• According to BusinessWeek, Sony BMG is "finalizing plans to sell songs without the copyright protection" and "will make at least part of its collection available without so-called digital rights management, or DRM, software some time in the first quarter." (BusinessWeek.com)

• U.S. and Canadian concert revenues rose 8% to $3.9 billion in 2007. That figure shows considerable growth in smaller scale concerts: revenue from the top 20 concerts dropped about 15%. (Forbes.com)

• Just as Napster quietly increased its monthly price to $12.95, Bear Stearns declared that "the pure-play music business faces significant challenges." (paidContent)

• Sirius Satellite Radio ended the year up 38% in subscribers, to 8.3 million. (Radio Ink)

Posted by Glenn at 10:06 AM | Link
|DRM||Napster||Sirius||Sony BMG|

• Singer-songwriter Jewel has signed a multi-album deal with the Valory Music Company, a new label created by Big Machine Records' president and CEO Scott Borchetta. (Billboard.biz)

• Pali Research's Rich Greenfield has put a "sell" recommendation on Warner Music Group's stock and set a target share price of $7.50. (Silicon Valley Insider)

• Here are a few recaps of Wednesday's FCC hearing of media ownership in D.C.: Washington Post, Washington Times and New York Public Television.

• PassAlong Networks inked a deal to include the Razor & Tie MP3 catalog in its StoreBlocks music library. The StoreBlocks platform in behind f.y.e.'s download store, among many others. (Press release)

• Napster narrowed its losses in Q2 2007 to $5.1 million on revenues of $30.5 million. That was a good improvement over last year's $9 million loss. A $5 million loss is expected in Q3. Napster reported 750,000 subscribers at the end of the quarter, down from 770,000. In January 2007, Napster announced it would pay $15.6 million for the 350,000 subscribers to AOL's shuttered music service. Napster's year-end estimate was 566,000 subscribers. With AOL's subscribers the year-end estimate was bumped up to 916,000. Those AOL subscribers -- the ones that stuck around -- have boosted Napster's subscriber base but it looks like about half or so didn't stay with the service. (AP)

• Today I will moderate a panel at Net Impact called "Greening the Music Industry." You can follow Net Impact throughout the weekend at OwenBloggers.com's Net Impact page.

Posted by Glenn at 11:00 AM | Link
|Napster|

• AT&T will offer Napster's catalog -- over five million songs -- available for wireless download next month. The service will not work with the iPhone even though the device uses AT&T for wireless service. Here's the bad news: songs will cost $1.99 each or $7.49 for five downloads per month. Slightly better news: mobile downloads come with a free-to-the-PC download. No word yet on the file format of either the mobile or PC downloads. It's good to see the growth of mobile music service, but I'd be surprised if this gains much traction. Its per-download price is not competitive for a market of sideloaders, and the service does not offer the all-you-can-eat music buffet for which Napster is known. I'm in agreement with Silicon Valley Insider: this pricing scheme is a non-starter. At the very least, this service gets AT&T up to speed with its competitors. (New York Times)

• Terra Firma's Guy Hands is hoping to sell off EMI's pension fund if it can get squared away with the Pensions Regulator over contributions. (This Is Money)

• Canada has set a tax of three cents for single downloads and one and a half cents for album track downloads. Personalized radio stations such as Pandora and last.fm will pay 6.8% of their subscription fees for the tax. (Radio Ink)

• Live Nation is reportedly in talks to buy merchandising company Signatures Network for $50 million. The company has the rights to license and market such artists as Bruce Springsteen and U2. (New York Post)

• The International Music Score Library Project, home to public domain musical works, has shut down after receiving a cease-and-desist letter from music publisher Universal Edition. (Slashdot)

• An article on EMI Publishing's new digs, a renovated 65,000-square-foot former textiles warehouse in Manhattan. Roger Faxon is using this space to get a formerly fractured staff under one roof and improve the way they work. "Faxon terms the system 'neighborhoods,' designed to encourage communication and collaboration between disciplines such as licensing, copyrights, and royalties." (BusinessWeek.com)

• CMJ is over. Here's a link to the New York Times' blog entries on the annual music festival. (Arts Beat)

Posted by Glenn at 1:27 AM | Link
|Mobile Music||Napster|

• Napster's free, ad-supported music service has been laid to rest. (Digital Music News)

• Australian music sales fell 13.64% in value in the first half of 2007. CD sales were down 15.72% in units and 17.34% in value. Downloads and ringtones rose by 89.67% in unit value and only 47.48% in dollar value. (Billboard.biz)

• Monday Night Football unveiled its new music features last night. Snippets of a song by Kanye West, who has a new album out today, were played before commercials and during the halftime show. In the coming weeks, MNF will offer a prime-time audience for new releases by Foo Fighters, Matchbox Twenty, Kid Rock, Eddie Vedder (who has a solo album coming) and Irma Thomas & Marsha Ball. (Billboard)

