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Napster On the Block 144

Posted by kdawson
from the strong-balance-sheet dept.
Ars Technica has a good wrap of Napster hanging out a "For Sale or Partner" sign. With half a million subscribers (down from the previous quarter) and $100M in annual revenue, the company is still bleeding cash. El Reg pinpoints the trouble: "The subscription crowd – and Apple via iTunes – must fight over a few pennies per song in profit. More from the Vulture: "You have to wonder if Napster's customer base is really worth the effort for a company such as Microsoft or even Real. The Napster brand has all the gravitas of a Che Guevara t-shirt."
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Napster On the Block

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  • Metallica? (Score:4, Funny)

    by corroncho (1003609) on Tuesday September 19, 2006 @04:35PM (#16140666)
    Maybe Metallica would be interested in this fine venture!!!!
    ________________________________
    Free iPods? Its legit [wired.com]. 5 of my friends got theirs. Get yours here! [freepay.com]
  • by EVil Lawyer (947367) on Tuesday September 19, 2006 @04:36PM (#16140684)
    At one point the Napster brand might have had all the gravitas of a Che Guevara shirt. At this point it has all the gravitas of a Jar Jar Binks shirt.
  • Is that revenue figure right?

    -jcr

    • by hardburn (141468)

      That's my thought, too. What could they possibly be buying that makes them bring in $100M in revenue and still be unprofitable?

      • IIRC, unofficial numbers from iTMS indicate they only keep $0.25-0.30 per song sold. Napster has the subscription model, but most likely the expenses are similar. Result: $100 million in revenue is probably closer to $25 million.

        Throw in bandwidth, employees, and adverstising (Apple advertises the iPod, but that has a comfortable profit margin. I don't think I've ever seen an ad for iTMS specifically). That's not much room for profit.

        My $0.02.

        • by Karlt1 (231423)
          Out of every $0.99 song, $0.65 does go to record companies. But out of that $0.34 Apple still has to pay credit card transaction fees. Everything that I have read says that Apple makes $.10 per song after paying the record companies and credit card processing fees. That does not include any other overhead.
      • by packeteer (566398)
        licensing...
    • by Anonymous Coward
      Yes, that's their gross income. They're operating at a loss, though; IIRC, they're losing about $10 million a year...
    • by tompaulco (629533)
      Wow, their half million users are spending $200 a quarter on songs? That is much more than I ever spent on CDs. I guess the electronic distribution method does work (except they're still losing money).
    • by ClamIAm (926466)
      lol arithmetic:

      500,000 users * $15 per month * 12 months = $90,000,000

      This assumes that everybody's buying the more expensive service that actually lets you transfer songs to your portable player. It also assumes that nobody buys any songs, and it appears that you have to buy songs for $.99 to burn them to CD.
  • Is this a surprise (Score:5, Insightful)

    by gbulmash (688770) * <.semi_famous. .at. .yahoo.com.> on Tuesday September 19, 2006 @04:37PM (#16140694) Homepage Journal
    Way back when the Napster brand was bought for a buttload of cash, I said it was a bad buy. The buyers thought the brand strength and name recognition would turn into cash when they rolled out a for-pay music service. But the people who used Napster to share music had moved on to Kazaa, Morpheus, and new ones when those got nailed or started barfing up spyware.

    When Napster was finally re-rolled out as a subscription service, all of its fans had moved on. There was some advantage to the name recognition, but overall it had lost its chic, its cool, and its cred. It was now a bunch of suits wearing the hip little cat head and everyone knew it. The users who "made" Napster were either illegally sharing via different apps, were buying off iTunes, or were going to hold the new Napster service up to pinpoint scrutiny like an ant under a magnifying glass.

    The term "irrational exhuberance" comes to mind. The people who bought the brand and built the new service got a lot of things, but didn't get *it*. Branding the service with the Napster name, while creating a certain amount of buzzz, also brought with it a certain amount of baggage, sets of varying expectations that would be hard to meet. And their declining numbers and murmurs of selling the business just go to prove that this was a bad idea that was not well-executed.

    Greg
    • Re: (Score:3, Insightful)

      by jdavidb (449077) *

      The people who bought the brand and built the new service got a lot of things, but didn't get *it*.

      Yep. Newsflash to the buyers: Napster was popular because it was a great place to get music without paying for it. Other than that, there wasn't much draw. Other people are doing a much better job on the "pay to download music" model, so unless you can do a better job of delivering on that, or unless you're willing to go back to Napster's original model, owning the Napster name doesn't do much for you.

