“Yahoo Inc.’s steeply discounted foray into online music subscriptions struck a sour note Wednesday with the shareholders of Napster Inc. and RealNetworks Inc. — the owners of the rival services that stand to lose the most from the new competitive threat,” Michael Liedtke writes for The Associated Press. “Napster’s shares plunged $1.70, or 26.8 percent, to close at $4.65 on the Nasdaq Stock Market, where RealNetworks’ shares fell $1.54, or 21.1 percent, to $5.76.”
“Yahoo’s entrance into the music downloading business even hurt Apple Computer Inc., which runs the dominant online music store with more than 400 million songs sold since it opened two years ago,” Liedtke writes. “Apple’s shares fell 81 cents, or 2.2 percent, to $35.61 on the Nasdaq, even though industry analysts say the company is far less vulnerable to Yahoo’s aggressive push than Napster and RealNetworks. Yahoo’s shares gained 82 cents, or 2.4 percent, to $34.88 on the Nasdaq.”
Liedtke writes, “Napster Chairman Chris Gorog sought to reassure investors as $69 million of his company’s market value evaporated Wednesday. ‘We think there has been a significant overreaction in the market,’ Gorog told analysts during a Wednesday conference call. ‘Our customers have not fled in the past when desperate pricing moves have been made by competitors.'”
“Los Angeles-based Napster has been struggling financially, even before Yahoo entered the fray. After the stock market closed Wednesday, Napster announced it lost $24.3 million during the first three months of this year, while its revenue rose to $17.1 million from $6.1 million a year ago. The company expects to lose another $27 million to $28 million in its current quarter. Wednesday’s stock market reaction reflected a wide belief that Yahoo’s music subscription service, introduced Wednesday, will force Napster and RealNetworks to either lower their prices or risk losing subscribers,” Liedtke writes.
“The subscription services enable customers to rent an unlimited number of songs without ever owning the music outright. That’s a significant distinction from Apple’s iTunes store, which sells songs for 99 cents apiece and so far has frowned upon the rental approach,” Liedtke writes. “Apple has been able to eschew subscriptions so far because only about 15 percent of consumers to date have expressed an interest in renting songs instead of owning them, said Piper Jaffray analyst Gene Munster… If Yahoo’s service catches on quickly with consumers, Apple probably will offer a subscription option before the end of the year, Munster said. The popularity of Apple’s iPod players also figures to work against Yahoo because those devices aren’t compatible with its new subscription service. Apple already has sold more than 15 million iPods, creating a loyal audience unlikely to move to a competing service.”
Full article here.
Related MacDailyNews articles:
Napster To Go Soon? Reports $24.3 million net loss on $17.4 million net revenue – May 12, 2005
J.P. Morgan: Yahoo music service ‘does little to break Apple’s tight grip’ on digital music market – May 11, 2005
Yahoo launches Napster To Go, Rhapsody To Go killer (takes aim at Apple’s iTunes Music Store?) – May 11, 2005
RealNetworks drops 21%, Napster plummets 30% on Yahoo music news – May 11, 2005
Apple debuts iTunes Music Store in Denmark, Norway, Sweden, Switzerland; over 400,000,000 songs sold – May 10, 2005<
Yeh-he-hesssssss Napster come poop on me
I feel sorry for Napster and Real. Oh wait, no I don’t.
“Napster Chairman Chris Gorog sought to reassure investors as $69 million of his company’s market value evaporated Wednesday. ‘We think there has been a significant overreaction in the market,’ Gorog told analysts during a Wednesday conference call. ‘Our customers have not fled in the past when desperate pricing moves have been made by competitors.'”
I agree with Gorog (wow!) Analysts are overreacting (when are they not)?
As far as Yahoo! ‘forcing’ Apple to introduce a subscription service, that’s complete nonesense. ONLY Consumer demand will push Apple to announce such a service. Analysts are a joke.
Let’s do the Math(thanks Napster)
400 million fairplay encrypted songs sold at $.99 each
is roughly $390 million dollars
Let’s say apple makes .10 profit per song sold.
That’s $39 million of profit.
Napster just posted another $17 million loss. That makes apple 56 million dollars richer than napster just on songs sold.
I don’t see subscription service coming to itunes for music. maybe video though.
Yeh-heh-hesssssss
Yahoo’s music play poops on Napster and RealNetworks; may force Apple to offer ipoop subscription service
I am a supportive MDN reader and prefer the current iTunes model over the music subscription services, but the reality is that customers do not own the iTunes songs they purchase. The original copyright holder (which could be the song writer, performer, or music publisher) actually owns the songs outright.