• Another CD Baby post. (Why not? They're good stuff.) This time we have a breakdown of the value of CD Baby digital sales at all services. iTunes has accounted for 67.8% of all sales. iTunes Europe is at 5.5% and iTunes UK is at 4.6%. With its other territories, Apple accounts for 82.8% of total CD Baby digital sales. At number four is the best non-Apple store, Rhapsody, which has 4%. Napster is fifth at 3.6%. Further down the list are eMusic (2.3%, which may seem low but this is dollar value, not unit sales), Sony Connect (0.4%) and Ruckus (0.1%). (CD Baby, via Digital Audio Insider)

• SpiralFrog has had a rough four years but doesn't rule out going public. ZDNet points out the company must begin paying the interest on the $10 million in raised through the sale of secured notes. (ZDNet)

• Qtrax, the legal P2P service that will hopefully launch of these years, has hired a chief technology officer. Qtrax's CEO told Silicon Alley Insider the service would be ready by mid-September. Place your bets. (Silicon Alley Insider)

Posted by Glenn at 10:33 AM | Link
|Napster||P2P|

I'm a day or two late on this, but I finally browsed through Napster's earnings release for Q1 2007. Here are the quick bullets:

• Revenue rose to a record $32.3 million, a 15% increase year over year.
• Net loss for the quarter was $4.2 million, an improvement from last year's $8.5 million loss.
• Subscribers dropped 2.5% as the company lost 40,000 university students.
• Cash flow from operations was positive -- $1.6 million versus negative cash flow of $8 million last year.
• Cash on hand dropped 28% to $30.6 million
• Gross margin dropped to 27.3% from 32%, though operating expense as a percent of revenue dropped sharply to 44% from 69%.

Overall, the quarterly earnings release was very encouraging. Napster now has 770,000 subscribers and its financials are coming around. I listened to part of the conference call. Management is betting on wireless to carry its earnings growth, especially in Japan. They're looking at new hardware partners this fall. Marketing has been shifted from ad buys to partnerships, which should be good for cash burn. Napster didn't break out the number of AOL subscribers it added but did say "it is living up to our expectations." The company has no plans to change its pricing but did not say much about it. Lastly, over the next fiscal year, Napster expects 20 million compatible mobile phones.

Posted by Glenn at 10:21 AM | Link
|Napster|

• Monterey Peninsula Artists and Little Big Man will be integrated into parent company Paradigm Talent Agency, and both names will be retired. The agents expect the change to give them more time to spend developing their artists and use the resources of the larger, combined agency. (Billboard.biz)

• Universal Music Group has purchased Sanctuary Music Group for £44.5 million ($90.7 million) As part of the deal, UMG will take on £59.8 million ($121.8 million) of Sanctuary's debt. The goal is to integrated Sanctuary's other services such as merchandise and artist management. (The Guardian)

• The New York Post reported that Universal Music Group is ready to sell BMG's European publishing assets. As part of a deal with anti-trust regulators, UMG will sell the European rights to Zomba U.S., Zomba U.K., Rondor U.K. and 19 Entertainment. (FMBQ)

• Napster has hired Christopher Allen to be its new Chief Operating Officer. He starts on Monday. Allen was previously Vice President, Product Strategy, Design, and Marketing for Blockbuster Online and replaces outgoing COO Laura Goldberg. (Press release)

• Satellite radio companies' biggest problem is attrition, says Bridge Ratings. "Because XM and Sirius calculate churn differently, official churn rates are difficult to nail down. However, our interviews with current and former satellite radio subscribers coupled with gross and net subscriber figures reveal attrition is growing placing extreme pressure on new subscriber acquisition strategies for both companies." (Radio Ink)

• The average computer has 880 MP3 files. (Digital Music News)

• Sort of a good point from a PC World columnist. On the Verizon deal for AC/DC's catalog: "That’s too bad for the industry. The latest report from UK-based Entertainment Media Research say here in the US music piracy is down. You can thank the ease, price, and flexibility of finding and buying music on iTunes part for that." One or two of these deals, though, does not do anything to hinder the availability and compatibility of digital music. To draw a parallel, exclusives at Best Buy and Circuit City have lead only to bickering between retailers. From what I can tell, consumers have accepted them. (PC World)

• Denton, TX, currently a hot spot for indie rock, has a new record label. Magilum Records aims to capture the ""bizarre folk scene in Denton" and "start a whole new subgenre (of folk)." (Star-Telegram)

• In-Stat analyst Mike Paxton predicts ditching DRM "will likely be viewed as a music-industry-only experiment, albeit one that will be closely monitored to see if a viable business model emerges." (Twice.com)