    • Re: (Score:3, Interesting)

      by nine-times (778537)

      Besides all that, there's just the fact that there isn't money to to made from selling music online. Let me rephrase that to be completely accurate: all the money made selling music goes to the label. Not to the artist, not to the online store, but just the label. Companies keep thinking that they're going to make a truckload of money if they release the new online store, but there's no business plan for it yet. For the amount of money the labels demand, and the price consumers are willing to pay, there

    • by tompaulco (629533) on Tuesday September 19, 2006 @06:12PM (#16141612) Homepage Journal
      I have to agree with you. My stepson begged me to let him get a trial subscription to Napster. My first thought was "Hey, aren't they the guys who got in trouble for sharing music illegally. No way I am going to pay money for pirated songs." But some of my friends told me that they are strictly legit now. So I told my stepson he could sign up. Next thing you know, they are wanting a credit card...for a FREE trial subscription. Reading the fine print, it appears that they are going to charge me a full month, and then refund it if I don't like the service. Well, that doesn't sound like a legitimate business to me, and I wouldn't do business with them. But my stepson said he would pay for it, so I went ahead and paid the $20 or whatever it is for a FREE account.
      Then, he couldn't get the software to load. Turns out you have to be an administrator to load their software. What kind of crap is that? Is it an OS or something? So I had to install the software for him because there is no way I am making him an administrator.
      Next, he couldn't get the software to work. I found it worked fine on accounts with administrator priveleges, but not on ones that are regular users. This was the final straw, as there was no way I was going to give my stepson administrator priveleges.
      So I cancelled the account. I cited the fact that my stepson was unable to determine if their service was any good, because their software was not compatible with the Microsoft security environment.
      Then, they pissed me off by charging me $1.94 because I used the service for 3 days. In fact, in those three days we downloaded exactly zero songs, and only even got connected once or twice, while testing with an administrator account. They claim to have a 15 day or so free trial, but they actually charge you a prorated amount during that period, even though you can't use their software if you set up your security properly.
      I even got American Express after them to try to get the charges reversed, but Amex sided with them. If you get a free subscription, you should have to pay for it, even if you can't use it.
      DO NOT DO BUSINESS WITH THESE SCAMMERS!!!
    • by Burning1 (204959)
      The Napster brand still has a lot of power with investors. Napster recieved the kind of attention that google also had, making it look very promising to anyone who had a spare million in cash laying around. With the success of iTunes, the online music market seemed very interesting. Although the Napster name did not attract a lot of the old members, it did give them an edge on signing up new members. How many successful no-name music services are out there, after all? It seems a hard market to break into.
    • by deviceb (958415)
      yeah, what idiot would invest in an old technology that already had its day.. again.. back like 5 years ago.
      It's obsurd that the word napster is still even around.
    • by GWBasic (900357)
      I tried a Napster subscription two years ago. It was great, I could listen to almost ANYTHING, instantly. The problem was that it sounded horrible. After two weeks, it gave me such a bad headache that I had to cancel it.
  • Finally! (Score:5, Funny)

    by RumGunner (457733) <rumgunner@DALIhotmail.com minus painter> on Tuesday September 19, 2006 @04:38PM (#16140718) Homepage
    I'm glad someone is finally sticking it to that sell-out Che Guevara. His marketing campaign drives me nuts.
    • As an American, my edumication was a bit incomplete. I never studied much more than a few obscure battles in early pre-US history. So, I had to look up somethings, and I'll have to say that Wikipedia is great for being able to read up on a topic like this. Che Guevara [wikipedia.org]
  • by stonedonkey (416096) on Tuesday September 19, 2006 @04:40PM (#16140733)
    ...what it's like to be on the artist's end of the contract.
    • by merreborn (853723) on Tuesday September 19, 2006 @05:01PM (#16140943) Journal
      Now they know...what it's like to be on the artist's end of the contract.

      That's the problem. Both the artist *and* the retailer get shafted (see: the recent collapse of Tower Records). The only people making money on this whole game are the labels.

      In fact, Weird Al recently pointed out that he, personally gets *less* from an iTunes sale than he does from a CD sale, thanks to his contract's "New Technology" clause. So even though the label's costs are *lower* for iTunes sales, they're making more, and *taking* more from the artist.

      The middlemen get everything. The retailers and the artists get nothing.
  • So what does it mean for those of us that have used Napster's legitimate service if it evaporates? Do we lose access to our songs once we get a new MP3 player or computer?

