of the hit download parade, to that technology for the nerdy, Microsoft, there is no shortage of suits looking to make a centavo off every download,” Crotty writes. “Worthy of consideration, Apple owns exclusive rights to music downloads for its stalwart iPod: None of the other downloading services interfaces with it. Napster’s service does not work with iPods, restricting Napster’s access to a valuable pocket of the market. Furthermore, it’s unlikely that the two will create an alliance anytime soon, given that Apple holds a healthy and continuous revenue stream in downloaded songs.”

Crotty writes, “Wall Street likes today’s news and sent Napster’s stock up 15% this morning. Hey, what’s not to like? Napster has net cash, or total debt minus cash, of $124 million. Isn’t that enough greenbacks to choke back competition? Well, let’s let the analysts have the final say. They see the company losing $1.72 per share for the fiscal year ended in March and then a larger $1.79 loss in 2006. The fundamental question — as costs to downloading decline and competitors emerge — is: Will Napster be able to continue its growth?”

Full article here.

MacDailyNews Take: In our usual subtle way, in case you missed the headline, we’ll let you know what we think: Napster is a joke. If Napster is Apple’s big competitor, Apple’s in a more dominant position than even we can imagine. We’re not discounting all of Apple’s competition in the online music market, just Napster. Thank a Napster investor, if you ever meet one, for paying for Apple’s market research and preparation. Napster’s plowing the field, planting the seeds, and doing all of the weeding and watering, but they won’t be the ones at the harvest, that’ll be Apple reaping the rewards. Think about it: Napster does all the work, pays to educate the public about the possibility of online digital music subscriptions, and if they happen to establish that a subscription model is feasible, Apple will simply launch their own iTunes Music Subscription service. In this case, Apple’s smart to wait and see. Apple’s subscription service would work better than Napster ever could hope to work (because Apple designs both the player and the service) and it’d also work with tens of millions of iPods immediately on launch day. Napster couldn’t compete on a la carte downloads with Apple’s iPod+iTunes Music Store and they won’t be able to compete on subscriptions either, if Apple decides to take that market, too. We did the math: Napster ends up equalling zero and if they didn’t have gullible universities and colleges to hit up, they’d probably already be close to zero today.

Related MacDailyNews articles:
Napster raises fourth-quarter revenue forecast from $16.5 to $17.5 million – April 05, 2005
Mossberg: Apple’s iTunes Music Store vs. Napster To Go – March 18, 2005
Napster CEO Gorog: Steve Jobs ‘must be pretty frightened’ of Napster To Go – March 14, 2005
Apple’s iTunes Music Store downloads pass 300 million songs milestone (with chart) – March 02, 2005
Napster’s math does not add up – February 28, 2005
Napster’s dirty little secret: changing subscription services into downloads is easy – February 18, 2005
Napster feels the heat over flawed copy-protection scheme – February 17, 2005
Apple CEO Steve Jobs warns record industry of Napster To Go’s security gap – February 16, 2005
Users thwart Napster To Go’s copy protection; do the music labels realize the piracy potential? – February 15, 2005
Napster-To-Go’s ‘rental music’ DRM circumvented – February 14, 2005
Napster CEO Gorog: ‘it’s stupid to buy an iPod’ – February 10, 2005
Report: Napster faces uphill fight to gain share, Apple prepared to run iTunes at a loss – February 10, 2005
Napster’s ‘iPodlessness’ doesn’t bode well for its future – February 10, 2005
$10,000 to fill an iPod? Napster’s going to end up with egg on their face – February 04, 2005
Why ‘Napster To Go’ will flop – February 03, 2005
Napster CEO: We’re ‘the biggest brand in digital music, much more exciting than Apple’s iTunes’ – February 03, 2005
Cornell University’s Mac users ‘uniformly unhappy’ with Napster – January 19, 2005
Cornell University wrestles with Napster’s exclusion of Mac and iPod-using students – September 08, 2004
Why are Cornell’s Mac students being forced to pay for useless Napster? – September 07, 2004
Napster schools to Mac-using students: bend over and take it – September 04, 2004

26 Comments

  1. MDN’s take is exactly right. If Apple discovers that people are not buying into the iTunes/iPod combo because they aren’t able to get a subscription service, Apple will quickly get such a service to market.

