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SmartMoney: Napster is a snooze, gushing money and renting music is un-American anyway
Wednesday, July 06, 2005 - 02:57 PM EST

"Did you hear? Napster s going to use Dell PowerEdge blade servers in its effort to provide universities with legal music downloads," Monica Rivituso writes for SmartMoney. "Finding it tough to contain your excitement? I know! I felt the same way when I heard the news on Wednesday."

"I jest. The announcement was meaningless. And yet it boosted Napster's shares by 2% early Wednesday (though the stock was down fractionally at 3 p.m. EST along with the broad market's selloff). Such is the way of this digital-music subscription service, darling. Anything can move its stock," Rivituso writes.

"Napster still strikes me as a lousy investment. The company is gushing money. In its fiscal fourth quarter, ended March 31, Napster posted a loss of $24.3 million, or 60 cents a share. While that was narrower than the 62 cents that analysts expected, it was far worse than the $6.57 million, or 20 cents a share, it posted a year ago. Revenue rose 188% to $17.4 million, slightly better than Wall Street's forecast. But management said that it figured the company would lose 62 cents to 64 cents a share, in its fiscal first quarter — worse than the 55 cents analysts expected. Gushing, indeed," Rivituso writes.

"All this talk about subscriptions has me thinking: Is that what we as a country are about — renting? What would our president say about all this? George W. Bush has cobbled together a basic framework for curing Social Security's ailments based on something he calls the 'ownership society,'" Rivituso writes. "And yet Bush's private accounts proposal seems to be dead in the water. So we won't be "owning" our retirement security anytime soon. And now Napster is suggesting that we should relinquish ownership of our Metallica, Gwen Stefani and 50 Cent tunes, too? What kind of message would this send to our children? Renting music would be a crushing blow to our national psyche. It would be, dear friends, un-American."

Full article here.

MacDailyNews Take: Snooze, joke, whatever. Read the full article, it's full of common sense which is a rarity when it comes to Napster analyses.

Related MacDailyNews articles:
Napster is a joke - April 05, 2005

Colleges should not exclude Mac and iPod users with Dell, Napster music hardware, software offering - July 06, 2005
Napster, other Windows Media-based music services 'chasing a niche opportunity' - June 29, 2005
Napster To Go Soon? Reports $24.3 million net loss on $17.4 million net revenue - May 12, 2005
Napster users admit sharing passwords to save on subscription costs - April 08, 2005
Napster raises fourth-quarter revenue forecast from $16.5 to $17.5 million - April 05, 2005
Colleges offering students music services that aren't cross-platform, don't work with iPod - March 22, 2005
Mossberg: Apple's iTunes Music Store vs. Napster To Go - March 18, 2005
Napster CEO Gorog: Steve Jobs 'must be pretty frightened' of Napster To Go - March 14, 2005
Apple's iTunes Music Store downloads pass 300 million songs milestone (with chart) - March 02, 2005
Napster's math does not add up - February 28, 2005
Napster's dirty little secret: changing subscription services into downloads is easy - February 18, 2005
Napster feels the heat over flawed copy-protection scheme - February 17, 2005
Apple CEO Steve Jobs warns record industry of Napster To Go's security gap - February 16, 2005
Users thwart Napster To Go's copy protection; do the music labels realize the piracy potential? - February 15, 2005
Napster-To-Go's 'rental music' DRM circumvented - February 14, 2005
Napster CEO Gorog: 'it's stupid to buy an iPod' - February 10, 2005
Report: Napster faces uphill fight to gain share, Apple prepared to run iTunes at a loss - February 10, 2005
Napster's 'iPodlessness' doesn't bode well for its future - February 10, 2005
$10,000 to fill an iPod? Napster's going to end up with egg on their face - February 04, 2005
Why 'Napster To Go' will flop - February 03, 2005
Napster CEO: We're 'the biggest brand in digital music, much more exciting than Apple's iTunes' - February 03, 2005
Cornell University's Mac users 'uniformly unhappy' with Napster - January 19, 2005
Cornell University wrestles with Napster's exclusion of Mac and iPod-using students - September 08, 2004
Why are Cornell's Mac students being forced to pay for useless Napster? - September 07, 2004
Napster schools to Mac-using students: bend over and take it - September 04, 2004
Apple launches 'iTunes on Campus' institutional site license program - April 28, 2004

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Jul 06, 05 - 03:11 pm Comment from: Eric24601

Un-American INDEED!

Jul 06, 05 - 03:14 pm Comment from: prominent analyst

We predict Napster to meet its doom possibly in the first quarter of 06. The numbers are not good.

Jul 06, 05 - 03:21 pm Comment from: John

I've said it before and I'll say it again. I won't rent music! Sure you get to choose from the whole library but... The minute you stop paying your monthly subscription and stop checking in with Napster or whoever, your music suddenly won't play anymore. Why should I pay over an over again for music I can buy once and play forever. Also if you want to burn those tracks to a CD you need to pay again! Really rediculous to pay twice or more for something you could have paid once for and still be able to burn or transfer to your music player.

Jul 06, 05 - 03:25 pm Comment from: neomonkey

John, Wire Tap, Audio Hijack. It's easy.

Jul 06, 05 - 03:28 pm Comment from: hammer

Ive got it, what Apple should do is allow users to "subscribe" to 5,000 songs per month. Why 5K? Well, you probably couldnt listen to more than 5K individual tracks per month anyway. They charge 10, 12 or 14 bucks for this service but what they do is instead of taking the 14$ and running, they allow you to use that money as a credit toward 10,12 or 14 songs per month that you purchase, just as you do now. You have to buy them by the end of the month or it rolls over (like emusic.com). That way Apple gets a guaranteed 10-15 bucks per month from each user in sales, but allows people to try out gobs of new music in the process.

