May 12, 2005
Napster Strikes Back
After their stock has gotten absolutely crushed from the announcement of Yahoo's new $6.99/month subscription plan, Napster struck back by saying consumers will hate being bombarded by ads using the Yahoo service. That's kind of a weak response, when even at $15/month Napster lost over $24 million in the last 3 month quarter. How are they going to do now that Yahoo is offering the same product for over 50% cheaper? Game, set, match. You're done.“Napster invented the portable sub model, and we believe it’s the future of the music buseiness. We expected some desperate measures to catch up with us, but we think there’s been a significant over-reaction to the arrival of a new competitor. We are excited to contine competing against any new entrants. Companies that price subs below cost will have negative gross margins and have to rely on advertising to make up the difference. From our perspective, we don’t believe consumers will be excited to pay for something and be barraged by advertising. If they reject an ad-supported environment, Napster will remain a haven…”
