Is Napster dead, or only dying?

[Yoda]

p2pnet.net Issues:- If a well-known independent online music store was having non-stop staff, financial and marketing troubles, the headline would be, "Death knell tolls for Slapster". Or some such.

So what about corporate stores backed by Big Music?

When Napster was disinterred by Roxio last October, bits of it were offered up as a " legit, for-pay online music site" which Roxio ceo Christopher Gorog believed, "could be every bit as influential as the infamous file-swapping site of old, largely because he felt the Napster name would quickly put Roxio on a par with digital music superstar Apple," says a BusinessWeek online story here.

Napster II launched on sad little teaser cartoons which were meant to show future punters how very cool it was going to be.

And that was the good part.

Today, "Napster remains a distant second in market share to Apple's popular iTunes service," says the report. "And management upheaval at Roxio has raised fears about Napster's future once again. Just days after the launch, respected Universal Music executive Lawrence Kenswil resigned his seat on Roxio's board. Since then, a stream of executives - including Roxio Chief Financial Officer Elliot Carpenter and Napster division President Mike Bebel - have left as well.

"All this has spooked investors, who have driven Roxio's shares from $10.50 at the time of the launch to around $3.80 as of Feb. 26," says BusinessWeek, going on to quote Gartner G2 analyst Mike McGuire as saying, "I'm not willing to say Napster is toast, but there's certainly a lot of smoke."

Hewlett-Packard dropped Napster like a hot potato, its top execs have hit the road and share price has plummeted.

What could be wrong?

Things may look a little untoward, but "The cat in the Napster logo hasn't run out of lives just yet," says the BW report. "It sells far fewer songs at its online store than Apple, which sells roughly 75% of the 3 million songs that are sold online each week. But Gorog points out that based on the latest weekly data from Neilsen SoundScan, Napster's share equals all other rivals combined, including services from Wal-Mart, MusicMatch, and Best Buy. He says the data show that Napster 2.0 is holding its No. 2 position against Apple in this music-download business."

The question is, however, what does this mean? The answer is, very little. And that's because no matter how much bragging and posturing there is - and there's an awful lot of it going around - the corporate music stores don't even begin to come near the number of downloads enjoyed, if that's the right word, by the major commercial p2p apps.

Where Napster brags about selling five million tunes over a five month period, the p2p apps accounted for five billion downloads.

OK - they weren't 'legal' a la music industry definitions. But they were real. The downloaders had no trouble finding what they wanted and they had millions (not 250,000) of possibilities to choose from. And they got what they wanted with no fuss and no muss.

If the songs had been sold from corporate stores at 15 cents a pop, say - or even through as-much-as-you-can-eat for $5 a month, as per a recent EFF Voluntary Collective Licensing suggestion - how much money would the music industry have earned? Not that much of that would have reached artists' pockets, of course. But that's normal.

Instead, the labels are moaning and whining and losing millions of dollars suing teenagers, at the same time trying to convince people that they're right to be doing it.

"Napster could start to increase market share in the more profitable business of selling monthly subscriptions, where customers can listen to - but not own - as many songs as they want each month for $9.95," says BW

Listen to, but not own? Like, you give it back to Big Music when you've heard it? And you pay $9.95 a month for the privilege? And the 'music' is mostly 'product'?

"While Napster is far behind RealNetworks' Rhapsody service, AOL's MusicNet, and others, it's taking the lead again in the old Napster's stomping ground: college campuses," says BusinessWeek.

Yes - but the original Napster was taken seriously by the music loving public. It was real. Napster II, on the other hand, is a mockery.

Nor is it on the campuses because students want it there. It was thrust upon them by the music labels' enforcement organ, the RIAA (Recording Industry Association of America).

The way it goes is: if students download 'authorised' (that's to say produced and marketed by the Big Five labels) music from online 'stores' the Big Five labels approve, everything is peachy. Then the labels won't have to sue students into buying 'product'.

And with Napster II breaking the trail, the way is now wide open for the music to force-feed American students under the pretext of saving them from having to go to court - to answer charges brought by the music industry in the first place.

Coming up? A Sony university service.

In the meanwhile, "Penn State University and the University of Rochester's Eastman School of Music intend to offer free Napster subscriptions to thousands of students in coming months," says the report. "These are just pilot programs, and Roxio granted big discounts that will keep profits negligible at best, say insiders.

"But the hope is that the students will become paying customers for years to come."

"Smart," Kenswil is quoted as saying.

You'll recall Kenswil resigned from Roxio's board days after Napster II was launched.

"Insiders say the main reason for Kenswil's departure was that Universal did not want a seat on Roxio's board, for fear other music services would be concerned it was playing favorites," says BW.

And, "Other recent executive departees left because Gorog consolidated music operations that had been spread between Los Angeles, New York, and Silicon Valley into the L.A. area, to be closer to the record labels, he says. And former CFO Carpenter had planned on leaving for personal reasons for months. 'It's a tempest in a teapot,' insists Gorog, who says layoffs cut less than 10% of the staff."

"We've created a hell of a defensible position." Gorog says at the end of the article.

Is 'defensible' a Napster II marketing term?

"I couldn't be more pleased," he says, going on that depending how the 'deals' with colleges work out, the music business will grow to anywhere from $20 million to $40 million in sales in 2004.

However, concludes BusinessWeek, there's a problem. And that is, "Roxio doesn't expect profits any time soon, and the competition is only going to get tougher.

"Worse, Roxio's core business of selling CD-copying software to PC makers is hurting, as well. In the quarter ended Dec. 31, Roxio lost $25 million on revenues of $18.8 million, with software revenues contributing to that loss. Roxio predicts that the PC software business should turn profitable this quarter, based on a new product release.

What happened to the Cat in the Can?

Be that as it may, "That leaves Gorog with little room for error as he pursues his grand music ambitions. Cats may indeed have nine lives, but ultimately, Roxio - or somebody else - will have figure out how to leverage Napster's valuable brand and innovative services into a business model that turns a profit."

(Wednesday 3rd March 2004)

Source

[Yoda]

R.I.P Ol' buddy

You are what got us here today now go away quietly while your ahead.