If you’re looking to download music, legally at least, your choices have never been better; the number of such services seemed to expand almost daily. It could be, however, that the salad days of iTunes Music Store wannabes, or at least one fairly prominent wannabe, are numbered.
The San Jose Mercury News is reporting that the newly reborn Napster is hemorrhaging money and top executives alike, despite being the #2 music download service. The newspaper also said that the company lost the deal with HP to provide a music link on HP computers, a deal that Apple eventually won. According to the Mercury News, HP backed out of the deal not long before it the was announced that Apple would provide music players and services to HP. From the article:
But in the days leading up to Napster’s re-launch in late October, HP suddenly — and without explanation — returned Napster’s $250,000 check and canceled the agreement to install a link to Napster’s online music service on its computers. Worse, in January HP announced a surprise partnership with Napster rival Apple Computer to feature the iTunes Music store on HP computers and sell Hewlett-Packard branded iPod music players.
Neither HP nor Napster’s parent company, Roxio, would comment on the soured deal, whose details were confirmed by sources familiar with the agreement. But its collapse was one of several setbacks since the reintroduction of Napster, the pioneering song-swapping renegade, as a paid music service.
Napster is losing money, and top executives have left the company, including its president, chief financial officer, vice president of programming and head of corporate communications as well a key board member. On Wednesday, Roxio began laying off people at its Napster division. A Roxio spokeswoman said the company was “eliminating redundancies in the organization” but declined to say how many people lost their jobs.
The Mercury News also reports that Napster lost US$15 million in the its first two months of operations, and that the service has some 12% of the market. According to the article, Apple has 56% of the market, while Apple claims 70%. You can find much more information in the full article at SiliconValley.com.
The Mac Observer Spin:
We don’t want to prematurely predict the demise of Napster, but it doesn’t take a pair of shades to peek into the company’s future.
If Napster is indeed the second largest download service, then the other services must not be doing well at all. Napster’s high profile launch might suggest that it has a higher overhead than, say, MusicMatch, whose download service is subsidized by rebranding deals with companies like Dell, but still, this doesn’t offer a rosy outlook for the industry as a whole.
The ironic thing is that Steve Jobs warned all of these would-be competitors from the beginning. When the iTMS was first launched, he said that doing a download service was hard to do, and more recently, he specifically said that there was no direct profit to be made from music downloads, at least not now. As the Mercury News points out, Napster’s lack of a music player hurts that company, while profits from the iPod make the iTMS worth while for Apple.
iTMS, with its Pepsi promotion, the hot selling iPod, and new iPod mini, seems to be the service of choice at the moment, and perhaps for the immediate future. iTMS’s music inventory continues to expand, and Apple is making it as easy as possible for people to buy or give music by selling prepaid cards in Target. Apple seems to be doing all the right things to ensure that the iTMS remains the digital music leader.
Is there really room for other download services? Of course. Even if Napster bites the dust, which we doubt will happen, other smaller services, like Magnatune, will continue to find an audience. Certainly services that use the Windows Media format are likely to continue, especially once Microsoft throws its weight behind a Microsoft-branded service. But at Apple, for now at least, it must feel great to be a market leader again.