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Napster Going Under?

Wednesday, January 18th, 2006 at 1:30 PM - by Staff

Digital Music News is reporting that the digital music subscription service, Napster, is in a dire financial situation, and that massive layoffs are imminent. Company executives may even be planning exit strategies that include a fire sale, or liquidation. In contrast, Apple's iTunes Music Store has scored 83 percent of the legal music download market.

Despite the fact that these reports supposedly come from within the company, Napster representatives are denying that executives plan to sell or liquidate the company. A company spokesperson commented "[There are] no imminent plans for significant layoffs."

Napster's shares aren't faring too well right now. Currently, the company's stock is trading at less than half of its 52-week high, at US$3.20.

Chris Gorog, Napster's CEO, commented to ZDNet that his company is actually doing fine. He claims that the company has doubled the number of subscribers in the past 12 months. Unlike the iTunes Music Store, where users purchase and download songs al-a-carte, Napster uses a monthly subscription model. Subscribers that fail to pay their monthly fee lose their music.

Mr. Gorog stated "With a track record of robust growth, exciting new developments in the pipeline and over $100 million on our balance sheet, we are extremely excited about the future of Napster."

If Napster actually is failing, it will mark only one in a long line of music providers that was unable to compete with Apple.

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A guest said: (hide)

Wed Jan 18, 2006 3:03 pm

i hope they go under, but not necessarily bc they are competition for apple, but bc they took the name napster. "napster" was a "free" revolution. while i don't agree necessarily with the stealing part of napster, i am glad napster happened and shook up the riaa, actually the riaa is still shaking. and it has changed the industry.

then they tried to profit for from the name - when in fact it stood for the opposite, i found that irritating!

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vasic said:

member since 09 Aug 2005 with 279 posts, unranked, send him a message or view his profile

Wed Jan 18, 2006 3:12 pm

Massive layoffs 'eminent'??? Most likely meant 'imminent' (eminent = famous or respected within a particular sphere or profession; imminent = about to happen).

It will not be a surprise if all those subscribers were left in the cold with their WMA DRM-enabled (therefore, practically useless) devices, filled with thousands of locked unplayable songs. Napster's doubling their subscriber numbers in one year is actually rather dismal, considering that a year ago, almost nobody knew about Napster's new identity (that was before the big Superbowl campaign).

Having said that, I have a feeling this is someone's wishful thinking, or a misinterpretation of a news tidbit from somewhere. I doubt it is going to happen that soon. Then again, stranger things have happened...

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A guest said: (hide)

Wed Jan 18, 2006 3:19 pm

$100 million on the balance sheet? Is that cash? If so how much has to go to the various labels. If that liability is over $100 million then they have a problem.

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vasic said:

member since 09 Aug 2005 with 279 posts, unranked, send him a message or view his profile

Wed Jan 18, 2006 3:46 pm

Well, if they have 500,000 subscribers @15 bucks a month, that works out to about $90 million per year. Apple, on the other hand, sells about 3M songs per day - in other words, what Napster does in one year, they do in three months. That assumes no attrition (i.e. sustained subscriptions), and no additional growth on the Apple side (which both are unrealistic). So, their $100 balance sheet is kind of meagre.

The writing's on the wall!

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A guest said: (hide)

Wed Jan 18, 2006 3:57 pm

So much for the alleged superiority of the subscription model.

Buh-bye Napster, thanks for playing.

.

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jimothy said:

member since 04 Jun 2004 with 612 posts, unranked, send him a message or view his profile

Wed Jan 18, 2006 4:50 pm

vasic wrote:
Well, if they have 500,000 subscribers @15 bucks a month, that works out to about $90 million per year. Apple, on the other hand, sells about 3M songs per day - in other words, what Napster does in one year, they do in three months. That assumes no attrition (i.e. sustained subscriptions), and no additional growth on the Apple side (which both are unrealistic). So, their $100 balance sheet is kind of meagre.

The writing's on the wall!

At 3M songs per day, Apple would have $90 million in revenue per month. Even factoring in album sales, it take much less than three months for them to sell $90M.

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Dirt Road said:

member since 24 Oct 2002 with 1239 posts, unranked, send him a message or view his profile

Wed Jan 18, 2006 5:39 pm

Heh... what happens to the customers if Napster does go under? All their music goes *poof*? What about people who have paid up months in advance, do they get their money back?

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A guest said: (hide)

Wed Jan 18, 2006 6:50 pm

keep in mind, Napster gets very little of that. I don't know how much, but Apple only gets like 10 cents for every song or something.

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gslusher said:

member since 13 Nov 2002 with 2088 posts, unranked, send him a message or view his profile

Wed Jan 18, 2006 11:34 pm

Quote:
i hope they go under, but not necessarily bc they are competition for apple, but bc they took the name napster. "napster" was a "free" revolution. while i don't agree necessarily with the stealing part of napster, i am glad napster happened and shook up the riaa, actually the riaa is still shaking. and it has changed the industry.

Oh, Napster changed the industry, all right. It was the major impetus for the restrictive DRM methods. Think of it like burglar alarms. If you live in an area with almost no burglary, you probably won't feel much need to have an alarm. Let a few burglaries happen, though, and many folks start installing alarms.

Napster wasn't a "free" revolution; it was, very simply, a "theft" revolution, even before the DMCA. Every single argument I've read in support of the original Napster was specious and/or very self-centered and childish. (E.g., "CDs cost too much," as if owning commercial music were a necessity of life or a natural human right.)

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A guest said: (hide)

Thu Jan 19, 2006 3:36 pm

gslusher wrote:
Napster wasn't a "free" revolution; it was, very simply, a "theft" revolution, even before the DMCA. Every single argument I've read in support of the original Napster was specious and/or very self-centered and childish. (E.g., "CDs cost too much," as if owning commercial music were a necessity of life or a natural human right.)

I'll have to disagree with that. Most of us (well, not the too young) recorded music from radio, exchanged CDs and copied them to tapes with friends, etc. It was still illegal but it was between family and friends, so it didn't feel all that bad.

Napster was indeed a revolution; it combined the ease of transfer via the internet, the high audio quality of MP3, and the broad audience of Napster users (much broader that your friends). It showed us another way to use the internet for, and that was a great achievement.

Ken

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dougolena said:

member since 20 Jan 2006 with 2 posts, unranked, send him a message or view his profile

Fri Jan 20, 2006 6:17 pm

In reaponse to gslusher, the original Napster model was legally problematic. However, it did spur sales of CDs. In addition, I downloaded electronic versions of albums that I had worn the vinyl out on. This was a great source for music that I had a legitimate license for but could no longer enjoy. Admittedly, I hunted for music I never had before, but since the quality was often fairly poor, I found myself buying CDs at an alarming rate to begin to enjoy again music I had kissed goodbye.

As well, I have a friend with an extensive vinyl collection that used napster to replicate and backup his original investment. How could this possibly be interpreted as theft?

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dougolena said:

member since 20 Jan 2006 with 2 posts, unranked, send him a message or view his profile

Fri Jan 20, 2006 6:22 pm

As far as Napster going under, I will be sad to see any of Apple's competors vanish. The reason is simple, without vigorous competition the leading company will get sloppy and forget it's customers. Competition keeps the industry healthy. Go Napster (even though I wouldn't begin to consider using you.)

I have found eMusic.com $10 a month for 40 songs! Beat that Apple! With the 50 free songs on signup and my first subscription payment, I have purchased about 80 songs. All for $10.

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