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?"

Comments

A loss from what?

[paragon_au]

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.

Aren't we being just a bit premature?

[jimfrost]

Napster2 hasn't been in business long enough to know if it's going to fail or not. I think you ought to give them a year, at least.

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.

Play the bass drums for DRM!

[pornstalker]

And what if the licence includes details on your HD as well?