Posted by Glenn at 8:26 AM | Link
|Agencies||Napster||Publishing||Research|

• The European Commission cleared Terra Firma's takeover bid of EMI. Today is the last day of Terra Firma's extended bid period. (Dow Jones)

• The rootkit is back in the news. Sony BMG has sued The Amergence Group (formerly SunnComm), the maker of the anti-piracy technology included in Sony BMG CDs that resulted in public outcry, lawsuits and government investigations. (AP)

• Senator Russ Feingold is checking in with the radio industry to make sure they're complying with the FCC's directive to enforce the ban on payola practices. He sent a letter to executives at Clear Channel, CBS Radio, Citadel and Entercom that asked for information on access the companies have given to artists and labels. "Have you taken any efforts to increase the amount of access provided and to facilitate submissions?" he asked. (Billboard.biz)

• The Wall Street Journal's Sarah McBride has an article on radio stations' analysis of P2P traffic to help create playlists. Clear Channel's Premiere Radio Networks has a venture with BigChampagne that offers traffic data to radio stations. She tells the story of Shop Boyz' "Party Like A Rockstar," which was big with file sharers but wasn't getting requests. Eventually, the requests started to roll in -- especially in text messages from mobile phones -- and track downloads increased as well. (Wall Street Journal)

• Fox and the production company behind "Laguna Beach" and "The Hills" are planning a reality TV series called "Nashville" that will follow musicians trying to make it in Music City. The show will feature Sony BMG artists Chuck Wicks, Matt Jenkins and Mika Combs. (Music Row)

• Just as Kelly Clarkson's My December album dropped 60% in its second week, rumor is that RCA pulled Clarkson's summer TV and print campaigns and are focusing on the upcoming Carrie Underwood album. (Kings of A&R)

• Swiss consumers will have to pay a tax on digital music players and some types of A/V recorders. (SwissInfo)

• Napster unlimited over-the-air download service launched with NTT DoCoMo in Japan. The service is integrated with the PC-based Napster To Go service. Here's a new twist for Napster: Customers have the option of paying for Napster through their DoCoMo bill. Whether or not mobile subscription services will take off is still up in the air, but these are positive steps. I like the billing option a lot. (No link to press release yet.)

• EMI and management company Union Entertainment Group have formed a joint venture record label called Audionest. The label will be distributed by Caroline. UEG manages rock bands Nickelback, Default and Candlebox. (Billboard.biz)

Posted by Glenn at 8:09 AM | Link
|EMI||Napster||P2P||Payola||Sony BMG|

• According to figures just released by the IFPI, the global recorded music market shrank by 5% in 2006. Digital accounted for 11% of shipments (odd that the word is used for a product that really isn't shipped) versus 2% in 2004 (ringtones are not included). Labels' income from performance rights collections rose 8% to $728 million. (Billboard.biz)

• Feisty Russian download store AllofMP3.com has been shut down. The site was singled out by U.S. trade representatives as Russia sought entry into the World Trade Organization. The same company that operated AllofMP3.com has already launched a similar site called mp3Sparks.com. (Times Online, via paidContent)

• The Kelly Clarkson saga continues. The singer has left The Firm and joined Starstruck Entertainment for management. (Bilboard.biz)

• T-Mobile has launched a mobile service in the U.K. that offers over 500,000 tracks at £1 each. The dual download service is called Mobile Jukebox. Each purchase results in an AAC file for the mobile device and a WMA file for the PC. (Mobile Choice U.K.)

• It probably won't have any effect on physical music, but the majors old Minimum Advertised Pricing (M.A.P.) came to mind when I read about the Supreme Court's decision that allows for minimum pricing by manufacturers and retailers. In a case that put Leegin Creative Leather against Kay's Kloset, Leegin defended its minimum pricing system by arguing in part that smaller retailers would be able to compete against discounters. Sounds just like majors labels' argument for their M.A.P. that denied cooperative advertising funds to retailers that advertised below a certain price. After the F.T.C. forced labels to drop M.A.P., mass merchants began their predatory pricing practices that has, along with digital downloading and the accompanying shift in listening habits, has helped put thousands of music retailers out of business. (AP)

• The final 700 or so employees of U.K. music chain Fopp were dismissed today. The company owes £10 million to suppliers who are not interested in extending new terms. Good call. Maybe they learned something from keeping Tower on life support as it failed to adequately update itself for a changed market. (Times Online)

• Napster issued a statement to investors about the possibility that the iPhone, with its lack of compatibility with Napster software, could harm its business. Pretty standard disclosure for a public company, in my opinion. And besides, Napster was always going to have to hitch its wagon to another device. (Information Week, via Engadget)

