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Napster Business Model Not Generating Revenue
An anonymous reader writes "We all know that Apple generates revenue from iTMS via hardware sales. How the hell can pureplay music stores like Napster generate revenue enough to even stay alive? They don't. Is this the first indication of the bubble bursting? Is it time to figure out what to do when your Napster WMA files go unsupported after Napster 2 dies?"
I don't know whether Napster's DRM'ed WMA need it to work - I'd guess they just need Windows Media to stick around. But that's the whole problem with DRM - sure, it's around now, but what about 20 years down the line? 50? 100? The RIAA and it's ilk want DRM to become the norm for all media - I don't know why the archaeologists aren?t complaining more.
It doesn't say why the are running at a loss.
Is it all the money they invested in creating the new software, paying up-front fees to labels, launch advertising, etc?
Its quite possible that they have only lost money due to once time investments, while they are making a profit on the actual selling of music. In which case, given a year they'll start turning a decent profit.
Are we all so media-crazed that we always have to buy the latest single songs online? Do we fear that we're no longer cool, so we spend $400 on a jazzed-up Walkman? When the last brick-and-mortar store closes, when the last music-afficionado gets thrown out of work, when the 'hip' bands have been cloned to the point of utter whitewash, when the droids at BestBuy and cdnow.com have completed the assimilation, who will you turn to?
Go buy a used CD, tape off the radio, or take your $400 and see 40 local band shows instead. Free your mind.
Is that permanent for you, or permanent for your computer? (I'm hoping to last longer than my current computer). I've never used any DRM, i'm wondering how this stuff works.
This is my Sig, this is my Gun. One is for Slashdot and one is for Fun.
I feel this article hits the nail on the head. I read the other day that Amazon has just recorded it's first profitable year. Napster 2 is still very new, and its entered during a period where the whole market is still within a state of flux. Audio DRM still lacks consumer confidence and the company is built on a completely new concept. By that I mean they have changed from a free-to-all concept to a pay-per-song model. And considering age of the new company model, I would be surprised to see profit at all. I would not be counting them out of the game just yet.
Napster is a DRM shell demonstrating that DRM is unprofitable even with the best brand recognition in the industry.
There is Lots of money for music and artists but no money for greedy middlemen not supporting recording artists.
Recording companies? Those are collections of sound engineers who help with a recording. They produce quality recordings that show the artist in the best light.
Publishing Monopolies? Those businesses buy what might be popular for as little as possible then sell it for whatever they can get.
how is this different from buying CDs? The way the RIAA et al seem to put it, I'm paying more for the "licence" than the media. But just try to go back to a record store with a cracked/smashed CD and ask for a replacement.
Which leaves you in the same place. What do you do with your unsupported AAC files when iTunes dies? If the vendor dies, your files will work on the systems they currently work on, but no new systems. Which means you better home your hard drive doesn't die. iTunes and Napster are in the same boat as far as DRM, but since iTunes is /. favorite, most people tend to overlook their DRM, even when it leaves you in the same place as all the others.
"Information wants to be expensive" - Stewart Brand, the same guy who said "Information wants to be free"
Most of the songs I look for on Napster, they just don't sell (not in their catalog). So it's off to Amazon or the CD store or a used music place.
Don't blame Durga. I voted for Centauri.
And even if it does fail, that need not be indicative of the viability (or lack thereof) of the whole market. It might just be that they have a bad business model.
Apple's iTunes and iPod provide synergy with each other but iTunes limits itself to only those with iPods (or effectively does, since converting from AAC to MP3 to use with other players is a pain). Nice for them in the niche market, but a limiter in the absolute sense.
I think Napster2's problem, and what will limit iTunes even within the iPod market, is simply how much the stuff costs relative to physical media. I know that many people, myself included, aren't really willing to pay $10+ for only the bits when the (higher quality) physical media is similarly priced. That's just a bad deal, and that's why of the 700+ albums I have in MP3 format every single one of them came from a CD. If you want to give me less, you have to charge less; think $.50 a track, $5 an album. I'd do that.
I don't really think the WMA format is limiting them, seeing as the only player currently on the market that doesn't support that is the iPod (excepting, of course, the first generation MP3 players; they all did by the 2nd generation, quite a coup for Microsoft if you ask me). Though, honestly, I'd prefer not to use either AAC or WMA -- unless, again, they give me even more of a price break for providing the stuff in a locked format. At $.25 a track, $2.50 an album, I'd do that. At those prices I can afford to buy again to migrate.
But I don't see those prices coming down until the record industry screws up CD media to the point where most people won't buy it. Moreover, the record industry may kill their own online sales by offering CDs with both raw tracks and WMA encoded tracks, something they appear to be doing.
jim frost
jimf@frostbytes.com
At the beginning Microsoft did not generate revenue. No pure software company did. It was IBM, a hardware vendor, who helped Microsoft to come up. So they did for Oracle (at eraly days of v5). So, yes, hardware vendors are now getting online music to work. But that only until people stop afraiding to download music. After that: a big part of RIAA revenue will go online (with RIAA participation or without). Then Online music will be self-efficient enough to live without hardware vendors.
