Napster losses deepen despite subs and sales gains

Posted on 9 Feb 2006 at 14:27

Napster has reported a rise in net losses over the last financial quarter despite recording increases in both subscriber numbers and revenue.

Losses for the quarter totalled $16.7mn compared to $14.9mn for the same period last year, despite a 94 per cent year-on-year increase in revenues and a 110 per cent rise in the subscriptions.

'Napster had a strong third quarter, adding substantially to our premium subscriber base which now totals in excess of 500,000,' said Chris Gorog, chairman and CEO, adding that subscriptions - rather than downloads - account for 86 per cent of its income.

'Going forward in 2006 we will expand our product offerings available at Napster.com including a free experience for music fans which will be supported by advertising,' Gorog continued. 'We believe the prospects for our new Napster.com initiative, the robust organic growth of our subscription business, together with our focus on cost controls will all contribute to accelerating our path to profitability.'

However Gorog was immediately pressed on whether there are plans to sell, following rumours to that effect at a music industry get-together last month followed by reports that Google may be interested.

The CEO told investors and analysts that the recent lay-offs were not an indication of hardship but 'nips and tucks' to help the company run more efficiently.

'Nothing more, nothing less,' he insisted.

But he did say that Napster has 'no shortage of admirers' enquiring about a possible purchase.

Rival music operator Loudeye, which operates dozens of digital music services in Europe through its OD2 subsidiary, has also reported 'significant losses' in preliminary quarterly results. It added that it also has limited cash reserves.

'Loudeye's estimated unrestricted cash, cash equivalents and marketable securities balance, as of December 31, 2005, of approximately $9.0mn raises substantial doubt about Loudeye's ability to continue as a going concern,' the company warned.

Apple, on the other hand, recently reported a 177 per cent annual increase in revenues from 'other music related products and services' to $491mn, while selling 14 million iPods.

Author: Simon Aughton