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Summary:

Talk about having a really bad day! Yahoo’s entry into the music business pummeled Napster – its stock skidded 30% for the day. What hasn’t helped the matters is that despite rising revenues, Napster is losing money faster than Jason Giambi is losing his bat speed. […]

napster Talk about having a really bad day! Yahoo’s entry into the music business pummeled Napster – its stock skidded 30% for the day. What hasn’t helped the matters is that despite rising revenues, Napster is losing money faster than Jason Giambi is losing his bat speed. Good news – the total subscriber jumped by 140,000 to 410,000 during the quarter. Impressive, right? Not Exactly!

Napster has always made it a point to highlight its subscriber base, so I did a very unscientific back-of-the-envenlope analysis of the current results. Given that company constantly harps about its subscribers, I decided to put its earnings under the subscriber-optimized microscope.

In the Dec 31,2004 quarter, each subscriber brought in about $15 a month, but also lost the company about $15.8 a month. In the March 31, 2005 quarter each subscriber brought in $14.15 a month, and also lost the company $19.60 a month. That’s about $4 per subscriber. In other words, the more subscribers it signs, the more money it will lose, at least in the near term.

I saw some of this kind of loss-taking bravado during the last bubble, and that’s why I bring it up. Good thing is that Napster has a lot of money, they are going to need it and spend it like crazy to stave off competition from the likes of Yahoo, which has built in promotional channel.

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  1. If Napster wanted to really grow the service, they should work hard to integrate podcasts, both on the subscription and publishing side. Yahoo’s going to do it sooner or later and bury Napster if they don’t. Media RSS anyone?

  2. Its not just podcasts. i think the biggest problem with Napster and all its competitors is that they are so generic and have nothing that stands out for them. podcasts … well they should do that anyway

  3. If Napster is losing $4 per subscriber, why would Steve Jobs ever want to introduce an iTunes subscription service?

  4. i think this is ridiculous. because you might sign up for “subscription” mp3s, but you can’t burn the CDs of your mp3s and if you stop paying, you lose all “your” music. this is more on-demand time-shifted radio than anything else. What kind of idiots think they can make money when they need $30+ in revenue per month per user, yet only charge half that? whats going on here people? What happened to the days of non-bloated startups (even though this isn’t a real startup, its basically Roxio v2).

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