Napster counters iTunes with new To Go service

Digital music service Napster LLC on Thursday announced the release of Napster To Go, a new Windows-compatible portable digital music subscription service that lets user move an unlimited number of songs from Napster to compatible MP3 players for a US$14.95 monthly fee. A $30 million marketing campaign kicks off Sunday during this year's Super Bowl, and is aimed squarely at Apple's iTunes Music Store.

"Napster To Go provides infinitely greater value and is much more exciting than the iTunes pay-per-download model," said Chris Gorog, Napster's chairman and CEO, in a statement.

Napster users can fill and refill compatible MP3 players with their choice of tracks, but must plug, or dock, the device into their PC at least once every 30 days into order for Napster to verify they are still paying customers. If users stops paying their monthly subscription fee, the music will no longer play on the device.

Napster's marketing efforts for the new Napster To Go service includes strategic alliances with major manufacturers of Windows-compatible digital music players like Creative, Samsung and iRiver. Napster noted that each of those companies will have Napster To Go-compatible MP3 players starting Sunday.

Apple has often stressed that its a la carte download service allows users to own their music like they do when they buy a CD. Napster will attempt to convince users that for the price of one CD per month, they'll have access to as much music as they want, and with a catalog of over 1 million songs, which gives them a lot more music to listen to, said Adam Howorth, Napster's spokesman in the U.K.

The iTunes Music Store remains the most popular digital music download service in the world today, with an estimated 70 percent market share for legal music downloads. By comparison, a report from analyst firm NPD Group published in 2004 showed that Napster had about an 11 percent market share. iTunes has a wider reach -- Apple now operates the iTunes Music Store in 15 countries, and recently said that it has sold more than 250 million songs since launching the service; Napster operates in the United States, Canada and the United Kingdom.

Apple also leads the market with its iPod and iPod mini MP3 players, the only digital music players that support the Digital Rights Management (DRM)-protected music sold through the iTunes store. By comparison, Napster doesn't focus on hardware music players -- instead, it partners with major MP3 player makers and also has a long-term partnership with electronics superstore chain Best Buy. It also participates in Microsoft's "Playsforsure" branding program.

"In some ways, it's probably unfair to compare Napster and other subscription services with Apple iTunes as one is a programming experience and the other is a retail experience," said Mark Mulligan, a senior analyst with Jupiter Research in London. "One key difference is that Apple doesn't have to educate people, whereas that's something Napster and any subscription service will have to deal with."

Napster has made an important step by making its music portable with some MP3 players, Mulligan said. "This makes the Napster service more appealing for current users and may also be the tipping point for some of those who are seriously considering getting a digital music player."

Apple's one-two punch has yielded remarkable results for the company -- for its last reported fiscal quarter, Apple attributed a combined $1.388 billion of its $3.490 billion in revenue to sales of iPods and music sold through the iTunes Music Store. Napster does not routinely reveal download rates for its service, though the company did recently indicate that it increased its number of paid subscribers sequentially by 50 percent for the quarter, exiting calendar year 2004 with 270,000 paid subscribers.

Updated 12:00 PM 02/03/05: Added comments from Napster spokesman and analyst and details about how Napster To Go works.

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