Less is more !
iTunes (small 'i', big 'T', no hyphen) is an application, one that runs on Windows and Mac OS X.
The iTunes Music Store (iTMS) is the web service. (Plenty of us use the former without the latter -- here in Europe, iTMS isn't even available...)
And, while I'm here, a related point that also causes confusion: the iTMS sells AAC files that have been wrapped in a FairPlay encryption wrapper. Plain AAC files are not encrypted or restricted in any way.
Right, now I've got that off my chest... Did anyone seriously think that people would be fooled by the Napster name? That they wouldn't realise it was a completely different service from a completely different company? I hate to rehash old jokes, but it does look rather like:
Ceterum censeo subscriptionem esse delendam.
It wasn't a boon to begin with. You have to bubble something up for it to burst. Not every moron and their brother who puts a face on "old technology" is an industry leader and going to revolutionize the world.
/. editors idolize the stupidest people really irks me. Let's get the facts straight. Napster was a cool idea when it was new. It was horribly written buggy software but the concept was cool. However, while mr. Napster was off doing whatever it is he does 300 others have written their own edonkey's and kazaas and winmx which are like a billion times better.
I'm sorry, but the way you
Anyways, getting back to the point. Not all business models are sustainable and are rarely thought out for the long term. Hence the
1. Stupid action
2. ???
3. Profit
jokes. So how about we idolize the players who are not in it to make the quick buck but to actually help progress society and technology?
Tom
Someday, I'll have a real sig.
And what if the licence includes details on your HD as well?
I listen to plenty of records that were recorded 20 years ago, even 50, and one or two that are pushing 100 (well, 80 - mostly early jazz). Much of the early jazz are transfers from the commerically produced end product. That's the point.
You all need to keep one simple fact of business in mind.
Very few new businesses (and this is a new business, because about all that was kept from the original Napster was the name) make a profit in their first two to three *years*. A great many of them take 5 years to show a profit.
So why is everyone acting so surprised that Napster isn't making a profit after mere months? Oh yeah...that's right...this is Slashdot...we don't let little things like "reality" get in the way of a hyping up a story where none really exisits...
I want a new quote. One that won't spill. One that don't cost too much. Or come in a pill.
(1) The medium is often all that's left, such as in the case of much of my early jazz. Back in the days when copyright was time-limited, often the masters would be lost. And with "ephemera", or material that just wasn't consistently popular, there isn't a financial incentive to ensure that this doesn't happen. That's why the like of the Prelinger archives are so important.
(2) I would like to buy my media once, and then use it forever (well, until my death). I have a large collection of LPs that I never listen to any more, and have re-bought many on CD. I don't want to repeat that. Avoiding it is possible now, particularly with digital media. The oldest files on my current laptop date from the mid-eighties - they started out on 5.25", moved to 3.5", a double-height 10mb Winchester, over many null modem cables, later CDRs, ethernet and WiFi, but they are still the same files! My music can now do the same - it's currently residing on a 670gb Shuttle box in my living room, but I'm sure that will not be it's final resting place.
DRM prevents all of this.
Oh come on, haven't you learned how the system works yet? People who had albums had to rebuy them as cassettes to be legitimate. People who had cassettes had to rebuy the songs as CDs. People who have them as CDs have to rebuy them in lossy compressed DRM protected formats. When the next thing comes along, the RIAA will expect you to repurchase your entire collection in whatever format that will be.
I read the other day that Amazon has just recorded it's first profitable year. Napster 2 is still very new, and its entered during a period where the whole market is still within a state of flux.
I don't think Wall Street will be nearly as patient with Napster as they have been with Amazon. Amazon is a huge business with huge revenues (not profits, not until recently) and a business model that requires huge infrastructure in order to support, not to mention buying, storing, moving, and shipping physical tangible goods.
Napster has none of these hurdles to surpass (and, in my estimation, none of the potential upside that Amazon has) and so it is unlikely that Wall Street will overlook more than a few more quarters of losses before they start pressuring Roxio to cut their losses.
That's my story, and I'm sticking to it.
People who say "sheeple" have about as much sophistication as an AOL user, and in fact are probably actually AOL users.
or take your $400 and see 40 local band shows instead
Many typical customers of iTunes Music Store or Roxio Napster would have to sit and wait for nine years in order to get tickets to a local band show. Twelve-year-old children control many of their parents' music purchase decisions, and venues friendly to local bands typically require all persons who enter the premises to be twenty-one years of age or older.
It's probably a sign of age, but I can't listen to most of the new music that's coming out now. For some reason, my perception of culture changing halted sometime around 1995. Most of the music I listen to came out of the 70's or 80's. I've enjoyed a few newer songs, but I can't tell most of these new bands apart.