This would all but kill every other service out there.

MDN MW "entire", as in it would take me almost 2 months of constant listening to hear my entire iTunes Library.

Jul 06, 05 - 03:36 pm Comment from: Tempus Fugit

i joined Columbia House some 12 years ago and "bought" several CD's on their 'Buy (blank) amount of CD's and get (blank) amount for free!" deals. as soon as i fulfilled the initial subscription minimum requirements, i quit then signed up again when they sent me a 'beg letter' asking me to join again weeks later. IF Columbia House worked like those subscription services, my copy of "Kind Of Blue" would have ceased working and gone up in smoke several years ago!
IMHO... subscriptions services suck. owning is much better.

Jul 06, 05 - 03:55 pm Comment from: ron

"Really rediculous"

Let's get it right--ridiculous!

Jul 06, 05 - 04:05 pm Comment from: MacMania

Is Napster still "locking out" Mac users?

Anyway, Apple will eventually add subscription and satellite radio to iPods/iTunes combo. Then when ihear something ilike, ican just buy it.

raspberry

Jul 06, 05 - 04:25 pm Comment from: Al

When Windows get's a universal spell checker, about 6 years from now, all of those spelling mistakes will just go away.

Jul 06, 05 - 04:29 pm Comment from: RePlay

I kind of like hammer's idea. Only problem for me is that I don't have time to sample much music, so it would be a waste on me. I'll just have to live buying the occasional song and missing out on all the browsing.

Jul 06, 05 - 05:24 pm Comment from: mike

Read the full article, it's full of common sense
---

no thanks, I'd prefer to stick with the snippet here.. the one that underscores the american fallacy of ownership, and how the supremacy of capitalism has something to do with subscribing to digital music.. like.. paid radio, etc.

The 'Ownership' Society, hrmm? What's wrong with National Health Care.. I think the Ownership Society means you OWN your pills that YOU paid for...

So the rich stay healthy and the poor slobs die off.. sounds like a plan Dubya

Jul 06, 05 - 05:55 pm Comment from: NewType

Here are the facts:

Napster's revenues increased 188% but their loses increased 270% in the same time period. Clearly, the subscriptions brought in more revenue, but the costs of running the service and the marketing necessary to bring in those subscribers means the company is losing money at a faster rate than it is able to bring in.

At some point soon, Napster will bring in all the subscribers it possibly can and that's when this house of cards will come crashing down.

I posted before that one thing analysts and investors are not factoring in the renting model is that the cost of running the service goes up geometrically as you bring in more users and those users begin to use the service more. You have to pay for essentially unlimited bandwidth to be able to guarantee an all-you-can-eat model because after an initial rush in subscriptions, you are only left with hardcore users who end up using the service to an extent that your $15/month fee cannot cover. Everyone else concludes that they don't use the service enough to justify continuing to pay the monthly tax.

Now we see that, sure, revenues are growing, but Napster is losing even more money per dollar made than ever before. I'd give Napster about a year at this rate.

Jul 06, 05 - 08:45 pm Comment from: The Mel

$15 bucks a month = $180/yr. Over 20 years, that's $3,600. At $12 per CD, that's 300 CD's over 20 years. That is NOT a lot of music, when one can have access to millions of songs for the same amount of dosh. Buying is a suckers game. In the grand scheme of things, we don't own anything.....we just use it while we are alive on this planet for a little while.

Jobs has pushed the buying thing because Job's always pushes any idea that supports what he has to sell now. Just like Job's comments surrounding video iPods....something like "people don't want to watch video on a small portable device". Just wait, as soon as Apple has a small portable video device, he'll change his tune.

$20 bucks says that Apple will offer a music subscription service over the next couple of years.

The Mel (Singapore)

Jul 06, 05 - 08:50 pm Comment from: MacDude

Question:

If Napster goes under, what happens to your music? Hmmmm. This subscription service is surely a risky investment.

Jul 06, 05 - 10:10 pm Comment from: RT

Even though most people want to own their songs (including me), clearly there are SOME who want to rent. What is the point of Apple shutting itself out of the subscription market? Don't get it--it's not either/or.

Jul 07, 05 - 02:53 am Comment from: Foreign therefore suspicious person

"What kind of message would this send to our children? Renting music would be a crushing blow to our national psyche. It would be, dear friends, un-American"

That's it, I'm never buying another tune in my life.
Napster, eh? Where do I sign up?

Jul 07, 05 - 03:24 am Comment from: Holy Mackerel

Apple should offer an iTMS Party Mix - you pay, say, $US5 per month (less than Yahoo), choose a genre or a favourite band or two, and Apple 'buys' the random music for your and download it permanently to your Mac. You own it, and get the latest contemporary and unusual hits. Would anyone go for it?

Jul 10, 05 - 03:51 am Comment from: neomonkey

Looks like Napster's not going ove very well:

Not a single University of Rochester student admitted to buying a song via Napster during the Fall 2004 semester. Instead, eight per cent of the students turned to the likes of iTunes and Musicmatch to buy songs they enjoy. That's an ominous sign for a company spending millions to seed the university market with music in the hopes of unseating Apple as the clear leader in online music.


http://www.theregister.co.uk/2005/07/09/napster_rochester_survey/

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