Instead, ITunes customers own a limited copyright license to play the songs downloaded from Apple’s Web site, and with some limitations, to make copies and store them on different devices for personal use. iTunes song buyers cannot resell the music, use it in commercial products, perform it in public, or use it to create derivative works without obtaining more extensive licensing rights.
Ideally, I’d like to see MDN develop more accurate language that describes the iTunes business model — one that doesn’t overstate the terms of the licensing agreement and thus subtley encourage copyright infringement.
Do it Steve!
Let’s put this to bed. Apple should offer both services. I hope Steve is not just being stubborn. It doesn’t mean you were wrong, it just means that Apple is open to being flexible, and ready to do whatever it takes to be number 1.
Crush ’em Steve.
That is another problem with the subscription model. If a person has no ownership in the music, then they will just jump to the cheapest vendor. It may take some time to reload all of their music, but a significant price cut may be worth it.
Let the price wars begin. Too bad, I liked Roxio products before they sold out to become Napster.
I don’t want to rent my music. I want to download it and keep it and use it. I don’t want to have to keep paying the music companies for the rest of my life so I can listen to music. I only buy about $20 to $40 of music a year, otherwise there is the radio which if free, so I don’t need to pay $60 a year to get music.
Rented music is a wonderful idea for people with only a short time to live.
But since most people aren’t suffering from terminal disease, Apple is wise to continue what is obviously working quite well.
I’m having a hard time imagining anything more idiotic than on-going rental fees for music.
It’s called burn to a cd folks. That’s why I prefer the iTunes model. Besides the fact I own an iPod and the subscription services are worthless to me, if the companies decide to go kaput or change the terms of service, we’re screwed, nothign to show for that subscription fee.
I see no threat to iTunes or the need to go to a rental service. If they do go to a rental model I will stop buying online and just go back to buying CD’s and rip them myself. Because I want to pay for my music once not over and over again for my entire life time.
I too prefer buying songs over a subscription service, but I can’t say that will always be the case, or that there won’t ever be a time where I would want to have both options. A music subscription doesn’t seem like a horrible idea (as many of you seem to imply) but at the moment it doesn’t seem to practical either.
Comparing it to radio isn’t a good comparison because you don’t get to choose what you listen to on the radio. Saying you don’t want to keep spending money on music isn’t much of an excuse either. I don’t imagine I will ever stop buying music. I will never reach that point where I feel I have all the music I’ll ever want and then stop buying CDs. Therefore, I will always be spending money on more music. For those that have a wide range of music tastes, a subscription service might make sense too. If the company goes bankrupt, that’s not really a problem because you can just go to another service and $7 later you’ve got all your music back. Granted, if you stop paying you have nothing to show for your investment, but then again, you’re not investing the same amount of money as you might have be if you were buying all the CDs you want.
In other words, buying your music seems to be the popular method, and perhaps the most practical, but it’s never good to be close-minded about a subject, and definitely not a good idea to ridicule those that have different preferences. Keep an open mind. When you see someone with different opinions, try to think different about your own opinions. Don’t get so caught up in thinking that since you have good reasons for your decisions, that those decisions must then apply to everyone else.
I doubt Steve is being Stubborn. Before the iTMS, there were subscription services and they didn’t prove to be a viable business model. Now, with services like Rhapsody/Napster-To-Go and Yahoo! Unlimited, Apple is most likely watching how they fare before blindly jumping into the game.
This way, it’s win-win for Apple. If subscriptions prove to be successful Apple can jump in and make more money. If they prove to be a flop, Apple can sit on the sidelines and say ‘Told you so’.
If rental works why not rent CD’s as they do in Japan. It works for Movies on DVD.
You rent, you copy, you burn.
It works the same way for MP3 rental plans.
You rent, you hyjack, you burn.
What do these monthly rental companies do when everyone has all the music they need and they cancel the subscriptions?
By the way, if you use the subscription method you are tied to only one store. Remember when that was a bad thing? Microsoft does.
GMW: “I am a supportive MDN reader and prefer the current iTunes model over the music subscription services, but the reality is that customers do not own the iTunes songs they purchase. The original copyright holder (which could be the song writer, performer, or music publisher) actually owns the songs outright.”
And that is different when you buy a CD in a store, how exactly?
If the market warrants it Apple will intro a subscription service. I am sure they probably already have one on a back burner just in case and could introduce it in short order if they chose.
I can’t wait for Motorola to intro the iTunes phone. Mobile phones are the real threat here. Altho I prefer mine separate, carrying one device rather than two makes sense to a lot of people.
Oh do grow up Triumph!
Doesn’t Yahoo already have some sort of music sales business? And now they’re late getting into this money-losing subscription model. No wonder Google is outpacing them. All it’ll take is for Google to have a service that links to iTMS and it’ll be lights out for Yahoo music.