Napster Shares Dip on Rival’s Favorable Publicity

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Shares of Los Angeles-based online music service Napster Inc. fell nearly 10 percent on Monday after a Barron’s magazine article praised RealNetworks, a rival in the music download marketplace.


Napster shares fell 91 cents to close at $8.73 on Monday. The stock traded as high as $10.40 per share in early December.


The Feb. 7 issue of Barron’s suggested that the current leader in the music download market, Apple Computer Inc.’s iTunes service, was vulnerable and RealNetworks could be a plausible candidate to dominate the industry. RealNetworks, trading in the $5 range for several months, was called an “inexpensive bet in this still-nascent market.”


RealNetworks shares rose $1.17 on the report, up 20.7 percent to $6.83. Apple shares gained 10 cents, to $78.94.


RealNetwork’s $9.95 a month Rhapsody service claims 40 percent of the music subscription market. The service grants subscribers access to its 900,000-song jukebox, which can be listened to while the customer is online. The songs can also be recorded onto a CD and transfered to a portable music device. (More songs are purchased through Apple’s portable iTunes, but it is not a subscription service.)


Napster charges $9.95 per month for a service that is similar to Rhapsody, and $14.95 for its new NapsteToGo, which can also be used with portable plaers. With the explosion of the iPod portable music player and other, cheaper versions like it analysts expect the market for portable digital music to reach $2 billion over the next five years, all driven by thirst of millions of portable MP3 players.


Part of the disappointment in Napster was attributed to the $30 million ad campaign it launched during Sunday’s Super Bowl.


“There is a sense that the Super Bowl ads were not all they could have been and now we have to worry its impact to earnings,” Chris Rowen, a SunTrust Robinson Humphrey analyst, told Barron’s.


Rowen expects RealNetworks’ stock could go as high as $10 this year due to a recent deal with Comcast, which has 6.5 million subscribers for its broadband Internet service, the analyst told Barron’s.

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