• At the Huffington Post, music writer Paul Bonanos on Beggars Banquet for its download scheme for vinyl copies of The National's Boxer album. Each vinyl LP comes with a code that allows for up to three album downloads (one for yourself, two for your friends). While "home taping" is hurting the recorded music business, wrote Bonanos, those extra copies benefit other revenue streams. "We're seeing CDs turn into promotional tools for the live tours," Festival Network head Chris Shields told Matt Miller in an article at The Deal. (Huffington Post)

• European antitrust regulators are stepping up their investigation into high-definition DVDs and possible anticompetitive practices in the format war. (Wall Street Journal)

Posted by Glenn at 11:11 AM | Link
|Brick-And-Mortor Retail||Mobile Music||Napster||Research|

Napster reported its fiscal and Q4 2007 numbers yestserday (read press release). For the year, revenues increased to $110 million from $90 million. Subscribers increased 37% to 830,000. Net loss improved $37 million from $61 million. Gross margin improved to 29.38% from 28.06% in fiscal 2006.

For Q4, revenues mildly improved to $28.9 million versus $26.4 million in Q4 of fiscal 2006.

Looking at a few ratios indicate the company is becoming more efficient in generating sales: Sales & marketing is a percent of revenue decreased to 30.8% in 2007 from 54.6% in 2006. R&D as a percent of revenue improved to 9.9% from 13.9%. G&A as a percent of revenue, though, was basically flat: 21.8% in 2007 versus 22% in 2006. For a company that requires scale for profitability, these ratios are encouraging.

Napster has been a whirlwind of business development recently -- some look good, some look questionable. The joint marketing agreement with Motorola and its partnership with AT&T will test the potential of subscription services via mobile handsets. The deal with Circuit City seems years late and uninspired.

Posted by Glenn at 5:28 PM | Link
|Earnings Releases||Napster|

• Warner Music has sued social networking site imeem for copyright infringement. According to the lawsuit, "Imeem itself directly engages in much of the infringing conduct by duplicating, adapting, distributing and performing plaintiff's works through Imeem's own servers." Indeed. Take a look at the top songs at imeem and count the number that have the proper license for on-demand streaming (somewhere around zero I would imagine). (Wall Street Journal)

• The UK Parliament Committee has called for an extension on copyrights on sound recordings from 70 years from the existing 50 years. (BBC News)

• The Los Angeles Times' Jon Healey was a good article on the sometimes perplexing variation of CD price points. A theme of the article echoes some of my recent arguments about differences in price elasticities, that "there are two price thresholds: one for fans and one for the merely curious." (Los Angeles Times)

• Motorola has inked a partnership with Napster to provide subscription services to the handset manufacturer. The Motorola ROKR and Z6m will be the first phones able to download and play tracks from the $14.95-per-month Napster To Go service. Motorola buyers will be offered the first month at no charge. (PC Pro)

• Great marketing: Blue Note will sponsor an air-conditioned jazz tent at this summer's Bonnaroo Music Festival. Blue Note artists such as Ravi Coltrane and Stefon Harris will perform. (AP)

Posted by Glenn at 11:22 AM | Link
|Legal||Marketing||Mobile Music||Music 2.0||Napster||Warner Music Group|

• Circuit City will use Napster's online service to create its own branded music service called Circuit City + Napster. The prices are standard -- $15 for the subscription, $0.99 per track for downloads. I don't understand Circuit City's thinking here. Wal-Mart's download store is nothing much, and Tower's foray into download stores was pitiful. Maybe there's a great opportunity to drive traffic through in-store sales of pre-paid download cards or MP3 players, but those synergies usually turn out to be more of a mirage. (Billboard.biz)

• SoundExchange has reached out to some webcasters -- and released a press release about it -- in the wake of the Copyright Royalty Board's hike of rates paid to labels and artists. "We recognize that there may be certain needs and expectations, as expressed by webcasters in recent days, that might possibly be addressed through direct discussions," said Executive Director John Simson. (Press release)

• The Miami Herald ponders the precipitous drop in Latin music shipments and the disparity between shipments and scans (which were up 5% last year). Latin's digital sales rose by 63% in 2006. (Miami Herald)

• Sony BMG is examining business opportunities in India. (Business of Cinema)

Posted by Glenn at 1:28 PM | Link
|Brick-And-Mortor Retail||Napster||Sony BMG|

• Several music publishers will supply tracks for the PS3 and Xbox 360 versions of the video game Rock Band. Maker of the popular title, Electronic Arts, said "unprecedented deals" with labels had been signed and that record labels would provide "master recordings from the biggest songs and artists of all time." (Games Industry)

• Napster reported that in the fourth quarter of 2006 it added over 225,000 AOL subscribers and added an additional 40,000 subscribers. Those gains put fourth quarter results ahead of prior outlook. Napster claims its 883,000 subscribers is the largest on-demand music subscription customer base. Rhapsody claims over 2.2 million subscribers, which includes radio and mobile subscriptions. (Press release)