    Yes, I bought DRMed stuff that I was having no luck finding elsewhere. And no ITunes isn't suitable for my needs: I don't use or want an Ipod. (SanDisk Sansa if you must know)
    • Re: (Score:2, Informative)

      by sbjordal (654330)
      yep. Check your contract.
    • I think that was always part of the "deal" with music-rental services. If they go under, or you stop paying -- if either one of you decides to terminate the arrangement, in other words -- your music becomes unplayable, just like those old Divx discs.

      Now if you're talking about music that you've bought at $0.99 a song, I would think that it would keep working, but I suppose you never know. I guess if I was in your position, I'd be burning it out to Audio CDs and then re-ripping it to some lossless DRM-free f
      • Now if you're talking about music that you've bought at $0.99 a song, I would think that it would keep working, but I suppose you never know.

        I'm really curious about that. I'm not too familiar with the Napster service, but I've wondered about iTunes, for example-- what happens if, hypothetically, Apple goes out of business or decides to quit running the store? Sure, I can keep running iTunes on my current computer, but what about when I get a new computer? What if Apple is no longer running servers capa

        • by Bassman59 (519820)

          I think the fair solution is obvious: Upon ceasing functionality of servers that can authorize computers, Apple should have to provide a means to strip DRM from all of their content for free. But "fair" usually doesn't matter, so I wonder what the legal repercussions would be? Could Apple be compelled to release a means of stripping DRM? Could someone be prosecuted for providing a means to strip the DRM at that point?

          Fuck it, just play all of the songs through Audio Hijack and recapture them. DRM be gone!

        • I'm really curious about that. I'm not too familiar with the Napster service, but I've wondered about iTunes, for example-- what happens if, hypothetically, Apple goes out of business or decides to quit running the store? Sure, I can keep running iTunes on my current computer, but what about when I get a new computer? What if Apple is no longer running servers capable of authorizing computers to play your songs?

          Last I looked, iTunes songs can be burned to plain old audio CDs.

          • This gets touted as a great way around the Apple DRM, but as everyone always points out, burning to CD and re-ripping results in a loss of audio quality. Since I haven't used an audio CD in 5 years and don't own a stereo, a lossless solution that allows me to keep my AAC files is pretty important.
    • So what does it mean for those of us that have used Napster's legitimate service if it evaporates? Do we lose access to our songs once we get a new MP3 player or computer?

      Yes, I bought DRMed stuff that I was having no luck finding elsewhere. And no ITunes isn't suitable for my needs: I don't use or want an Ipod. (SanDisk Sansa if you must know)

      pretty much what was predicted by everyone who questioned the subscription music service: you lose it all. when napster was "reborn" there were loads of people pr

    • by vought (160908)
      Yes, I bought DRMed stuff that I was having no luck finding elsewhere. And no ITunes isn't suitable for my needs: I don't use or want an Ipod. (SanDisk Sansa if you must know)


      iTunes music store lets you burn your music to CD and re-rip it at any level of quality you want - including lossless. The DRM goes away at that point.

    • by badasscat (563442)
      So what does it mean for those of us that have used Napster's legitimate service if it evaporates? Do we lose access to our songs once we get a new MP3 player or computer?

      Unless you use FairUse4WM...

      Pretty much the situation it was designed for.
    • by ClamIAm (926466)
      This is one of the better trolls I've seen in a while. There's no maliciousness, just pure innocence.
  • by tommasz (36259) on Tuesday September 19, 2006 @04:45PM (#16140765)
    ...Web 2.0!

    1) Change name to Napstr.

    2) Profit!
  • El Reg pinpoints the trouble: "The subscription crowd - and Apple via iTunes - must fight over a few pennies per song in profit.

    Napster doesn't sell hardware. Furthermore Apple consciously did that. And further further more, both are doomed as DRM awareness and issues surface.

    Apple is double-doomed since when everyone gets a good enough iPod, the only revenue Apple is left with is iTunes.

    Hence movie downloads.. But they won't have success. Life sucks, doesn't it?
    • Bob Iger announced a million dollars revenue in the first week of movie sales on iTunes. This with a very limited catalog and no living room capabilities.

      Disney has found a $50M a year outlet for its old catalog requring no production costs and promotionally piggybacking on latest releases and Apple announcements. I bet they'd like more failures like that.
      • by suv4x4 (956391)
        Bob Iger announced a million dollars revenue in the first week of movie sales on iTunes.

        Those numbers sound impressive until you realize it's few percent of the iPod users buying a single movie out of interest.

        Disney has found a $50M a year outlet for its old catalog requring no production costs and promotionally piggybacking on latest releases and Apple announcements. I bet they'd like more failures like that.

