Reuters: Napster cuts price and adds 5 downloads

By Yinka Adegoke
May 18, 2009

NEW York – Digital music supplier Napster said on Monday it is slashing its monthly subscription price to $5 and adding downloads of songs to its streaming service in a bid to expand its customer base and compete with Apple Inc’s iTunes.It is the latest attempt by Napster to take on iTunes, the dominant digital music leader, and its first major strategic move since being taken over by retailer Best Buy Co Inc last October.

Los Angeles-based Napster said users can now get unlimited access to stream music from its library of 7 million songs and five free songs for download every month for a subscription fee of $5. Previously, Napster had charged subscribers $12.99 for a streaming-only service.

Napster will roll out an in-store marketing campaign across Best Buy’s 1,031 stores in the United States.

“We’ve worked very closely with our label partners to come up with a re-engineered economic structure that is a win-win for everyone starting with consumers,” said Chris Gorog, Napster’s chief executive.

As fewer music fans buy albums, record labels have been keen to develop subscription services like Napster whose recurring revenues are increasingly attractive to their shrinking businesses.

To date, subscription services like Napster’s and RealNetworks Inc’s Rhapsody have taken a relatively small share of music dollars.

“Our partners recognize that the way we can all earn value from this is to substantially grow the paid subscription model,” said Gorog. “Nobody wins if it remains a niche product.”


The original Napster, founded by then college student Shawn Fanning in 1998, helped set the digital music market in motion in the late 1990s with an extremely popular free music-sharing service, which was shut down following a lawsuit filed by the music industry.

The brand name was bought and resurrected as the current legal digital subscription service.

But despite name recognition and several strategic initiatives, Napster has not dented iTunes‘ dominance. In part, that dominance is built on Apple‘s market-defining iPod digital music player.

Gorog and his team believe that adding the downloads to the on-demand music access could rekindle Napster’s popularity.

“It’s the closest we’ve ever come to the original vision of Napster,” said Gorog.

MP3 downloads could also help Napster compete with iTunes as users would be able to transfer the songs to their iPods.

Napster’s subscriber growth had stagnated at 700,000 subscribers at the time of its acquisition by Best Buy last October. Gorog declined to update Napster’s current subscriber numbers.

Best Buy is moving into categories outside traditional consumer electronics as it looks to double annual sales to $80 billion over the next five years. It is also boosting its wireless offerings since completing the introduction of Best Buy Mobile shops at its U.S. stores.

(Reporting by Yinka Adegoke; Editing by Gary Hill)

Posted by Ted • Monday, May 18, 2009 .