• The Good, The Bad and The Queen is the first EMI artist to release a DRM-free album. It can be purchased directly from the band's website. EMI's catalog is expected to be available without restrictions some time next month. (The Guardian)

• A Carmel Group report, commissioned by the National Association of Broadcasters, said a merger of XM and Sirius would result in "less service, less affordability, less diversity and less choice in content and hardware." In a joint statement, XM and Sirius called the report "biased" and "hostile." (Washington Post)

• Judging from this job posting at Digital Music News, it looks like NPR is moving forward on a plan to launch an online store that will leverage its music-related assets. Last year, some news broke about just such a strategy when NPR's "A Blueprint For Growth" (read PDF) announced a plan to explore the development of a "multi-genre, digital music service." (Digital Music News Job Board)

Posted by Glenn at 9:30 AM | Link
|Napster|

• EMI and Bertelsmann settled their lawsuit related to the latter's support (loans) for the Napster P2P service. Specifics were not disclosed. Universal Music Group settled for $60 million in September 2006. (FT.com)

• Napster inked a deal to provide its Napster To Go subscription service free of charge to AT&T wireless and high-speed Internet customers. Customers will be able to upload tracks to portable music players and compatible mobile phones. The offer will be free with a two-year wireless agreement with purchase of select phones. Home users will get the service if they purchase ATT&T Yahoo! or FastAccess DSL Ultra Internet service. (Press release)

• Sprint is dropping prices for over-the-air downloads to $0.99 for customers that subscribe to any Sprint Data Vision data plan. (Press release)

• Nettwerk and video game company Electronic Arts announced a joint venture label, Artwerk, to develop new and established for both physical and digital distribution. (Digital Media Wire)

• Waylon Jennings' "Theme From Dukes of Hazzard (Good Ol' Boys)" has become the first country music ringtone to reach platinum, or sales of one million. (Press release)

• Doug Morris, CEO of Universal Music Group, was named to CBS Corp's board of directors. (Broadcast Newsroom)

• Read DiMA's reaction to the U.S. Register's call for modernization of Section 115 of the Copyright Act. "A streamlined blanket music licensing system will guarantee digital music services access to more music with lower transaction costs, which in turn will encourage innovation, keep legal music prices low, grow our industry and increase royalties to all creators." (Press release)

Posted by Glenn at 8:15 AM | Link
|EMI||Mobile Music||Napster||Ringtones|

Napster released its earnings for its third quarter ending December 31, 2006. (Download PDF of 10-Q) Revenues were at all time high of $28.4 million, a 21% increase over the previous year. Its net loss was $9.5 million, also an improvement over last year. Net loss from operations was 28.3 million. Management pointed to the company's many partnerships as signs that it is poised to take advantage of growth in the mobile market.

The company's subscriber base grew 48,000 to 566,000 at the end of the quarter (including university and Japanese subscribers). Not included in that figure were any customers gained in Napster's recent purchase of AOL's subscription customers.

Other key points:

• Napster recognized as income $2.1 million from gift cards that it believes will not be redeemed (breakage).
• Advertising costs were approximately $6.9 million and $19.8 million for the three and nine months ended December 31, 2006, respectively, and $11.6 million and $31.9 million for the three and nine months ended December 31, 2005, respectively.
• Gross margin improved to 30% from 27%.

Things are improving at Napster. Management expects revenues next quarter to top $26 million and says operating expenses will drop. Let's wait and see how many AOL subscribers they retain. Cost-efficient subscriber growth is the key, and the AOL deal is far more cost efficient than the company's usual customer acquisition through marketing and advertising.

Posted by Glenn at 6:31 AM | Link
|Napster|

• Today The New York Post reported that Jermaine Dupri, recently ousted as the head of Virgin Records' urban unit, "is in negotiations with Universal Music Group about joining its Island Def Jam label." Talks are focused on his role at the label but details have not yet been determined. (Read article at New York Post)

• Napster Mobile has launched on au/KDDI, Japan's second-largest mobile network with over 20 million subscribers. The service is already on Japan's i-Mode platform. Napster Mobile requires a $3-per-month access fee, and users buy credits that are redeemed for over-the-air song downloads and ringtones. (Read press release)

• Digital distributor IRIS Distribution has inked deals with dance/electronic labels Neurodisc, Scion and Subliminal Records. Artists added to the IRIS catalog include Erick Morillo, Bob Sinclair, Harry "Choo Choo" Romero and Spank Rock. (Read press release)

• Digital Music Group Inc. signed a three-year deal with Apple to sell its video content at iTunes. Two weeks ago, the company announced a distribution deal for nearly 200 hours of video content for content such as ""Hopalong Cassidy" and "My Favorite Martian." DMGI's shares rose more than 30% on the announcement. (Read article at Sacramento Business Journal)

• Apple's FairPlay DRM is illegal in Norway ruled the Consumer Ombudsman in Norway. (Read article at The Register)

Posted by Glenn at 8:45 AM | Link
|Digital Distribution||Napster||Online Stores/Services||Universal Music Group|

AOL has dropped its Music Now music service and is migrating its 350,000 customers to Napster (read press release). It's a great -- although expensive -- windfall for Napster, which raises its subscriber base to 916,000 from its year-end estimate of 566,000. (Napster will release financial results on February 8, 2007.)