        Disney definitely did find revenue. The question is what did Apple find?
        • Content.
        • by DMaster0 (26135)
          Apple found another reason for people to spend more money on an Apple media player, than any other brand's media player. Itunes content can only be played on an ipod, therefore Apple doesn't care about making a few pennies here or there at the itunes music store, they care greatly about having you buy a brand new video playing ipod, where they make at least $100 pure profit (maybe more, depending on the model) per unit sold, not to mention the vast amounts of profits on accessories and licensing the access
  • thanks for sharing
  • 1. Napster is right where the labels want them. The red-headed step child nobody wants.
    2. This is exactly what happens in markets with wealthy, powerful companies unfettered by regulation. Price fixing, absurd litigation, even more absurd legislation.
    3. Let's not forget their outdated business model which, in 2006 looks good for another 25 years. It took them 3-5 years as enforcer to force consumers to treat mp3's like vinyl.

    It's like punk rock was in the 80's. Only with fiddles and twangy stuff
    http://w [crowmedicine.com]
    • Re: (Score:1, Troll)

      by stubear (130454)
      Their business model is not outdated and I really wish you stupid geeks would quit parroting this stupid mantra. I know you think if you say something over and over enough times you are bound to finally be right but it's not going to happen. There has been no conclusive proof that alternatives like distributing via P2P and selling concert tickets or merchandise is a legitimate business model. This also assumes that all businesses which rely on copyrights will be able to do the same. What are authors sup
      • our current system works just fine unless you simply want shit for free and are willing to illegally distribute intellectual property over the internet.

        Um, except that's exactly what people want, and that's exactly what they're doing.

        So basically ... I'm in complete agreement.

        • by stubear (130454)
          So, you're OK with using blackmail and other illegal means to conduct business? I mean, you're not really hurting anyone when you bride someone or threaten to whack someone in the kneecaps are you? You shouldn't see any problem with monopolies either I guess.
          • If you want to equate copying a bunch of bits to bribery or assault, that's fine.

            However, most people don't think they're on the same level, as evidenced by the rampant amounts of technically illegal copying that goes on, and the significantly less-than-rampant amount of bribery and assault.

            Lumping everything in life together under "legal" and "illegal" may be fine in elementary school, but most people don't think that way. If you think life is that black and white, congratulations and I wish you the best.

            Y
            • by stubear (130454)
              Putting small busineses and independent singer/songwriter and artists isn't physical harm? Must be nice to live in your world.
              • by Mr2001 (90979)
                Putting small busineses and independent singer/songwriter and artists isn't physical harm? Must be nice to live in your world.

                Yes, it is. Why don't you come join the other 6 billion of us?
      • by fwarren (579763)
        our current system works just fine unless you simply want shit for free and are willing to illegally distribute intellectual property over the internet.

        I think what most here find so gulling, is the inequity.

        Electronic distribution should mean cheap distribution, and more variety, after all, how much would it cost to put ever lables back catalog on line?

        Instead, we have the labels doing what they have always done, take more from the artist, take more from the vendor, and keep more for themself. And yes,

        • by stubear (130454)
          Electronic distribution is occurring but people don't like the way it's happening. Too bad. Start your own label and show us all how to do it right. When your business goes under you'll learn the hard way that it's not as easy as you think. if the labels sold uncompressed, unprotected audio tracks for 10 cents a piece, giving 90% to the artists, a handful of people would purchase the songs and distribute them via P2P. Know why? Because these people secretly like Britney Spears and Jessica Simpson and
          • by Ilex (261136)

            Electronic distribution is occurring but people don't like the way it's happening. Too bad. Start your own label and show us all how to do it right. When your business goes under you'll learn the hard way that it's not as easy as you think. if the labels sold uncompressed, unprotected audio tracks for 10 cents a piece, giving 90% to the artists, a handful of people would purchase the songs and distribute them via P2P. Know why? Because these people secretly like Britney Spears and Jessica Simpson and they c

            • by shark72 (702619)

              "They are the only fully legit music service to able to offer IPod compatible tracks and have taken the No2 slot after ITunes because of it."

              For what it's worth, they're a distant second... 11% to Apple's 67% in July. But still... #2 is a pretty good accomplishment.

              "That's exactly what eMusic has done. This was not a moral decision, it was purely a business one and they don't seem to be suffering from rampant piracy either."

