Napster Rallies! Now, About Those Growth Plans...


We’ve been sceptical about Napster’s chances for several years, so let’s give them credit today — the online music retailer was able to increase revenue in Q1 — up 15% to $32.3 million — while cutting losses from $8.5 million to $4.2 million. Most important: The company, which has torched $196.6 million since 2004, actually added $600,000 to its cash pile last quarter, and now has $67 million on hand.

So let’s put the whole “will Napster survive” question aside for now (Remember when the company hired UBS to shop it around last fall? What happened to that?) If it wants to, it can putter along with its music subscription business. But even though people who use music subscription services tend to rave about them, there just aren’t that many of them out there.

Napster is hinging its growth hopes, as is competitor RealNetworks, on the mobile business. But while the first part of both companies’ pitch makes sense — soon everyone will have a music player on their phone, just like every phone now has a camera — the notion that they’ll want to pay anything to fill them with music is a leap of faith.

Apple has now sold 3 billion songs via iTunes. But remember, that works out to about 20 tracks per iPod. So even if Napster (or RealNetworks) and the carriers come up with a solution that’s as elegant as iTunes (good luck), that’s not a lot of business to split between them. Or put it another way — how much money have you spent to use your phone’s camera lately?

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