Today Napster filed an 8-K with the SEC (read PDF) that has some dollar amounts and specifics. Napster will pay AOL $15.6 million for its 350,000 subscribers (along with "certain related assets and liabilities"), or $445.71 per subscriber.

As a part of the deal, Napster will get exclusive advertising rights throughout AOL Music Channel for one year. The agreement will be subject to renewal if certain, unnamed milestones are hit.

Napster's losses from operations are falling but are still losses, and there are worries about the company's liquidity. Even so, the acquisition of AOL's subscribers was pricey but the correct move. The bottom line is the company needs far more subscribers in order to reach profitability. Between April 1 and September 30, 2006, Napster spent $19 million on advertising and marketing and lost 60,000 subscribers (excluding college subscriptions, which are seasonal), part of the reason for the drop was the introduction of the free Napster Light streaming service. In comparison, paying $15.6 million to acquire 350,000 subscribers -- which increases its subscriber base by 38% -- was a bargain.

Posted by Glenn at 2:16 PM | Link
|Napster||Online Stores/Services|

Napster released its results for the fiscal second quarter ending September 30, 2006. The financials show a company that continues to grow, continues to better its positiion, but continues to land in the red. The launch of a mobile service shows a foreward-thinking strategy but was too recent to make a financial impact.

Revenues were up 9% to $25.5 million while the net loss improved to $9 million from $13.6 million. (Read press release.) About Napster's outlook, the company's CFO said the company continues "to expect solid double-digit annual revenue growth for fiscal 2007." Revenue in the next quarter is expected to be $27 million, although marketing expenses will increase as well.

A look at the balance sheet reveals one important change: Cash and cash equivalents declined to $31 million from $46.8 million since the end of the second fiscal quarter of 2005. Working capital -- the difference between current assets and current liabilites -- dropped to $60.1 million from $74.4 million in the last six months.

Napster reported 9.0 million registered users; Its paid subscriber base is 518,000 and it has 31,000 university subscribers. The company claims the launch of its free, ad-based Napster.com website has "increased the user traffic to Napster.com to over 4 million unique visitors per month."

Posted by Glenn at 12:26 PM | Link
|Earnings Releases||Napster|

• Sony BMG settled with Canadian music fans over its infamous root kit. Hundreds of thousands of consumers will get $8.40, a replacement CD and free downloads. Information on the settlement and how to fle a claim can be found here. (Read article at Vancouver Sun)

• The Zune makes an appearance on "The Ellen Degeneres Show." Degeneres gets the facts a bit mixed up; users cannot take songs from other Zunes, they can only take what is sent to them. (Watch clip on YouTube, via Medialoper)

• Rags Gupta thinks about Napster's possible suitors: wireless carriers, handset makers, cable/DSL providers and XM. For wireless and cable/DSL, Gupta floats the idea that using Napster as a customer-retention strategy could possibly make it a good investment. (Read post at Digital Music News)

• The Motley Fool's Rick Aristotle Munarriz thinks Google is the best fit for Napster. His best argument fits Napster's free, ad-based platform to Google's talent for selling ads. I dunno. Google, currently sitting on cash piles that inch toward the moon, could surely build something far better. (Read article at The Motley Fool)

• An interview with RealNeworks CEO Rob Glaser that hits on the company's parnerships with Sonos and SanDisk. "If you're on the right side of history, there's nothing wrong with starting out with a product at the high end and then riding that into the mainstream. That is the path we're on with Sonos." (TechNewsWorld)

• Delphi has introduced a new XM receiver, the SkyFi3. (Read review at CNET)

Posted by Glenn at 9:45 AM | Link
|Napster||RealNetworks||Sony BMG||XM||Zune|

• There's a controversy brewing about a 2004 report on media ownership. Former FCC Chairman Michael Powell says he never saw the report, which found that increased media ownership decreases the amount of local news reported on local television stations. (Radio and Records)

• Amazon.com launches a "CD on demand" service today called CustomFlix that will allow independent musicians and small labels to create just-in-time CDs. The services costs a $50 flat fee for musicians and labels, plus $4.95 to $7.95 per CD. (Seattle Times)

