Napster Offers Enthusiastic Revenue, Subscriber Snapshot

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Napster, the music streaming service, has reported better than expected quarterly revenues and an aggregated subscriber tally of 830,000. The company stated that it now anticipates quarterly revenues of $28 million, which is better than the street estimate of $26.6 million. Napster Chairman and CEO Chris Gorog announced that the company has successfully integrated over 225,000 AOL Music Now paid subscribers onto the Napster service, and that it enjoyed healthy organic growth adding another 40,000 net paid subscribers during the quarter.

Gorog further noted that Napster has surpassed on-demand rival Rhapsody in terms of overall subscribers, though Rhapsody parent RealNetworks has not disclosed subscriber figures for its service. On an aggregated level, RealNetworks recently offered a subscriber tally of 2.25 million, a figure that traverses Rhapsody, premium radio services, and mobile subscribers powered by its WiderThan unit.

Napster’s acquisition of AOL Music Now helped to transform the subscription picture, positioning the company to eventually surpass one million subscribers. In January, Napster paid $15.6 million for the then-350,000 base, just under $45 per head. However, continued losses may keep investors concerned, despite the revenue and subscriber gains.

Napster’s deficits have traditionally been heavy, though the company may be containing the bleeding somewhat. During the fiscal third quarter ending December 31st, the company lost $9.5 million, which was a narrower loss than year-ago dips of $17.0 million. Meanwhile, cash burn levels will be important to watch. In the same period, the company finished with a cash account of $80.9 million, down from $90.3 million the year earlier and a drop of $14 million over a six-month period. Napster shares most recently landed at $4.30, which is part of a relatively lukewarm reception on the street.

Napster’s success in the first quarter of 2009 is attributed to its ability to integrate AOL Music Now subscribers onto its platform, which resulted in the addition of 225,000 subscribers to its existing base. The acquisition of AOL Music Now put Napster in a good position to surpass one million subscribers. However, Napster has been struggling with heavy losses, which may still be a cause for concern among investors despite the recent gains in revenue and subscribers.

The company has been working hard to contain its losses and improve its financial position. During the fiscal third quarter ending December 31st, Napster managed to narrow its losses to $9.5 million compared to $17.0 million the previous year. However, the company’s cash account has been decreasing steadily, dropping by $14 million over a six-month period.

Despite the challenges faced by Napster, the company has managed to surpass its on-demand rival Rhapsody in terms of overall subscribers. Napster Chairman and CEO Chris Gorog stated that the company has 830,000 aggregated subscribers, which is more than Rhapsody’s parent company RealNetworks. RealNetworks has not disclosed subscriber figures for its service, but recently offered a subscriber tally of 2.25 million, which includes Rhapsody, premium radio services, and mobile subscribers powered by its WiderThan unit.

Napster’s success in the first quarter of 2009 is an indication that the company is moving in the right direction. However, investors are still concerned about the company’s continued losses and cash burn levels. The company will need to continue working hard to contain its losses and improve its financial position if it hopes to maintain its recent gains in revenue and subscribers. Nonetheless, Napster’s recent success in surpassing Rhapsody in terms of subscribers is a positive indication that the company is making progress in a highly competitive market.