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 Napster.com 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 Napster.com initiative is to leverage the brand and take advantage of the two to three million visitors to Napster.com 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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38 Comments

  1. I can’t believe what I’m READING…so three million visitors to Napster.com 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 Napster.com 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 Napster.com 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 Napster.com 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.

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