Napster to shift focus from subscriptions to ad-based business model

“Piper Jaffray analyst Gene Munster maintained an ‘outperform’ rating and $6 price target on Napster, expecting the Street to shift its focus from subscriber additions to the company’s new initiative over the next few months,” Maya Roney reports for Forbes. “Napster shares have declined 15% over the last four weeks and, excluding cash, shares are trading at 0.4 times Munster’s revenue estimates for calendar 2006.”

The premise of the initiative is to leverage the brand and take advantage of the two to three million visitors to every month through an advertisement-based business model, according to the Piper analyst. In time, Napster believes this new business has the potential to be bigger than the existing music service,” Roney reports. “The music downloading industry’s dominant player continues to be iTunes from Apple Computer, with more than three-quarters of all audio downloads. Napster, Yahoo!, Microsoft unit MSN and RealNetworks are fighting for the remainder of the pie.”

Full article here.

MacDailyNews Take: Gorog’s “secret plan” – not-so-secret anymore – exudes the odor of desperation.

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Related article:
Napster CEO Gorog blames Microsoft for failure to compete with Apple’s iTunes Music Store – March 01, 2006
Napster CEO Chris Gorog has ‘secret plan’ to help beleaguered company become profitable – February 09, 2006
Google: no interest in Napster, no plans to develop music store at this time – January 31, 2006
Napster does the math: layoffs commence with 10-percent of workforce lopped off – January 25, 2006
EMI Music Chairman: Music subscription services like Napster and Rhapsody haven’t beeen huge – January 23, 2006
Napster CEO Gorog: ‘we are extremely excited about the future’ – January 18, 2006
Report: Napster executives do the math, consider selling or shutting down, layoffs imminent – January 16, 2006
Napster CEO Gorog: Apple iPod is a ‘villain’ – December 12, 2005
Do the math: Napster posts $13.6 million second-quarter loss – November 02, 2005
Napster President: Apple CEO Steve Jobs has ‘tricked people into buying a hardware trap’ – August 22, 2005
Apple’s roadkill whine in unison: ‘incompatibility is slowing growth of digital music’ – August 12, 2005
Napster: the only thing missing is the sock puppet – August 04, 2005
Napster, other Windows Media-based music services ‘chasing a niche opportunity’ – June 29, 2005
SmartMoney: Napster is a snooze, gushing money and renting music is un-American anyway – July 06, 2005
Napster To Go Soon? Reports $24.3 million net loss on $17.4 million net revenue – May 11, 2005
Napster is a joke – April 05, 2005
Napster CEO Gorog: Steve Jobs ‘must be pretty frightened’ of Napster To Go – March 14, 2005
Napster’s math does not add up – February 28, 2005
Users thwart Napster To Go’s copy protection; do the music labels realize the piracy potential? – February 15, 2005
Napster CEO Gorog: ‘it’s stupid to buy an iPod’ – 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
The de facto standard for legal digital online music files: Apple’s protected MPEG-4 Audio (.m4p) – December 15, 2004
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  1. I can’t believe what I’m READING…so three million visitors to are going to support the company through click ads? Come on! There has to be a REASON people are going there. If the site becomes some top-40 Pop music portal, then the Naspter brand will have nothing left to sell out.

  2. Napster used to be really really good. Looking forward to writing a similar client this summer (when my thesis is done!) which searches the metadata of files, not just filenames.

  3. “Napster believes this new business has the potential to be bigger than the existing music service”

    They can believe whatever they want, the bottom line is, they are done and grasping for anything to hang on. Good bye.

  4. Quote:

    “In time, Napster believes this new business has the potential to be bigger than the existing music service,” Roney reports.

    From where I sit, it wouldn’t take much for their ad revenue to eclipse their music subscription revenue….

    However, what happens when people have no reason to go to the napster website?

  5. All this talk of the “Napster brand” makes me laugh. Napster means nothing to people now, or if it does it means “that 90s music thing that got shut down”. Nobody now has any positive feelings about Napster, the brand, because they know its just not the same thing as it used to be.

    Napster will be out of business is 3 years or sell.

  6. I am still in shock over this. It makes less than any sense.

    Perhaps MDN could help us out here. knowning what you know about your own site traffic, and the advertising rates, and assuming had regular visitors like MDN, what could they expect to pull down in the first quarter or two of operations?

    But other things amaze me too (no wonder they are loosing $0.40 per share per quarter!) There is the amazing figure that it costs Napster $130 to get a single customer. Assuming that customer goes for a 12 mo. $15 subscription, that’s $180 in revenues, less the $130 marketing expense, less the actual cost of music royalties, network bandwidth, etc. So they aren’t making much – and that’s on someone who gives it a full year, not just a couple months and leaves.

    Anyway, If people are going to to learn about Napster music subscriptions, buy/redeem gift cards, etc, then it is all predicated on the idea that there are Napster customers. and apparently there is 2-3M in traffic a month.

    But if that customer base declines because people already know about Napster or have tried it or whatever, then what will drive the traffic? No one really goes to to “hang out online” – so Napster will have to spend MORE money on content to create the portal to get the visitor numbers and “stickiness” up so that Pepsi or whomever will pay to have their banner ads on the site.

  7. Okay, okay. I’m a tad lost here.

    Basically, Wall Street is saying that Napster will not significantly add to it’s subscription base in 2006. Okay, fair enough. So what Napster is going to do is “take advantage” of the 2 or 3 million people who visit every month.

    Okay, do they mean the web page? Maybe it’s me, but I have my doubts about the alleged 2-3 million. So are they going to try to turn Napster into a “portal”? Remember way back in the”Internet Bubble” days when everybody was going to become a “portal”?

    Or will the Napster music playing app start showing advertisements, a la iTunes with Napster will charge the music companies for placement? “Hey, if you like Hellwitch, you might like the latest from Hillary Duff!”

  8. This marks the end of the Napster story. Period. The three million people they are talking about will not appreciate the ad slamming and will tell them to go to hell. They will probably lose 1/3 of those people within the first month.

    Bye bye stinly Napster. You should have stayed dead.

  9. “So you’re going to have consumers having to make a decision between last year’s technology, your father’s Oldsmobile, or any other MP3 player that will support this extraordinary portable subscription opportunity.”

    brought to you by General Motors! America’s #1 brand!

    how’s that ‘iTMS-killer’ subscription model coming along there, Gorog?

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