Music service Napster is showing more cracks. It's subscriber level dropped in Q2 to 708,000 from 760,000. Now the company has reportedly killed its Napster on Campus program.

In an effort to boost its number of subscribers, Napster is offering a discount on Napster To Go. It has a promotion of 6 months of the subscription service plus 50 free MP3 downloads for $69.99.

Will a bundle of MP3s lure new customers? Will Napster be able to retain a good percent of those new customers? Some and sort of. Using MP3 tracks as bait ignores the serious, fundamental problems that face the company. Even if it has modest success with this promotion, Napster is saddled with a product that has limited appeal.

Using MP3 files as bait strikes me as an act of desperation. It's not a coincidence that both Napster and Rhapsody are using MP3 files as bait -- Rhapsody hopes its new MP3 store will help grow its subscription service. Ownership, the marketplace believes, trumps access. And access is becoming easier to get for free (last.fm, imeem, etc.)

When Rhapsody and Napster started selling MP3 files, I wasn't sure it was a good idea to place side by side DRM-free tracks and subscription tracks with DRM. It sends mixed messages. A consumer looks at that and has to wonder, What is the product here? If it's a subscription service, why can't you just stand behind your product? Why mix the two?

As a company, Napster should consider having one identity and sticking to it. If it's going to be a subscription service, then it should try to be the best subscription service it can be. That may mean getting MP3s out of picture. In an effort to get some incremental MP3 download revenue, it may be harming its main product. Looking at its financials, however, I think Napster may almost be out of time.