• Napster has a secret admirer. The company announced yesterday that it has "recent third party interest in establishing strategic partnerships or potentially acquiring the company." (Press Release)

• Rising Virgin rock band 30 Seconds to Mars has left The Firm? (Kings of A&R)

• Can the Internet alone break a band? "Internet activity alone does not break a band," says the manager of YouTube celebrities OK Go. "The Internet is a great tool for reaching people and getting the word out, but it doesn't sell records and it doesn't sell tickets." (Pollstar)

• JP Morgan maintains a neutral on EMI shares, but warns of tough year-on-year comparisons and sees selling opportunities ahead. Just imagine if Robbie Williams' album was pushed to the next period. (Dow Jones)

• ZZ Top parted ways with its manager as well as its $30 million deal with RCA Records. (Starpulse)

Posted by Glenn at 7:04 AM | Link
|EMI||Napster||Radio|

Napster reported earnings yesterday for the quarter ending June 30th, 2006 (read press release). The company narrowed its losses to $9.6 million (a mere 0.2% of Somalia's GDP) from $19.5 million last year. Revenues grew to $28 million from $21 million a year ago and $26.8 million in the previous quarter.

But if a one-time $1.9 million gain for "pre-paid card breakage" -- which represent those Napster prepaid cards that have expired without being redeemed -- is taken out, the most recent quarter's revenue would have been a shade lower than the previous quarter. Another $300,000 of expired prepaid card money was realized in the quarter. That's good money.

Possibly due to its free service, Napster's subscriber base decreased by 49,000 last quarter, to 508,000 from 547,000. The company expects a lag time in coverting free service customers to paid customers. "In the near term," reads the quarterly report, "we expect service revenues to decrease as prospective customers continue to delay subscribing to our premium music services while trying the free music services, which we experienced in the first quarter of this year." That is...if the carrot works.

The press release also mentioned the company will roll out Napster Mobile with SunCom Wireless next week in the Southeast United State. The service will offer over-the-air downloads with a dual delivery to the consumer's PC.

At the end of the day, this line from page 33 of the quarterly report says a lot about the company's prospects: "Our digital music distribution business has a limited operating history and a history of losses and may not be successful." No kidding.

Posted by Glenn at 8:33 PM | Link
|Earnings Releases||Napster|

Napster reported its fourth quarter and fiscal year today. The verdict? Sales growth of 100% for the year, improved losses for both the quarter and year.

• Fourth quarter loss was $4.4 million compared to $24 million the previous year.
• Sales and marketing costs for the quarter decreased by almost half for the quarter but increased for the year.
• Loss from continuing operations decreased to $10 million from $24 million for the quarter, and improved to $61 milion from $67 million for the year.

Shares dropped, though, as analysts expected a better estimate for first-quarter revenues. The company expects first quarter revenues to be in the $25 million to $28 million range. Fourth quarter revenues were $26.2 million. Given the fact that Napster just introduced a new ad-based model, it's not irrational to expect a bump in revenues for the first quarter.

Posted by Glenn at 7:58 PM | Link
|Earnings Releases||Napster|

Ever since Napster unveiled its new free music site -- songs can be played for free up to five times before a subscription or purchase is required -- the comments and coverage have been intense. Some don't think much of the poor sound quality. Others consider the ad-based royalties a breakthrough and an important first step in exploring alternative business models.

Coolfer's first few attempts to check out the new features were thwarted by a slow site -- traffic was obviously high. When I finally got an acceptable speed the free listening was a smooth experience. Regisration is required to stream tracks but no money changes hand unless the user wants to buy the track or sign up for a subscription to the music service (streams and tethered downloads).

High marks are given for the easy search process and the worry-free media player, which requires no software or installation. From a blogger's point of view, the best thing about the new Napster is that every song has a unique URL that can be emailed or embedded in a blog post. Other services don't have this, and it's a fantastic way to share music with others. (Coolfer will regularly include Napster links from now on.)

(To underscore the depth of the music catalog and what a far-reaching collection of music is now at people's fingertips, the media player pictured above shows that Napster has an album by French artist Benjamin Biolay -- two, actually -- that were never released domestically.)

On the downside, the audio quality is in the AM radio range, which means songs can be heard and previewed but not totally enjoyed. To hear the subtleties and richness in songs, a subscription is needed or the track would have to be purchased outright.

Select media commentary on the new Napster:

• The LA Times' David Colker lists his pros (search function) and cons (limited to five songs per play, can't build playlists.
• BusinessWeek.com gets experts' opinions on likelihood of success (not all are sold on it) and estimates of ad revenues.
• The Register shows its stripes in this biting criticism of Napster's portrayal of "its service as an open paradise."

