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Napster plays blame game
Adam Pasick in New York
MARCH 01, 2006
NAPSTER'S chief executive has blamed technical glitches from Microsoft and music player makers for hampering his company's ability to compete with Apple's iTunes music service.
"There is no question that their execution has been less than brilliant over the last 12 months," Napster chairman and chief executive Chris Gorog said at a New York conference.
"Our business does rely on Microsoft's digital rights management software and our business model also relies on Microsoft's ecosystem of device manufacturers," he said.
Microsoft had to grapple with the complexities of dealing with a number of different services and device makers, Mr Gorog said.
"It's a lot more complex to get organised properly than it is to build one device and one service as Apple has done," he said. "It's always been painful at the introduction of new technologies. But it always takes shape like it's done in the past."
Mr Gorog, whose company has one of the best known names in the business but has failed to put a dent in Apple's market share, argued that eventually the "Microsoft ecosystem" and its Windows Media format would prevail, with new devices on the way from firms like Samsung and Sony.
"Ultimately, the consumer electronics giants ... are all going to come to this Windows Media party," he said. "This is really going to be the ubiquitous format."
Apple's seamless combination of music player and download service has not yet faced a significant challenge from devices made by groups such as Samsung, Sony or Creative, or from services such as Napster or RealNetworks' Rhapsody, which offer monthly subscription plans using a Microsoft format.
"Apple set the bar ... it just worked," a spokesman for RealNetworks said. "That's one of the things - it's hard to make it easy and easy to make it hard."
Napster, which shares a brand but little else with the free service that originally shook up the music industry in the late 1990s, has struggled to make its case with investors and consumers, Mr Gorog said.
"We have not been as successful as we might in articulating the real value of this business," he said. Napster's market capitalisation is about $US160 million ($215 million), but it has cash assets of about $US112 million, leaving it with a relatively small enterprise value.
The company's third-quarter net loss widened to $US17 million for the three months to December 31, from a loss of $US12.8 million a year earlier. Revenue rose to $US23.5 million from $US12.1 million.
Napster has faced persistent speculation that it may be bought by a larger rival - possibly a device manufacturer or a telco - but Mr Gorog insisted there was no sale in the works, despite numerous approaches.
"We have not ever sought any sale of our business. But we have received many enquiries from around the world and I think we well continue to receive many inquiries," he said. "We will do a deal if and when we feel it's in our shareholders' interests."
The company was working on an advertising-funded music service hosted at Napster.com. It was also developing a platform for mobile phones in partnership with Ericsson, but so far it has only stuck one deal with a mobile phone carrier.
Mr Gorog insisted that despite Apple's dominance, the competitive landscape would be far different "in the next 12 to 24 months".
"A lot of people following this story in the media and investors ... are really focusing on the tree and are not stepping back and looking at the forest. To date, only 5 per cent of (music) sales have migrated digitally. We are in the very, very early days of this."
Reuters
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