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View Full Version : Napster - now just $5 per month for streaming service



autopilot
2009-05-18, 03:24
http://www.engadget.com/2009/05/18/napster-relaunching-again-5-per-month-plus-five-to-download/

Includes 5 'keep forever' DRM-free downloads per month. Bargain. Not sure what this means for UK customers though, can't see any info on the UK site yet. Spotify now looks a whole lot less attractive to me.

simbo
2009-05-18, 03:35
I really hope they apply this to the UK. As great as I've been finding the service (now it's available via SBs), I've been finding it difficult to justify the 10pm.

As for Spotify, it'll be interesting to see what they do. As I understand it the VC money is running out fast and they were hoping for more premium users than they have.

Siduhe
2009-05-18, 03:51
I'm not holding out that much hope of the reduced pricing in the UK. Napster UK seems to be run very much separately from Napster US.

On a potentially related note, my daily Napster email today had a big banner headline referencing a Logitech competition to win a Duet. However, it just links (for me) to the UK Logitech streaming devices page - no sign of a competition. Can't work out if Logitech simply hasn't put the relevant page up yet, or whether the competition is US only - anyone else received the email and know?

simbo
2009-05-18, 04:02
On a potentially related note, my daily Napster email today had a big banner headline referencing a Logitech competition to win a Duet. However, it just links (for me) to the UK Logitech streaming devices page - no sign of a competition. Can't work out if Logitech simply hasn't put the relevant page up yet, or whether the competition is US only - anyone else received the email and know?
Same here... straight to the Wireless Music Players product list... no competition mentioned.

Siduhe
2009-05-18, 08:11
As for Spotify, it'll be interesting to see what they do. As I understand it the VC money is running out fast and they were hoping for more premium users than they have.

I hear the same, and seems to be confirmed by this:

http://www.techdigest.tv/2009/05/spotify_coming_1.html

Interesting that they are looking to focus on things like music recommendations - possibly in partnership with Last.fm or someone like it...

EnochLight
2009-05-18, 08:17
I just posted the same story in the SqueezeNetwork section, albeit linked to Gizmodo.

Anyone have any thoughts on how Napster compares to Rhapsody? As a US subscriber, I am seriously thinking about jumping ship.

Siduhe
2009-05-18, 09:02
Thanks EL, your link seems to answer my/simbo's query - US residents only right now.


The new Napster offering is now available for U.S. residents at www.napster.com.

autopilot
2009-05-18, 09:18
I just posted the same story in the SqueezeNetwork section, albeit linked to Gizmodo.

Anyone have any thoughts on how Napster compares to Rhapsody? As a US subscriber, I am seriously thinking about jumping ship.

Well you get a 37 day trial with Napster, so why not give it a test drive?

mortslim
2009-05-18, 10:54
I am very concerned that you mention that the VC (venture capital) money may be running out for Napster. If that is the case, I see their new gesture as a "hail mary" pass that could possibly have devastating consequences for both itself and Rhapsody.

If you sell a service below your costs (this is hypothetical as I have no idea what Napster's costs are) then you are not going to make up for it by increasing the volume of sales, or even by mooching sales from Rhapsody.

All you are going to do is get customers used to a certain price point and then when you later raise that price to a sustainable level, you will most likely lose those customers again. Not a very viable long term strategy.

When you compare the prices (before price drop) of Napster and Rhapsody, they are bargains for what they deliver: any album, any song, any artist on demand. I use my Rhapsody service ten times more than I use my cable TV service, and yet I pay ten times more for cable TV. So if my math is correct, that means that internet radio is 100 times cheaper than cable TV.

Many years ago I remember a neighbor of mine started a small shop to rent roller skates for use at the beach. When another skate store lowered its prices, then my neighbor lowered his prices even more. This spiraled out of control to the point that it put both stores out of business.

If Napster's strategy is to try to put Rhapsody out of business, then this may be an anti-trust issue.

I encourage healthy competition, not predatory pricing.

Of course all of this is a result of the short-sightedness of the record companies who are not pricing their own products in a healthy manner. Record companies are forcing this upon Napster and it may be the ruin of all the companies.

Record companies don't get any royalties from terrestial radio although there is talk in Congress about changing that. If radio stations pay, maybe there will less pressure for internet radio to pay more than their fair share.

I hope Napster is playing fair with its new price structure but I doubt it.

I am going to stick with Rhapsody for the moment till I see where the dust settles. I am more than happy to pay value for value. I understand there is no such thing as a free lunch. I understand that Napster may be underpricing in a last desperate misguided attempt to survive.

If that is the case, then rest in peace Napster. I won't be party to your shenanigans.

