10:40AM Napster (NAPS) 8.16 +0.38: The Napster music subscription service released a figure that analysts and investors have long been waiting to learn - the total number of subscribers. This is a number that the company has kept private until a recent release announced that subscriber growth was strong as the total increased 50% in the third quarter to 270,000.
The timing of this release is somewhat suspect though, as it comes as TheRegister.com reported that Napster was in danger of being shut down again. SightSound Technologies filed a motion in the US District Court for the Western District of Pennsylvania asking for a preliminary injunction against the company after negotiations over a licensing deal with one of SightSound Technologies patents hit the skids. It was noted that SightSound has successfully defended its patents in the past with a $3.3 million settlement with two units of Bertelsman.
While the revelation of the number of subscribers was a surprise, and a better than expected surprise, it was released the same day as a potential negative story was set to run. The release also noted the number of subscribers increased at a strong rate in the most recent quarter, suggesting that the model is gaining acceptance far more rapidly than most expected.
The online music business is currently being dominated by Apple Computer and its iTunes division which is being driven by the large demand for iPods. Napster is seeing demand come from the bevy of the MP3 players, the majority of which were previewed at the Consumer Electronics Show (00C) in Las Vegas a few weeks ago. The company also believes that the Windows operating system, which is the likely to be the chief competitor to the Apple OS for MP3 players, will be a driver going forward.
The key idea from the release is that the early movement to the subscription model is much greater than expected and the impending crush of low priced and feature rich models will only drive demand further. In a recent Napster presentation, the company noted that customers balked at the idea of filling up their iPods with $10,000 worth of songs, when they can spend $10 a month to have access to nearly a million songs.
We think the future looks good for Napster as the year 2005 is slated to be the biggest year for entertainment hardware and media in some time. Microsoft's general push into entertainment and focus on the living room is not the least of events that is driving this trend. The expected increase in the number of MP3 players that have greater video capabilities could drive more demand for a subscription based model that offers TV shows as well as music.
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The above from Briefing.com |
