For the last fiscal quarter, online music service Napster has been focussing on offering free music via its Web site—but the tactic seems to have had an impact on its core business. In a time when the popularity of digital music services is exploding, the company’s quarterly numbers indicate Napster subscriptions have declined seven percent. Napster also reported a net loss of $9.8 million for the quarter, although its overall revenues increased year-to-year from $21 million to $28.1 million.
Napster CEO Chris Gorog tried to put a positive spin on things, saying that he expects Napster’s free offerings will increasingly shift customers over to paid subscriptions. “We recently implemented significant changes to Napster.com to create the optimal balance between our free and paid offerings, which should improve the conversion from free users to paid subscribers. We expect that these changes will result in substantial new subscriber additions during the second half of our fiscal year, which is typically our strongest sales season,” said Gorog in the company’s statement.
Part of the subscription decline may be attributable to summer, as the majority of Napter’s university subscribers drop off the service in summer months. As of June 30, 2006, Napster claimed a paid subscriber base of 512,000 users, which represents a 26 percent growth in subscribers year-over-year, excluding university users. And it might be a good thing Napster isn’t counting university subscription in quite the same way as other paid subscribers: a recent report in the Wall Street Journal indicates student-oriented music subscription services offered by universities aren’t all that popular with students, who dislike the inconvenience and not being able to take their music with them when they leave school.