P.S. This may also have implications for Logitech also. I assume it receives a percentage of sales for the premium services so if that revenue falls, it may affect Logitech's ability to keep its servers online, develop new products, support existing products, update SqueezeCenter, etc.

simbo
2009-05-18, 11:11
I am very concerned that you mention that the VC (venture capital) money may be running out for Napster.
Sorry, I was referring to Spotify running out of VC money. There's a timely piece on The Register today (http://www.theregister.co.uk/2009/05/18/spotify).

Your nice long post wasn't in vain however; Napster are having issues of their own. They were bought last year by Best Buy, who seemed to be more interested in the "platform" (read: mobile framework) rather than the existing subscription base. Analysts think music subscriptions services just aren't working, due to static revenues against a changing environment. This may be Napster's attempt at starting a price war and, as you say, it can only end in tears. To be honest I don't quite understand why subscription services wouldn't work and be the most popular approach - but maybe that's because they fit my needs the best.

browellm
2009-05-18, 14:30
Wow, even if we get /$ parity in the UK, it would be really really worth it for 5.

simbo
2009-05-20, 01:08
According to The Register's article (http://www.theregister.co.uk/2009/05/19/napster_five_bucks_per_month_service/) on this new price structure, "the big downside is that the streaming music is available only on a PC or laptop". I'm guessing this is just ignorance on the part of The Register and that 5$ subscribers can still access via SB - but can anyone confirm?

byKnight
2009-05-20, 05:18
According to The Register's article (http://www.theregister.co.uk/2009/05/19/napster_five_bucks_per_month_service/) on this new price structure, "the big downside is that the streaming music is available only on a PC or laptop". I'm guessing this is just ignorance on the part of The Register and that 5$ subscribers can still access via SB - but can anyone confirm?

Yes. I signed up last night. After upgrading my SqueezeCenter to from 7.3 to 7.3.2 and installing the Napster plug-in, I can listen to Napster on my Squeezeboxen.

TiredLegs
2009-05-21, 12:04
If you sell a service below your costs (this is hypothetical as I have no idea what Napster's costs are) then you are not going to make up for it by increasing the volume of sales, or even by mooching sales from Rhapsody.
In the case of selling a service or an electronic product, the costs don't scale up directly with the volume of sales. For example, if you are selling software, the engineering costs stay relatively the same regardless of whether you sell a thousand copies or a million. It's quite possible that Napster could become more profitable just by increasing the number of subscribers to reach a critical mass, even if the average revenue per subscriber drops.

mortslim
2009-05-21, 12:39
From what I have read about the record industry's demands for royalties, it is based upon the number of times a song is played. The more times an internet radio station plays a song, the more money has to be paid to the royalty collectors (riaa, bmi, soundscan, etc.). I understand there are complex formulas that are still evolving based upon number of listeners, number of "channels" and total revenue, however song plays continues to be part of this forumula.

Thus Napster's costs are "variable", not "fixed". The more music Napster plays, the more it has to pay to the royalty collectors. (Motorcycle legend Jesse James, who started his career being a collector for Rick Rubin, co-head of Columbia Records, has a tatoo on the palm of his hands with the script "Pay Up Sucka").

Thus it is hard to believe that Napster can still make money by lowering the price of its subscriptions, if it is indeed below its costs. Since Best Buy owns Napster, maybe Best Buy just looks at Napster as a loss-leading marketing tool to (eventually) drive traffic to its digital music sales. I believe this is what Walmart is doing with its own music sales.

Since Rhapsody is not owned by any conglomerate (although it is its own mini-conglomerate with its venture with MTV), maybe this is indeed bad news for Rhapsody. I guess I just feel sorry for Rhapsody because it took the risk to pioneer this type of subscription format and now maybe it is threatened if indeed it can't meet this new challenge from Napster.

If it is Rhapsody that eventually "goes", then Napster may have a monopoly. Not good for the consumer if prices later rise. And as mentioned earlier, not good for Logitech, to the extent it depends on its own stake in its premium services.

TiredLegs
2009-05-21, 13:53
Napster's costs are "variable", not "fixed". The more music Napster plays, the more it has to pay to the royalty collectors.Napster's royalty costs may be variable with the number of tunes played, but: a) the company has many operating costs associated with it that are not directly variable; and b) the variability of royalties is based on the number of songs played, NOT the number of subscribers. Newer subscribers might be less frequent users than the existing subscribers, so even if total operating costs do go up, revenues and operating margin could both improve as well.

This move by Napster/Best Buy is a classic test of price elasticity. The downside risk is not because of increased royalty payments, it's that the number of new subscribers might not be enough to make up for the lower subscription fees.

mortslim
2009-05-21, 14:13
[QUOTE=The downside risk is not because of increased royalty payments, it's that the number of new subscribers might not be enough to make up for the lower subscription fees.[/QUOTE]

My opinion is that Rhapsody is going to face two risks going forward:

1. My understanding of the formula as to how the record industry is demanding royalty payments is that royalties will go UP as Napster increases its subscriber base; and,

2. As subscriptions increase, Napster won't be able to keep up with demand resulting in poor service. Just look at AT&T and its iPhone. Its network in general can't support the demand for 3g service from this phone. I see Napster facing stress on its servers causing an inability to deliver. And if it goes to a "cloud" service, it will have to pay increasing fees to the "cloud" provider. I really see this as a black-hole for Best Buy, just like youtube has become a cash-burner for Google.

