The new Napster, now ensconced in Los Angeles and reconstituted as a legitimate, fee-for-service music downloading business, is about to launch a new program it expects will allow it to compete with Apple Computer Inc.'s market-leading iTunes.
Next month, Napster, a unit of Roxio Inc., will start offering a $14.95 monthly subscription service that allows unlimited downloads from its million-song archive.
Key to the release of its Napster To Go product is the implementation of Janus, a new software package from Microsoft Corp. that blocks users from the MP3 music files if the subscription is not renewed.
Under Roxio, a manufacturer of CD-burning software, Napster has been offering a $9.95 monthly subscription service since October 2003. That service gives users access to 30-second samples of all songs in its catalog. The existing service allows songs to be downloaded for 99 cents each (80 cents each if more than 50 are purchased at once) or by the album for $9.95. The music can be downloaded and played on up to three computers, but not on portable players.
Napster To Go, which will allow song-playing on a portable device, will compete more directly with Apple's iTunes, whose 99-cent songs are playable only on Apple's iPod.
Napster has struck a deal with consumer electronics manufacturer Samsung Corp. for a branded MP3 player that it helped develop. It has also agreed to co-promote Gateway Inc.'s MP3 Photo Jukebox. In addition, IRiver America, Rio and Creative Technology Inc. all have devices slated to ship before the end of the year that are compatible with Napster To Go.
"Our subscription service that was limited to your PC is now portable," said Brad Duea, Napster's president. "We listened to consumers who said they wanted greater portability, they wanted to listen to downloaded songs in their living rooms or their cars. We also wanted to give consumers more choice in subscriptions and in devices they can use."
Napster started its corporate life as a Web-based business that provided software allowing the exchange of music files among users who did not pay royalties to the artists. It lost a 2001 copyright infringement suit brought by the major record labels, and Roxio stepped in to buy its assets for about $5 million in 2002, saving it from liquidating.
Despite its rebound, Napster has a long way to go to catch up with iTunes.
"Right now only a fractional number of the devices that will be compatible with Napster will be sold," said Gene Munster, a senior analyst at Piper Jaffrey & Co., who tracks Roxio. "The sales volume won't really be enough to change the game, but it's a start in the right direction."
The popularity of the iTunes' 99 cent-per-song service and the iPod devices pushed both to the top of their markets. ITunes, launched in April 2003, accounted for nearly 70 percent of all legally downloaded music in the U.S. in the first six months of the year, while Napster provided 11 percent, according to NPD Group Inc.
The total number of paid music downloads peaked at 1.3 million in April, backing off to around 1 million a month, according to NPD.
Napster does not release subscriber or download numbers, citing past problems with inaccurate reporting by other music download services. But it did report that subscription sales accounted for 73 percent of the $9.3 million in online music revenues for the second quarter ended Sept. 30.
The Recording Industry Association of America has estimated that record companies lose more than $4 billion a year to music piracy and illegal file sharing, and the labels are now happy to see license fees growing.
"New Napster has been out for a little under a year, but iTunes is the biggest," said Amanda Collins, a spokeswoman for Warner Music Group, which is among the major labels to which Napster pays license fees. "There are a lot of different models out there, and the market is just beginning to determine what is good and what isn't."
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