Posted by Glenn at 3:20 PM | Link
|Napster||Online Stores/Services|

• Muze has purchased the U.S. operations of digital media company Loudeye for $11 million. (Reuters)

• Another week, another rumor about EMI and Warner Music Group. This article says EMI is likely to make a takeover bid for WMG "within weeks." (Sharecast)

• Napster has launched a new, web-based and mostly free version of its music service. Each song can be streamed up to five times. Good news for bloggers: "It seems pretty easy to paste Napster Links to any personal page, a wiki, or an email." (Jupiter Research, via paidContent)

• The Stinkweeds store in East Valley, Arizona, will close its doors in about a month. The Phoenix location will remain open. Stinkweeds is a member of the Alliance of Independent Music Stores (AIMS). (Arizona Republic)

Posted by Glenn at 9:11 AM | Link
|Brick-And-Mortor Retail||Digital Music||Napster|

• Napster expects its fourth quarter top and botton lines to exceed the company's prior guidance. What's that mean? The net loss is projected to be "in excess of $26 million." If that doesn't strike you as particularly good news, this might do the trick: year-to-year revenue growth is expected to be about 100%, and the company's subscriber base is over 600,000 worldwide. (PR Newswire)

• Album sales were down 3% in the first quarter of 2006. Universal Music Group had the biggest share at 30.7%, a number that includes Fontana's sliver of the market. (The Hollywood Reporter)

• Touch and Go Records is celebrating its 25th anniversary and is throwing a three-day celebration with bands such as Calexico, Pinback, Shellac and Black Heart Procession. (Touch and Go 25)

• Times two: The Capitol Records Tower is celebrated its 50th birthday yesterday, and there's even a blog filled with history on the building and the label. (Pop Culture Fanboy)

• Sprint is crowing over reaching the two million over-the-air download mark. (The first million milestone was reached a bit over a month ago.) Wonder how many of those were freebies... (Wireless Week)

• MTV Networks' Van Toffler calls the mobile phone "the holy grail of electronic devices" at the CTIA Wireless convention, the discussed his company's mobile programming. (Digital Music News)

• Has he been reading Coolfer's posts on the Cult of Bronfman? Analyst Michael Savner of Banc of America Securities dowgrades Warner Music Group's stock to "neutral" from "buy." (New Ratings)

Posted by Glenn at 9:00 AM | Link
|Digital Music||Music Industry||Napster||Warner Music Group|

There's been a lot of scattered talk lately about current and possible online music stores: Napster's financial health, the possiblity of a Google music store, rumors of a Google acquisition of the dollar-short Napster, and Amazon.com's foray into digital music. Here's a recap.

To start, a Bear Stearns analyst Robert Peck got people talking when he forecasted an imminent Google music store.

There was a report from Digital Music News that Napster going to layoff some people. Napster denied those rumors but did announce it would cut ten middle manager positions.

And there has been some professional chatter about the possibility that Google will acquire Napster as a means to enter digital music sales. Citing anonymous sources, the NY Post reported (as reported here by News.com) Google was in talks with Napster over an "extended alliance" and a possible "outright acquisition." Forbes reports Napster's takeover value at $3 to $5.

As is often the case in Silicon Valley, Google denied rumors that it was looking to acquire Napster. "No, we have no plans at this time to develop a music store, or to compete with existing online and offline music retailers," said a spokesperson.

Last week Napster released its "sorry results" for last quarter. Napster wouldn't say what it had up its sleeve, but in a conference call with analysts CEO Chris Gorog said the company was optimistic about an upcoming initiative.

On Saturday The Independent ran an article about the music ambitions of Amazon.com and Google and how music executives are eager to work with the two companies in hopes they will loosen Apple's strangehold on digital music. One executive claimed "active communications in the last 60 days" with the two companies, and put Amazon.com ahead of Google in preparedness to launch a store.

Posted by Glenn at 10:56 PM | Link
|Music Industry||Napster||Online Stores/Services|

Online music store Napster reported its second quarter results yesterday. Its loss of $13.6 million was an improvement over the $15.3 million loss for the same quarter last year. The company said it had a total of 448,000 subscribers in the quarter, up 146% from last year.

Net revenue from continuing operations grew to $23.4 million, a 151% rise over the same quarter last year, and an 11% increase from the first quarter.

Notes from the financial statements:

• Cash is down to $68 million from $135 million at the beginning of the fiscal year.
• Sales and marketing expenses have dropped considerably from the first quarter (must have been that Super Bowl promotion).

Read the press release at Yahoo! Finance.

Related: Napster just signed a deal with Clear Channel that gives it the exclusive digital rights to Instant Live concert recordings. Instant Live is Clear Channel's live concert recording arm that gives concertgoers the ability to purchase a recording of the concert they have just attended.

Posted by Glenn at 9:12 AM | Link
|Music Industry||Napster||Online Stores/Services|