Google has been trying for quite awhile now to make youtube self-sustaining however it has yet to create a viable model. Best Buy doesn't have the resources of Google and if Best Buy sees that Napster is dragging it down with no hope of a turnaround, it will cut it loose. The concern is that along the way, Rhapsody will burn out first, leaving no subscription service featuring on-demand songs, albums and artists.

If Napster succeeds, then great. I believe in capitalism. However I just have this dread that in the long-run this new model from Napster may hurt the whole subscription model for this type of service, leaving us with no Napster, no Rhapsody and nothing to take their place. I don't find the playlists offered by Pandora, et al to be an equal substitute for the on-demand experience I now get from Rhapsody (and I assume from Napster too).

autopilot
2009-05-21, 15:18
Well the market can't be that terrible. Other companies seem to be jumping in now, including start-up's Spotify, Nokia's new 'come with music' service and a new Napster style subscription service from Microsoft recently. There has also been rumours of Apple doing the same for a while too. I personally think the subscription model has just been slow to take off, but i do think it will ultimately work - it's just a mater of who will be left when it does. So maybe this a canny move by Napster to head of the increasing competition that starting to spring up now. Thats assuming this is a price war, we dont know what Napster's finances are like or what their long term game plan is - don't forget this is only for streaming - the ability to transfer music to off-line mobile devices does not seem to be effected by this announcement - that's where the money must be. They could lose money (and we are making a lot of assumptions here) on streaming revenue, but draw more customers to the downloads side. It might just be strategic change, rather than a price war or kamikaze attempt at rescuing some market share. I'm personally still quite positive about the subscription model - most people i speak to really love the idea, but too many people own iPods.

Goodsounds
2009-05-21, 15:30
My view is that internet music subscription services may be facing a situation not unlike the market for sat phones, sat radio, etc. These markets all have small cores of enthusiastic users who will pay whatever to get the service. But the business model ain't there because the market is too small. The barrier to growth isn't the price, but rather the limited attraction of the service that results in a too-limited market opportunity.

With all the alternatives available, I think the Napsters of the world are finding that it's hard to charge for something that most people find is equivalent to what can be obtained for free. Whether it is equivalent or not is not the issue.

My prediction is that most of the current providers will be gone in a few years. Ironically, there are some similarities between music (whether sold or streamed) and the now-struggling print media. In both cases, people thought the Internet would provide opportunities for new growth and revenue forms. It turns out instead to be an agent that breaks the historical business model altogether.

mortslim
2009-05-21, 15:48
Well I just hope that we're not headed back to AM quality "top 40" where every station is playing the same playlist.

autopilot
2009-05-21, 15:54
My view is that internet music subscription services may be facing a situation not unlike the market for sat phones, sat radio, etc. These markets all have small cores of enthusiastic users who will pay whatever to get the service. But the business model ain't there because the market is too small. The barrier to growth isn't the price, but rather the limited attraction of the service that results in a too-limited market opportunity.

I disagree, although not entirely. I think we are writing this off before its had chance to take off, which i think it will (and is beginning to, with all the new providers coming on board now in the last few months - are all these companies crazy?). All successful technology products start off with a small group of enthusiasts. The barrier has not been limited interest per-say, but heal dragging of the music industry and Apple's business methods, but i think these things are finally changing now. If the iPod supported unlimited music rental for a small monthly fee it would be an overnight success IMO. But people are switching on now and joe public is more tech savvy than ever before, people are demanding more than just what their iPods can do, it's just going to take a bit longer in this climate. We could have been having this exact same conversation about MP3 players 8 years ago. Thats not to say Napster wont go bust in the meantime, but we are making a hell of a lot of assumptions here! Maybe what we are seeing now is that the subscription model is not failing, but is really starting to take off now and Napster want to grab as much market share as they can, now the likes of Nokia and Microsoft are in on the action. There is another company that just opeded up a subscription service very recently (other than Spotify), but i have forgotten their name. So for a market thats going down the pan, a lot of companies have really started showing great interest.

Goodsounds
2009-05-21, 21:21
......are all these companies crazy?.....

Maybe yes, maybe no.

That happened once before in my lifetime, on a much much greater scale. During the dot com bubble it seemed like all the new ventures (and the people working and investing in them) were crazy. Turned out, 99+ % of them were indeed chasing ghosts and shadows.

As you say, time will tell.