-
Tech News, Reviews and Tutorials
Record companies think every single song is pure gold
No they don't, they know damn well that they put one or two good songs on a CD and the rest are just shitty filler. That's why "conventional" singles sold in record stores have always been so damn expensive-- they want you to look at the single for $5, and pass it up for the $15 CD because the per-song cost is much lower and there might be a good song or two on there that won't see radio airplay in an attempt to make it a hit.
That's also why the RIAA members fought online single sales for so long-- if you only buy the songs you like, they lose the money they put into pumping out the shitty songs.
the exact amount will not be displayed until the song has been purchased.
If you want to know why people feel so much anger over DRM, this pretty much says it all.
What justification is there for not disclosing the terms of sale until you've already sold?
D
You are right. The iPod presently allows him to subsidize his music store, to the benefit of all parties involved. If his strategy works, most other music stores will go out of business due to the unsustainable business model, and then he'll go back to the labels.
For an idea of how this will work, consider his contract with Disney over Pixar. Disney got 50% of revenues, got sequel rights, got merchandising rights and all sorts of other stuff.
When he signs a new distribition contract, odds are that the new distributor will get 10% of revenues, no sequel rights and merchandising rights split.
That's the difference between a venture capital investment that's basically a gamble on everyone's part, and the closest thing to a sure thing.
I'm sure his negotiations to renew iTunes Music Store contracts will be very similar, and he will get similar results: A bigger share of the pie in return for a proven success.
I don't think anyone has ever accused Steve Jobs of being a dummy.
Or a poor negotiator.
D
Don't forget that the original Walkman cost more than $400 in 1979 Dollars.
A bit of Walkman history
It was also derided as an unecessary gadget, but you know how history turned out.
Joe
The copy protection is working well enough. Think about it. The major intent of the schemes used by the online music services is to prevent the downloaded files from ending up on P2P networks. Nobody will share them on P2P networks if they require user-specific keys to play. You can't just post your key along with the file. The key can be used to uniquely identify you; Napster or Apple or whoever has a copy in their database, right next to your name and address. Your real name and address; you can't give them fake information, because if they can't bill you, you can't download from their services in the first place.
This space unintentionally left unblank.
He's not talking about some kid 3 or 4 generations down the line blasting Led Zeppelin in his bedroom. He's talking about scientists who may try to understand the long-since-fallen nation of the USA.
The vast majority of information regarding any time period tends to be tainted by the powers-that-be at the time (revisionist history) or lost due to sparsity. Should all of present day media be shackled with such short-lived technologies, then there would be nothing for those scientists to uncover that might paint a clearer picture of this era.
The problem with most of the perspectives of the "producers" and the politicians they manipulate is they assume the world of today will continue with only slight changes over time. History shows a much different perspective - ALL societies that have ever been before have fallen. Some spanned decades, some (as our present) evolved over centuries, some (Ancient Egypt comes to mind) endured for many thousands of years. All of them eventually fell (via war or other catastrophe) and after a period of disorder, or outright chaos, another social order built up in their place (with most of what was gone forever).
Considering the growing disparity between the wealthy and those in poverty today - and the increasing attempts to cement control by the former combined with the rapidly growing numbers in the latter, shows just how volatile our society is. How much longer until those once called Citizens, now called Consumers, are finally labeled with the inevitable Peasant. How long after that before the peasants revolt and destroy all that's been hoarded by the wealthy. There is absolutely no guarantee that the USA will maintain it's own social order, let alone the current "New World Order" as described by the first President Bush.
I don't wish to spark a left vs. right debate on today's social state. Despite what both conservatives and liberals claim are the causes and solutions to such ills, they do presently exist. The longer they persist, the longer the risk. I do not advocate any such uprising, I do not predict any such revolt, I simple mention that historically speaking - the risk exists. Should our present society fall into chaos, and most of what we've accomplished reduced to ashes and dust, only fragments of what once was will remain. If these fragments are useless due to DRM, there will be nothing truly left. That is what the original poster was asking - Why aren't archaeologists (and other scientists) speaking up about this risk?
I AM, therefore I THINK!
Deleting the music file would be more like breaking a CD (DRM doesn't make a difference in this case anyway), and if you do that, it's your own dumbass fault. This is more like having your entire CD collection stop playing because the record store you bought them from went out of business.
Audio Hijack on the Mac will allow you do this. I believe that I've heard of others, as well as PC programs.
You are correct. But if the iTunes music store remains the most popular outlet for legal downloadable music, they have enormous leverage.
A better comparison might be between book publishers and Borders or Barnes & Noble. Getting a book prominently shown on those shelves can mean success; having it absent can mean failure. So of course those chains get the best terms.
Same with iTunes. If it becomes a distribution choke point for music, Jobs will do just fine when he renegotiates the contract.
D