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Napster (pay service)

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This article is about the company formerly known as Roxio. For the original Napster filesharing service, see Napster.
Napster, Inc.
Company typePublic (Nasdaq: NAPS)
IndustryOnline Music
FoundedReconfigured by Roxio in 2003
HeadquartersLos Angles, California, USA
Key people
William Christopher Gorog, Chairman & CEO
ProductsNapster Light<br\>Napster Members
N2G(Naspter to Go)
RevenueIncrease$46.729 Million USD (2005)
Decrease-$29.506 Millions USD (2005)
Number of employees
135 (2006)
Websitewww.napster.com

Napster, Inc. (Nasdaq: NAPS, formerly Roxio, Inc.) is an online music provider offering a variety of purchase and subscription models. As of 2006, they are apparently the number one most popular music subscription service. Their a la carte sales have also been modest compared to their most significant competitor (Apple Computer's iTunes Music Store).

History

File:Napster2.0.jpg
Napster 2.0

Roxio bought the assets of the original Napster company at its bankruptcy auction in 2002 and the online music service called pressplay in 2003, with the intention of using these assets as the basis of a new legal online music service that would let users access music through a subscription or on a fee-per-song basis—and thus giving the record companies and the artists/composers (or their estates) the royalties they had been asking for as itunes does. This service was confusingly dubbed "Napster 2.0", despite the fact that the original Napster Inc.'s now-dead version of Napster p2p had actually been at version 2.0 for some years. It had a beta release in New York City on October 9, 2003, and went into full production on October 29. Napster 2.0 is not a peer-to-peer service, but aside from the name and logo this new version does contain some features (such as artist, album and song search) similar to those of the original Napster. It was the second legal music download service to gain widespread popularity, launched six months after the iTunes Music Store.

Users may use the subscription based service (N2G and Members) for a monthly fee or pay per track (Napster Light). Some colleges, including Pennsylvania State University, have a deal with Napster that provides students with free Napster accounts.

Introduction

File:Artistsetuponnap.JPG
Viewing Music on Napster

On October 27, 2003, just 48 hours prior to the official launch of Napster 2.0, Napster posted a press release on their website stating that starting in November, people can buy Napster gift cards for $14.85 from Safeway, Rite Aid, CompUSA, Best Buy, and ExxonMobil. This card will have a scratch-off surface that will reveal a unique PIN that can be used with Napster 2.0 to give 15 credits for permanent download of music from the Napster 2.0 service. In another press release Microsoft announced that its new Windows XP Media Center Edition 2004 will feature the Napster 2.0 service. Earlier in October, Napster and Samsung revealed the first Samsung Napster Player, which is currently available at electronic stores throughout the U.S. The press release also claims that Napster 2.0 supports all the leading digital music players currently released on the market, though it does not support the popular Apple iPod or iPod mini. One of the company's first major moves involved a deal with Pennsylvania State University, which started using Napster to provide its students with a legal alternative to illegal file sharing of music.[1]

On February 23, 2004, Roxio announced that Napster 2.0 had sold 5 million tracks since its launch in October, 2003, and attracted roughly 1.5 million customers. However, at this point the number sold was still far behind Apple Computer's iTunes Music Store, which by January 6, 2004 had sold over 30 million tracks. Analysts were further concerned when it came to light around February 23 that the Hewlett Packard (HP)-Apple deal to bundle iTunes with all new HP PCs in return for an HP-branded iPod had originally been Napster's deal, which was cancelled a few days before Napster 2.0's October 29 launch.

On May 20, 2004 Napster announced that it had set up a British service ahead of iTunes to compete with the British legal download market leader OD2 co-owned by Peter Gabriel. There was some concern by British consumer groups about the higher cost charged in the UK which the company attributed to higher record company wholesale costs and the British VAT.

New focus

On August 9, 2004 Roxio announced the sale of their Consumer Software division (Roxio's core business prior to their acquisition of pressplay) to Sonic Solutions, for $80 million in equity. The transaction was completed on December 17th. The company then rebranded itself Napster, Inc., and shifted their focus entirely to their music efforts.

Napster
Developer(s)Napster Inc.
Stable release
3.6.07 / March 2006
Operating systemMicrosoft Windows XP
TypeMedia player
LicenseWMA
WebsiteNapster.com

Napster Services

Napster Light is for users who don't wish to pay for a subscription or wish to fully own the music they listen to. Purchased media may be burned or transferred to a compatible MP3 player.

Napster Subscription Services have two subscription models: Napster to Go or Napster Members. Having any of the two does not give users the right to burn songs to a CD unless they buy those songs.

Napster Members is intended for people who spend much time by their PCs and have broadband. The service enables users to stream the songs without downloading them. Assuming users listen to the same song more than once, streaming uses up more bandwidth and is hence recommended for broadband users only.

N2G(Napster to Go) allows unlimited transfer to a compatible mp3 player. The Napster To Go model, launched quietly in late 2004, permits the users to transfer an unlimited number of songs to their own devices. The device must be Microsoft "Janus" compatible. These songs can be listened to only while the Napster subscription is active; if customers terminate their subscriptions, they will no longer be able to listen to the songs. This service is not compatible with Apple's iPod or Sony's Walkman.

Napster also sells ringtones and mobile phone wallpaper.

Success

Napster has generally been loathe to disclose download or subscriber numbers, perhaps out of fear of comparison to the more popular iTunes service. However, based on revenue and subscriber figures from their second quarter 2005 (calendar) SEC filings, it is possible to establish an absolute upper limit of approximately 8.8 million downloads/quarter from their "a la carte" service. This compares unfavorably to the approximately 130 million songs sold by iTunes in that time period.

That said, their 500,000+ paying subscribers[2] compare favorably to market leader Rhapsody's 545,000[3], and their penetration into higher education through discounted pilot programs has, while controversial[4], grown steadily[5]. However, Napster expects to remain a money-losing business for the foreseeable future.

In January 2006, Napster laid off around 10 management jobs from a staff of 153[6], causing some to question the viability of the company. In response, Napster claimed that no further layoffs would take place and cited a doubling of revenue for the last quarter of 2005 from the year before.

Sources

  1. ^ Penn State and Napster team up to make legal tunes available to students
  2. ^ As of January 18, 2006. See press release.
  3. ^ As of the quarter ending September 30, 2005. Estimated based on quarterly earnings conference call's figures of 328 million on-demand streams per quarter and usage figure of 200 streams per user per month.
  4. ^ Vance, Ashlee (November 7, 2003). "Penn State students revolt against Napster, DRM invasion". The Register. {{cite news}}: Check date values in: |date= (help)
  5. ^ Napster, Inc (July 19, 2004). Global Napster Expands University Program with the Addition of Six Schools. Press Release.
  6. ^ Viega, Alex (January 25, 2006). "Napster denies rumors of trouble amid layoffs". San Jose Mercury News. {{cite news}}: Check date values in: |date= (help)

See also

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