              This is because emusic's userbase skews older, with customers who have mo

        • by shark72 (702619)

          "Electronic distribution should mean cheap distribution, and more variety, after all, how much would it cost to put ever lables back catalog on line? Instead, we have the labels doing what they have always done, take more from the artist, take more from the vendor, and keep more for themself. And yes, I know, the best we can do, is to try and starve them out, not buy stuff that comes from a major label, and I am not talking pirating."

          Magnatune [magnatune.com], whose motto is "We Are Not Evil," has overhead that is muc

    • Only On Slashdot (Score:2, Insightful)

      by squiggleslash (241428)

      Q: I've heard a lot about "business models", can you show me an example of a good one?

      A: Certainly! A good business model is one where you provide a service without charging any money. For example, the original Napster would be an example. They did lots of research and development into their "file sharing" product, and co-opted the work of artists across the world to produce a product that people would want to use. How did they make a profit without charging anything? Answer: Volume!

      Q: Ok, so can you g

    • by minsk (805035)
      Hang on a second -- Copyright is a regulation, and infringement is investigated and punished by government agencies. So how are the abuses surrounding the music industry qualify tied to a *lack* of regulation?

      I would advance that legislation is by definition regulatory, and all of the ongoing litigation is driven by regulations. The stupid agreements that musicians make with major labels are probably the only non-regulatory thing in the whole mess. Price fixing depends entirely on creating barriers to compe
  • In retaliation for Napster giving away free songs, the Offspring started selling t-shirts with Napster's logo on it. I got one during the brief time they were selling it. As the original poster said, Napster just isn't cool anymore unfortunately, so I can't bare to wear it.
  • Heh (Score:1, Funny)

    by Anonymous Coward
    You'll never shut down the real Napster.
  • I was a subscriber since it was called 'Pressplay', and the service was fair to use but it was riddled with DRM related issues. I vowed never to buy anything with DRM again after I was unable to authorize my computer to play a few tracks that I had bought, but Napster no longer sold. I did what I was supposed to and 'backed up' all of my licenses, and restored them after a reformat and reinstall of Windows... No dice, the files that I had purchased reverted to a 'subscription' license and I couldn't burn
  • What is this "Napster" thing, and is there a torrent available so I can download a "demo" of it?
  • The concept of leasing seems to work alright for expensive material goods such as cars, but people generally don't like spending money to temporarily "rent" crippled, DRM-infected media they're used to owning... or can otherwise download for free (regardless of legality). Witness the downfall of the original DivX DVD format (not the codec): http://news.com.com/2100-1040-227194.html [com.com]. Though the creators believed the blame for its downfall was not lack of consumer interest, the truth is most folks don't like
    • That and Napster didn't really provide much value above and beyond competitive alternatives

      I agree with almost everything you wrote and I'm usually someone who would never rent/lease anything. But I do think Napster's subscription model offers value above and beyond the other music stores I've encountered.

      The value I find in Napster is one of discovery. For $10/month I can legally download as many full albums as I want, not the useless 30 second song clips the other guys offer, and I can listen to them at
      • I've got to admit, that was one thing that interested me in a subscription service.

        A Napster subscription could have been a competitor to an XM or Sirius subscription, had they marketed it that way. "Listen to all the music you like, not the music they like" sort of thing. Do your damndest to get it on portable players and interface them with cars. Do various podcasts for your subscribers, etc., and try to compete with the satellite companies.

        That, I think, has some possibilities. But the subscription m
  • napster still exists?
    i thought napster died long ago...
    hmm... maybe lack of advertising/awareness is exactly why they're doing so poorly.

    of course, I _know_ about itunes, and still wont use it...
  • I'll just download the company for free.
  • The old Napster had a tremendous amount of material. The music selection of the current Napster is pathetic.

    At least for me, it has nothing to do with the fact that it costs money. Every time I take a look at Napster, I'm frustrated that I can almost never find even mainstream stuff I'm looking for. Give me eMusic anyday... 10 times the value and more interesting content. It's a great trade off for not having the major labels.

    The market seems to agree with me, too.
  • Any other legit all you can listen to services then with the to-go method available as well, for those who want to go legit and need something simple?
  • When people catch on that Zune purchasers can't play music downloaded from Napster and its ilk... that Napster and other Microsoft customers have been suckered by the biggest Microsoft head-fake since 1990... I suspect there will be a rash of failures.

    It will be comparable to the wave of software development companies that folded or were seriously wounded after hitching their wagon to the OS/2 star (as Microsoft convinced them to do while secretly developing its own products for Windows).

Faith may be defined briefly as an illogical belief in the occurence of the improbable. - H. L. Mencken

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