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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?"
it means they need napster alive to be playable?
SHE does throw dice.
Any attempt to sell digital music while keeping the current cost model (where a huge part of the proceeds go to feeding record company structures) is going to be a loser.
Apple don't mind because they drive hardware sales with it, and the lossy business model will drive off competitors.
The questions for me are: how long can the music industry survive when it can't even make the Internet a cost-effective channel for distribution? And what will happen than?
Ceci n'est pas une signature
Don't you think it's a bit early predicting the demise of Napster? They lost money, sure, but they just launched. It costs a lot of money to launch a business. You claim that their model doesn't generate revenue (and I think you may mean profits, not revenue) but I don't see where in the article that claim is validated. Add to that the fact that the article mentions they are restructuring to cover the costs and this post is a non-story.
Support the First Amendment. Read at -1
It could be that they're absorbing a financial hit now so that 3 years from now, when brick-and-mortar stores vanish, they have brand awareness and at least some following among consumers. Besides having to compete w/ iTMS, Napster's problem is that they need something to distinguish themselves from the rest of the pack. As Napster II has discovered, brand awareness isn't always enough: it sure as hell didn't work for them his time around!
Honestly are you surprised Napster is failing? Napster was one of the first victims of the RIAA's war against music swapping online. The average person's recollection of Napster is "Oh that music software that got shutdown." It's hard to shake that image, especially with Joe Smoe.
Besides look at Apple... They're Itunes service has caught on with the Non-Computer-Nerd as well because Apple has been able to market it as the Cool / Easy to use music service.
Hell even my mom could use I-tunes.
Here's what I don't understand: Presumably, at a large cut of $1/song the record companies are spinning a nice profit. Otherwise, why would they be joining iTunes/Napster/everyone else?
/james
Now, if the vendors can't break even, why doesn't a record company (or, say, the RIAA itself) buy an 'unprofitable' online vendor and continue merrily selling songs - sure, the service itself costs money to run, but 100% of the money goes to the label. Is doing this stuff so expensive that it actually costs them more than $1 to let you download a song?
I remember that Napster belonged to Bertelsmann/BMG before, but apparently not now. Hmm.
I don't know about you, but I don't sit infront of my _radio_ waiting for them to play my favorite song. and on another note... you said "jazzed-up". square...
In Soviet Russia, the music pays you! (Or pretty close, from 1c/track).
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
When the large record producers no longer have a lock on distribution, when even independent artists can make a living if their music is good enough...?
Dominates every market they enter? Really, I thought they pretty much only dominate two markets. Operating Systems and Office Software. Out of 7 business units, Microsoft only makes a profit in 2 of them. Maybe 3 tops. They use those 2 or 3 to fund the others.
The great problem (read: opportunity) with music is that supply doesn't meet demand: I'm sick of my music collection, i want to find new stuff, but it's really hard because you can't search for what you don't know exists.
If i were the RIAA or one of its licensed resellers (e.g., Apple, Napster, Tower Records), i would provide people with their own personalized Internet radio station:
You launch the application, and they start streaming you some music. If you like it, you give it a thumbs-up. If you don't, you give it a thumbs-down (and probably skip to the next song). Pretty soon they've built up a profile for you and can search their database for other people with your tastes. You're discovering all sorts of new music that you never would have heard of.
But it's just a stream -- you can't save the songs and listen to them anytime you want. Unless you click "Buy this song", in which case the MP3 is saved to your hard drive. Perhaps you could even recommend songs to friends.
Maybe the radio station could be subscription-based, but i'd run it as a loss-leader.
There. That'll increase music sales tenfold. As a nice side-effect, little upstart bands could make it big (or simply make enough to support themselves) without having to get "discovered" by an "insider".
--
Mod up a post Rob doesn't like and you'll never mod again
Please. Microsoft has had only a few interesting or original ideas in its entire existence. That's what it needs today. This whole monopoly thing was probably fun for them while it lasted, but it is starting to wind down. As much as I dislike Apple, they have a great image and that is what matters here. Among security, reliability, and some other things like having a hip image, Microsoft completely fails.
Another twenty-five cents of that goes towards distribution costs. It leaves Apple with less than a dime profit per song. They are not taking a loss, but a profit margin of less than 10% is nothing to be proud about, especially when you factor in initial start-up costs. It takes a lot of time to make your money back.
We all remember this article.
Auto-reply to ACs: "Truly, you have a dizzying intellect."
well, WMA DRM is built into the file format, Fairplay is a wrapper.
since fairplay is a wrapper, tools can be created to extract the AAC file with no quality loss.
if you are a DRMless purist, sure, all the services suck, but if you see it with a hint of grey, iTunes is the best service out there, if for no other reasons that it uses a file format that is not owned by any one single company and it can be played on Windows and Mac OSX.
I am the Alpha and the Omega-3
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.
The problem with this statement is that it ignores the fact that Apple has a sustainable hardware business, and will continue to support (or be compelled to support) your AAC files for as long as they remain in business.
