October 9, 2003 9:41 AM PDT

Napster launches, minus the revolution

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A brand-new Napster unveiled its digital face Thursday morning, a year after the once-proud file-swapping service was sold in pieces in bankruptcy court.

The new digital music service, owned by CD- and DVD-burning software company Roxio, bears little resemblance to the original anarchic Napster. In its place is something like a cross between Apple Computer's iTunes download store and the Pressplay monthly digital music subscription service Roxio purchased not long after buying the Napster name for about $5 million in court.

Like an increasing number of rival digital song stores, the new Napster will offer 99-cent downloads of single tunes to anyone who downloads the free software. People also can pay about $10 a month to listen to an unlimited numbers of streams and downloads, although subscribers will be more limited in what they can do with those downloaded songs.

Roxio is betting that the Napster brand name and the familiar earphone-wearing kitty logo will be enough to win back people's attention, followed quickly by their wallets. Analysts say the company is likely to get a quick look from many nostalgic online music lovers, but building that initial curiosity into a profitable business will be a long-term task.

"A lot of people will stop by, just so they can accuse everybody of being sellouts. That will be a challenge," said Mike McGuire, an analyst with GartnerG2, a division of the Gartner research group "But at the same time, it is a significant set of brand attributes. If they hit the right chord, they can make it work."

What that "right chord" is for the online music market remains to be seen. In the wake of Apple's iTunes launch, a myriad of companies launched into the song-selling business, their ambitions fired by newly flexible licensing terms from the major record labels and increasing interest from consumers.

iTunes sold nearly 10 million songs in its first four months of operation, serving just the relatively small Macintosh market. Its Windows version of the service is expected to be unveiled next week. MusicMatch and BuyMusic are each operating download services that are aimed at Windows users. Sony has announced that it will launch a service next year. RealNetworks said it will add a download component to its Rhapsody service, and companies such as America Online and Amazon.com are expected to throw their rings into the hat before long.

Napster, like RealNetworks, is betting that the subscription model--in which consumers have limited access to an unlimited quantity of music without paying by the song--will resonate with a sector of the music market that is used to getting all the music it wants for free.

"Napster invented online music, and we are reinventing it with Napster 2.0," Chris Gorog, chief executive of Roxio, said in a statement. "Napster 2.0 is unequivocally the most complete and comprehensive music service in the world."

Roxio had original Napster creator Shawn Fanning, who served as a consultant on the new service, on hand for the unveiling.

"I've used Napster 2.0, and it's really great," Fanning said. "It has community features and tools for discovering new music that were important parts of the original Napster experience."

The hybrid per-song and subscription model will give the new service valuable room for experimentation, analysts said. Indeed, metrics released by RealNetworks' Rhapsody service Monday indicated that its unlimited streaming service is gaining some traction, despite the greater attention that's being paid to download services such as iTunes. Subscribers listened to more than 21 million songs in the month of September, RealNetworks said, representing a 30 percent jump in usage since August.

Napster is going a step further than some other services, adding direct relationships with hardware makers. Samsung, for example, is co-marketing a line of digital music players with the new Napster. Roxio also announced that the Napster software will be preloaded on some new Gateway PCs.

All this is still part of a trial stage, analysts said. Although the music services boast catalogs of hundreds of thousands of songs, critical gaps--including a lack of songs from such standbys as The Beatles and Madonna--will keep some consumers from switching wholly to the digital realm. Nor do any of the services offer sound quality that's entirely comparable to a CD, although most are now of a high quality.

"This isn't the end," GartnerG2's McGuire said. "Napster and all the others will have to be committed to constantly tweaking and bit-twiddling the model."

The Napster software will officially launch on Oct. 29, the company said.

 

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