New Napster Not Making It?

in General Discussion edited January 2014

Well, Napster (Roxio) is not making the grade according to this article. Surprise!:


Smiles fade at Napster


By Dawn C. Chmielewski

Mercury News

It was a breakthrough deal that would have put the Napster kitty on millions of Hewlett-Packard computers.

But in the days leading up to Napster's re-launch in late October, HP suddenly -- and without explanation -- returned Napster's $250,000 check and canceled the agreement to install a link to Napster's online music service on its computers. Worse, in January HP announced a surprise partnership with Napster rival Apple Computer to feature the iTunes Music store on HP computers and sell Hewlett-Packard branded iPod music players.

Neither HP nor Napster's parent company, Roxio, would comment on the soured deal, whose details were confirmed by sources familiar with the agreement. But its collapse was one of several setbacks since the reintroduction of Napster, the pioneering song-swapping renegade, as a paid music service.

Napster is losing money, and top executives have left the company, including its president, chief financial officer, vice president of programming and head of corporate communications as well a key board member. On Wednesday, Roxio began laying off people at its Napster division. A Roxio spokeswoman said the company was ``eliminating redundancies in the organization'' but declined to say how many people lost their jobs.

And while Napster can legitimately claim it's the second most popular online music service, infomation provided by insiders at two of the major music labels shows it sells only about a quarter the number of downloads from their artists as Apple's market-leading iTunes store. Napster refused to release download figures.

``I think it's a very competitive market with very ugly economics and there's just no money in the download business,'' said Steven B. Frankel, managing director of Adams, Harkness and Hill, a Boston investment bank.

Napster 2.0 launched with a celebrity-studded bash at the House of Blues in Los Angeles and the bold pronouncements of its chairman and chief executive, Chris Gorog, who hailed the reborn Napster as the best-known brand in online music.

The reality of reincarnating the onetime bete noir of the music industry into a legitimate music service proved more sobering. Napster lost $15 million in its first two months of operation. And the most recent sales data reported to two of the major music labels shows Napster with an estimated 12 percent share of the download market, compared to Apple's 56 percent. Analysts estimate Napster's market share at 15 percent to 20 percent.

No music players to sell

Perhaps more telling is the state of Napster's subscription business, which is widely perceived as more lucrative than selling 99-cent songs. That's especially key for a service like Napster, which unlike Apple, derives no income from the sale of a branded music player.

Napster declined to provide specific subscriber numbers for its service, aside from noting that downloads and subscriptions each contributed equally to Napster's $3.6 million in revenue for the last three months of 2003.

That means Napster has attracted about 90,000 subscribers in its first two months -- ranking it fourth, behind RealNetworks' Rhapsody service, America Online's MusicNet and MusicMatch.

Gorog said he resists comparisons with other subscription services because of incongruities in the way subscriber numbers are reported. But he expects the business will mature as users realize it's cheaper to pay a flat fee for access to 500,000 tracks than to pay $1 a song.

Gorog was upbeat in a conference call last week with analysts and investors. He said he expects sales to reach $20 million within 12 months -- possibly even double that, as the Napster service launches in Europe.

``We are very pleased with our performance,'' said Gorog. ``It will again not only prove the strength of our service, but the extraordinary value of the Napster brand.''

Promoting Napster cards

Gorog points to key retail partnerships as spurring growth. An eclectic group of 20,000 nationwide retailers -- from Radio Shack to 7-Eleven and Exxon service stations -- sell prepaid Napster download cards. And this week, Target kicked off a nationwide Napster promotion, selling pre-paid music cards and kitty-branded merchandise.

In an interview with the Mercury News, Gorog said investors recognize the inherent value of the Napster brand and are patient enough to wait for the services to gradually attract customers and become profitable. They don't expect an overnight sensation, he said. Indeed, Napster raised $22.5 million as recently as January.

Differences over strategy have created tension with some music label veterans who came to Roxio through its acquisition of the Universal-Sony Music online music venture, pressplay.

Indeed, the new Napster appears to be plagued by the kind of management turmoil that marked the old Napster.

Music industry veteran Mike Bebel is gone as Napster's president. So is Lawrence Kenswil, the lone board member representing Roxio's largest shareholder, Universal Music Group. Alex Luke, the long-time vice president of music programming, who left shortly after the service's launch to join the rival Apple service. And Roxio's chief financial officer, Elliot Carpenter, who resigned for family reasons.

``You're after something that I don't think is there,'' said Gorog, when asked about top executives leaving the company.

Key executives with music industry backgrounds -- including Napster's chief operating officer, Laura Goldberg -- remain with the company.

``The question is how long can they hang in there? The answer is, for a while,'' said Gene Munster of the Piper Jaffray & Co, which has an investment banking relationship with Roxio.



  • Reply 1 of 25
    I read the article - this makes me so happy! Finally, a company blatantly imitates Apple, and winds up sucking dust.

    If I had some more time, I'd love to Google the quotes from those wipes at Real, and Roxio, who said things like, "Well, Apple has a commanding lead, but we're so smart, we prefer to work with the other 95% of the market."

    Am I the only one who's pumped about this? I remember getting physically ill reading quotes from the competitors upon their launch.

    Maybe if I get a minute, I'll look for it - if anyone else can find them, that would rule.
  • Reply 2 of 25
    Big surprise.

    Considering many places have blocked on their firewalls, for fear of illegal music trading, don't expect admins to open it up again anytime soon just to satisfy Napster's desire to get marketshare.

