Napster and MP3, together again
The original Napster didn't invent the MP3 format, but it did more than any other software company to popularize it. That, of course, was its undoing. Now, almost seven years after Napster went under, the company that bought the its name in a bankruptcy auction is making its first foray into selling MP3s. It's late to the party, but at least it's making a big entrance -- the new Napster has more than 6 million MP3s for sale, the largest collection of any online retailer (excluding those with dubious licenses). Like Amazon.com, it has MP3s from all the major record companies. But Napster Chief Operating Officer Christopher Allen says his company's selection is about three times the size of Amazon's because of the extensive offerings from indie labels and artists.
The move isn't likely to catapult Napster into the iTunes Store's orbit. Apple's dominance starts with the fact that its store is integrated into one of the most popular pieces of computer software on the planet. Amazon, meanwhile, has a larger user base and lower prices (89 cents per track). But the new MP3 store does give Napster a way to do at least some business with the, oh, 200 zillion people who own iPods. Until now, none of its products worked with iPods -- its music subscriptions and 99-cent downloads are wrapped in Microsoft's DRM, which Apple doesn't support. In fact, you couldn't buy a downloadable track from Napster without installing its software, which doesn't run on Macs. Ick. As of now, the company is no longer selling DRM-wrapped tracks, reserving the electronic locks for its subscription service (where it automatically renders the all-you-can-eat downloads unplayable if you stop paying your monthly fee). The store has its own site -- www.napster.com/store -- and is also integrated into Napster's free web-based player, where people can listen to songs in full without charge before deciding whether to buy. As a bonus, most of the MP3s are encoded at 256 Kbps variable bit rate, a high-quality approach.
Allen said Napster still expects to make most of its money off subscriptions, which today account for 80-80% of its revenue. The MP3s may persuade more people to sign up for the unlimited monthly plan, but the iPod incompatible problem remains a huge hurdle on that front. More intriguingly, Allen said, today's step could be the first move toward a sort of subscription hybrid -- unlimited streams and tethered downloads combined with a certain number of MP3s for a flat monthly fee. In other words, kind of like what Nokia is trying to do with its "Comes with music" program. "It’s probably going to take a couple extra steps to get there," Allen said. "I think it will be more of an evolutionary process.... At least directionally, we're headed in the right direction."