Napster, as an arm (wholly owned subsidiary?) of Roxio does not have such a clearly sustainable business. If it's a subsidiary of Roxio, can't Roxio just fold it up and walk away when the losses become unbearable? Even if Roxio were compelled to support Napster's WMA files (legally or otherwise) is Roxio itself really the most stable corporate parent?
For instance, Apple has already subsumed much of Roxio's core functionality (disk burning, red book audio, etcetera) into MacOS X. How long before Microsoft does the same thing, leading to dwindling sales for Roxio as they desperately cling to their business model? What happens to support for Napster WMAs then?
To top it all off, if Microsoft really does become a player in the digital music distribution game, Bill will have added incentive to subsume Roxio's core functionality in a bid to drive them (and thus Napster) out of business.
People who say "sheeple" have about as much sophistication as an AOL user, and in fact are probably actually AOL users.
25 cents for distribution costs? Do you mean bandwidth? It would seem to me that Itunes is the mechanism for distribution.
Who needs WiFi when we can have Packet Over Sheep! http://datacomm.org/PoS-InternetDraft.txt
Not to be nit picking, but profit margin of any type is still profit. The sales of iTunes music might not produce billions in profit revenue, but in the grand scheme, it makes money -- after operating costs and advertising, and even without hardware sales. A 'loss leader' is one where money is actually lost on each sale. Steve Jobs is downplaying music sales to discourage others from doing it.
Big companies, those not in technology especially, often make money with a lot of profitable divisions that make a profit, not single cash cows. Dell, Microsoft and Apple do not follow the atypical business structure due to the nature of their explosive early growth ( and the boom of tech ).
Will apple just stop making iPods & Close iTunes when costs catch up to Profits? if so this does not bode well for those of us who want to see the legit music D/L continue. The RIAA will say 'see we told ya - Pirates even killed the legit download sources'.
Maybe Apple is trying to become a distributor, and take some power away from the big labels. I.E., Apple markets, promotes, distributes via iTunes, eliminating the need for Sony, BMI, etc.
Steve Jobs at the Grammy's LOL
I have a guitar and I know how to use it.
How much money do you pay to the sheet music publishers for the rights to use your guitar publicly? Are you aware that if you write your own songs, you are likely to accidentally copy a popular song? Subconscious copying is actionable infringement.
I still don't like gimmicks controlling how I use the music. This seems to be somewhat flexible, but if I can't listen to it where I want, on the type of player I want to listen to it on, then I can't see paying for it. As for the pricing model, I find it hard to complain about demand driven pricing. I would prefer a low, flat rate. I would like to build a library of thousands of songs (mostly older stuff), but it's not going to happen if it costs thousands of dollars. If it were only going to cost hundreds of dollars, I would reallocate money set aside for other forms of entertainment to the music library fund.
It takes labor to maintain the iTunes application program for Mac OS, the iTunes application program for Windows, the iTunes Music Store web application, and the parts of the iPod firmware that deal with compatibility with the iTunes Music Store.
Because then people could listen to a single song streamed over the net and copy it to disk using a utility like Wiretap.
Some operating systems provide ways to disable audio capture shims such as Total Recorder and Wiretap. In those systems, the operating system publisher signs audio drivers with permission to play digitally restricted media; in order to get a signature, a driver has to shut off all cleartext digital outputs during playback of such media.
Search for "Secure Audio Path" for more information.
Wouldn't have thought they would put that significant of a associated cost and including it in their pricing like that.. I am sure over time that cost will diminish significantly
Who needs WiFi when we can have Packet Over Sheep! http://datacomm.org/PoS-InternetDraft.txt
/me dons his Apple apologist suit.
The thing about Fairplay is that it's really, really easy to understand what's happening, and to authorize computers to play the music. WMA is so flexible that understanding which rights you have and which you don't can be complicated, e.g. I can stream song X, but can't download. I can burn song Y Z times, but can't transfer. I can transfer song A B times, but can only burn it Z times (you get the idea). With fairplay, I can burn a song an infinite number of times. I just can't burn the same playlist 10 times in a row (which hasn't come up yet). I can play the song on 3 computers, and an infinite number of iPods (because Apple assumes you can't get the bits back OFF the iPod, which certainly is possible). And, if I really feel like pirating something, I can just re-rip a burn of the song (with quality loss, but I have a $60 sound system, so I can't tell) so iTunes treats it like a non-DRM'ed file.
In our apartment, we had (at last count, excluding gamestations) eight computers for three people, so we swap around iTunes purchases all the time. Two of my machines are "authorized" on my account, so I can drag-n-drop over the network and they just plain work with no problems whatsoever. The 3rd license I keep up in the air, for whoever wants to listen to my library. If someone wants to listen to one of my purchases, I can "authorize" the machine, and it'll work. Easily. Later on, we just deauthorize it whenever's convenient.
It can be a minor pain because the iTunes Rendezvous just plain works when you turn on the machine, and doesn't differentiate between DRM'd songs and plain vanilla AAC songs that I've ripped. Maybe they'll change that in the next point release.
Disclosure: I have a financial interest in Apple Computer, Inc.
Michael C. Hollinger
I thought the newest form of WMA was a bastardised form of mpeg4?