Napster, Still Struggling, Puts Itself Up For Sale

from the shocking dept

Napster's never been able to regain its cachet in the music-download business after going legit, despite a few different owners, so it's hardly surprising to see the company essentially put itself up for sale. While the company's CEO says there's been a lot of interest in partnerships or joint ventures, Napster's struggles illustrate the reality of the music download business as one where it's awfully hard to make money. While Apple's sold over a billion songs through the market-leading iTunes Music Store, those songs were loss leaders, intended to drive iPod sales and to lock users in to the device. The CEO also says that its new products are getting "traction" -- but they don't look to be helping the company turn a profit, and it said it's losing paying subscribers as it promotes its free service. There's nothing here, and nothing in the company's history, to suggest it can be successful. Perhaps the best thing for the company and its shareholders is to grab whatever cash it can in a buyout, playing off the growing interest in mobile music download services by selling out to a company in the mobile space that can ditch the current Napster offerings and salvage its backend into something useful -- with Ericsson, a company already partnered with Napster for mobile music, a prime candidate.

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  1. identicon
    Brian Weatherley, 19 Sep 2006 @ 1:24pm

    Loss Leader

    In marketing, a loss leader is an item that is sold below cost in an effort to stimulate other profitable sales. If we have no data on actual cost per song, it is difficult to say.

    Loss leaders are an expense, just like advertising. If a company declares a product to be a loss leader, they are really the one in the best position to determine that.

    I suppose close analysis of quarterly statements can determine if profit is generated from the direct sales of songs. But the cost of a product is the sum of all expenses involved in moving it. So for it to be above cost, and therefore not a "loss leader" one must take into consideration all expenses associated with the product.

    Also keep in mind that some expenses remain generally static when compared to volume sales of a product. So there would also be a definite volume requirement for a certain product to meet before it becomes a "profitable" item.

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