    Factoring in the iPod established userbase and Apple’s ease of use, such a service would undoubtedly be a success.

    The key is that switching from one subscription service to another is ridiculously easy since you don’t own or keep any of the music files.

  2. One thing I want to know is will the same “subscription prejudices” apply if Apple enters the realm…

    I hope that the same critics of Napster’s model are equally tough on Apple if they decide to implement a similar system.

    I’m an Apple Kool-Aid Drinker to the core, but just because it’s from Apple doesn’t mean it’s good.

    167MHz system bus anyone?

  3. so let me get this straight…

    You’re praising Apple for letting Napster do the dirty work. Then Jobs will decide if he wants to copy them or not.

    So basically, you’re saying Apple will pull a Microsoft?

    I love my macs probably just as much as you if not more, but damn – some of this crap you write is so damn RDF ridiculous.

  4. It you watch closely, Apple let others bring out mp3 players for many years before getting into that market. Same thing with music download services. They waited patiently until the market was ripe. An iTunes subscription model is ready and waiting. Why bring it out early? Apple will wait until the right time to unveil it. Apple has become a mature, disciplined company under Steve’s leadership.

    When it’s clear that millions of iPod owners want a subscription service they will roll it out. But not yet, because it’s too early. And with 25 million or so iPod users by the end of 2005, I think you’ll see a subscription service in 2006 and it will be for iPods and cellphones. Then Apple will stomp on Napster once and for all.

    Napster loses money every quarter and next year, Wallstreet will dump them and the Napster bubble will burst. It’s about profits! Apple make profits, Napster does not and will not. Napster will end up being sold to a big company by then end of next year.

  5. Why is the all-in-one model good for iTunes/iTMS/iPod but has been the point of serious criticism for MS regarding integration of Windows/IE/WPM/Etc.? We can’t have it both ways.

    Yes, I know Apple does things better, but you have to admit that to have certain apps integrated with Windows provides some benefits, just like the iPod/iTMS integration.

    Let’s not be hypocrites.

  6. DrDude,

    Apple has a 100% monopoly in the Mac market – greater than the monopoly Microsoft has with Windows in the overall personal computer market.

    The great benefit of the Mac platform is that Apple controls the entire widget: hardware, OS, and certain apps.

    It is legal to have a monopoly until you abuse it to knock off competition.

    Microsoft is a convicted monopoly abuser. Therefore, it is not okay for them to bundle apps to kill competition.

    Your comparison is flawed.

  7. I did not read that MDN is “praising” Apple for letting Napster do the dirty work. It’s not a question of who copies who but rather when a company decides to enter the market. Do you honestly think Napster pioneered the idea of subscription based servce.

    MDN simply said “thank a Napster investor for paying for Apple’s market research and preparation.”
    That statement could apply to any company looking to enter the subscription based service market.

    For those of you who slammed the subscription based service model in previous posts. I think you will be suprised at what the future will hold. I believe subscription based services will be a huge, with many players. The only question is… who will dominate the market?

  8. Wait who is still on top of all competition.Well. iTunes DUH because its integrated and innovative . This is what makes iLife sooooooo good!!!! No one else has the “Magic touch of apple”.

  9. Napster is not the technology “innovator”. They are simply utilizing Microsoft’s Janus DRM technology. I don’t know if they are tweaking it in some way to be incompatible with the standard implementation. That sort of tweaking could really fracture the subscription market. I think Microsoft would like their “Plays for sure” logo to mean that any Janus based service can use any “Plays for Sure” device.

    I agree that subscription services will play a significant roll. I don’t know how profitable it will be for the companies offering the service however. Are they keeping track of play counts? If someone downloads 1000 songs, does that mean that each copyright holder gets 1.6 cents per month? How does the model work?

  10. I don’t think Apple is ever going to do the subscription model but even if they want to, there may be a major stumbling block. To start up a subscription service would take a re-negotiation with the music labels. The problem with that is that the music labels want to raise the price of iTMS singles. Steve Jobs is not going to want to go over $0.99/track. So now the labels have Apple between a rock and hard place if Apple has to do start a subscription service. If you like $0.99 singles, you should hope that subscription services fail.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.