Music subscription service Napster Inc. [
NAPS] has
announced the launch of an online store that will sell 6 million downloadable songs in the
DRM-free MP3 format. For the first time Napster will
offer a product playable on iPods and iPhones, as well as various other devices, priced competitively with Amazon.com Inc.'s [
AMZN] downloads, which are also DRM-free. The Napster tool will also work with Apple Inc.'s [
AAPL] iTunes store, which continues to sell some song files that are only compatible with a certain number of devices.
Napster's bread and butter remains its subscription service, in which users gain access to a large library of music for a basic monthly fee, starting at about $13 a month. The recurring-revenue model is relatively novel for the music business, but it hasn't proven popular enough to bring Napster remotely close to profitability--it lost $36.8 million on sales of $111 million in 2007, and its
share price also has taken a beating.
Napster's store will have a hard time luring customers away from other available options, especially without an obvious value-add. It will initially market MP3s to people already paying for its subscription service.
I do believe that customers will eventually migrate away from online stores that sell tracks with DRM, although those stores themselves may in time cease to exist. (Apple already sells DRM-free songs from EMI, a struggling label that is
ready to experiment, as well as some indies.) Besides, selling 99-cent songs isn't a high-margin business. For Apple it's a low-margin mechanism that spurs sales of its iPod, while for Amazon it's a supplement to a wide range of offerings largely outside of the music sphere.
-- Paul Bonanos For more see
TechCrunch,
Bit Player and
Mashable
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