    Besides, you can't play their files an an iPod!
  • Reply 3 of 25
    This would appear to be very good news for Apple. Fairly predictable (though I didn't expect thing to happen so fast). Looking more and more like Apple knows what they are saying when they say there is NO MONEY TO BE MADE in selling the music (download). You MUST have something else! Apple does.
  • Reply 4 of 25
    ah that article made my day
  • Reply 5 of 25
    Add Chris Gorog to the idiot CEO list that I'm creating. Scott Blum is already there. I mean it's one thing to compete but quite another to make the stupid public comments both of these guys have made. Watching them get their azzes kicked is really making me happy.

    Funny thing is the rumors of Apple purchasing Roxio/Napster may still bear fruit. I imagine in another 6 months of watching R/N bleed money Apple will be able to scoop them up for a song and get their IP for pennies on the dollar.
  • Reply 6 of 25

    Originally posted by hmurchison

    Apple will be able to scoop them up for a song and get their IP for pennies on the dollar.

    What IP do they have that Apple could possible want?
  • Reply 7 of 25
    Apple WILL make money on downloads by the end of 2005 - assuming they open more international stores. There's more competition coming, however, from Sony and they do have players to sell. Nevertheless, Napster and soon will be gone by years' end.
  • Reply 8 of 25

    Originally posted by MacsRGood4U

    Apple WILL make money on downloads by the end of 2005 - assuming they open more international stores.

    POssibly. But still not much.


    Originally posted by MacsRGood4U

    There's more competition coming, however, from Sony and they do have players to sell. Nevertheless, Napster and soon will be gone by years' end.

    As someone pointed out (elsewhere)...this creates an interesting situation. It IS true that SONY appears to have the same advantages as Apple (a service AND devices to sell). But they also have a problem. They are a music company. This is where Apple has the advantage of being idependent. The reall question is how easily the other record companies will license there stuff to SONY (a competitor) to sell.
  • Reply 9 of 25
    Man, I totally forgot about I'm going to give them another month, they'll be gone.

    And Napster, I never thought that would work out anyway, good to know they'll be gone soon though

    heh, the store was on MacCentral earlier.. napster must have made them take it down..
  • Reply 10 of 25

    What IP do they have that Apple could possible want?

    Good CD Burning Code in Toast and EZ CD Creator. And an infrastructure already in place for Electronic Data Distribution.

    Plus some nice lowend video stuff that could help. Apple was already rumored to be interested in a buyout before but after another 6 months that price will be even cheaper and woohooo Apple is debt free
  • Reply 11 of 25
    nice pic, there's no room for copycats in this market.
  • Reply 12 of 25
    leonisleonis Posts: 3,427member
    The only apps that make Roxio "important" are CD Creator and Toast.

    When these apps are sold to other Roxio is pretty much "done"
  • Reply 13 of 25
    rokrok Posts: 3,519member

    wasn't it the president of napster that was telling people just a month or so ago to not side with apple's ipod?

    no here's a (potentially dumb) question: if napster goes under, what happens to the ownership of the songs they sold or streamed until now? i'm sure the end user must retain some or most rights, especially if napster is just a distributor.
  • Reply 14 of 25
    ah, that article made me feel good. I knew it was gonna blow the first time I heard about it... this is just reassurance.
  • Reply 15 of 25
    eugeneeugene Posts: 8,254member
    Link to SJ Mercury so I can show it to others? Why do I even bother asking anymore?

    EDIT: Got it.
  • Reply 16 of 25
    a_greera_greer Posts: 4,594member
    napster SUCKS

    as a "beta tester" i was promised 5 free songs - well they wanted to bill my creditcard BEFORE i could even shop, who pays to betatest?

    i downloaded itunes and luv it
  • Reply 17 of 25
    crusadercrusader Posts: 1,129member
    I like iTunes. I drink was more Pepsi than should be good for me. I think Apple will have some tough time coming up soon. If Coke creates their own music distribution deal with say, Napster, it could reinvigorate them. Doesn't Napster have several contracts with colleges to provide them with unlimited free songs? This is the one area where Napster has an edge, along with a slightly different music library. Hmm, I gotta stop just writing whatever is on my mind...
  • Reply 18 of 25
    buonrottobuonrotto Posts: 6,368member
    The HP thing has got to hurt. You just know that Jobs helped scuttle that bundle.

    I do however think that the big 5 music companies want to make sure that Apple is not the 800 lb. gorilla in the online market. They don't want any company have clout over them. They also don't want CD and especially music DVD sales to lose momentum to online sales in the next few years. So they might just throw their music at Sony if they think they can get a stalemate going, throw in MS with their own service, and three players in the online music distribution market don't pose a threat to the big players.
  • Reply 19 of 25
    rokrok Posts: 3,519member

    Originally posted by BuonRotto

    I do however think that the big 5 music companies want to make sure that Apple is not the 800 lb. gorilla in the online market. They don't want any company have clout over them.

    i agree, but who ever accused the record companies of actually going the intelligent route?

    plus, they needed a test market, and apple/mac was small, so they could gauge success at first, secure, and had a manageable tech infrastructure. they could have made agreements with both microsoft and apple, but that might have been a pandora's box they didn't want to open, and in classic fashion, microsoft was too busy pushing the longhorn schedule back to consider this as a viable source of revenue. but they thought steve could be the pioneer, and if he survives, they'll just belly up to the bar and muscle everyone out of the way.
  • Reply 20 of 25

    Originally posted by hmurchison

    I imagine in another 6 months of watching R/N bleed money Apple will be able to scoop them up for a song...

    You made a joke.
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