10:36AM Napster (NAPS) 8.12 +0.26: Napster reported earnings last night that were bascially in line with Wall Street expectations, but many that follow the story already knew where things would end up as the company released subscriber numbers in January. The company had a 50% increase in subscribers, but no projections for future subscribers were provided.
Getting the public to accept the idea that Napster is now a legitimate source of music is certainly the first step. The next step is the much more difficult one - convincing consumers that the subscription model is better than the $0.99 per song model. The company noted that its commercial on the Super Bowl was designated "Ad Champion" by Forrester research. USA Today released a far different idea when they said that the Napster commercial came in dead last.
The commercial more than did its job, as it is getting extra exposure from media outlets, and attention was the goal. The "Do the Math" banner that was the focus of the ad pointed out that it would cost $10,000 to fill an iPod with 10,000 songs, but only $14.95 a month buys an unlimited amount of songs.
The company was quick to note that they would not be giving any projections concerning subscriber growth, subscriber acquisition costs, or churn. These metrics are used by investors to measure how the company is performing, but with such a new operation, management felt it was not in their best interest to publish those numbers. They declined to speculate at a subscriber number that would bring them to breakeven.
The 30-day free trial is longer than the standard two week trial, and will soon return to more normal levels. The longer trial and Super Bowl ad caused traffic to increase 300% earlier this week. The company also noted that MP3 manufacturers like Dell and Creative have supplied the company with MP3 players.
While an analyst floated the idea of the company getting into spoken word products and videos, management noted that they have a lot on their plate at the moment but there could be developments in those areas down the road. The stock has seen some pretty big swings of late and the lack of metrics will serve to extend that trend. |
