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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?
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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.
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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...
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".
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Mod up a post Rob doesn't like and you'll never mod again
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."
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.