Napster loses subscribers

Napster's falling subscription base may be the first sign that the struggling company is ready for sale. On a conference call with analysts, Napster told anlaysts that its future was not as bright as previously thought and that it had lost about 7 percent of its subscriber base as it focused on promoting a new free Web site. Reuters repors that Chief Executive Officer Chris Gorog would not rule out a sale of the company. "We do not have our heads in the sand regarding an M&A (merger and acquisition) transaction. We continue to receive a lot of interest in the company. We will always carefully weigh any valuation alternative against the opportunity and risk associated with continuing as a stand-alone company," Gorog told analysts on a conference call. While facing the a growing prospect of a sale, The company said it was still looking for a "working business model"--a bad thing for the company's operations, the CEO acknowledged.

"Napster's still trying to find a working business model, which is bad from an operating standpoint. But we see an increased likelihood the company will consider a sale, especially since management mentioned it on the call," said Kit Spring, analyst with Stifel Nicolaus & Co Inc.

The company reported a loss of subscribers in higher education. As of June 30, Napster's total subscriber base was 512,000, including 4,000 university-paid subscriptions; however, excluding university, the number of paid subscribers grew 26 percent year-over-year.

Despite a rise in revenue, Napster reported a net loss of $9.8 million for the first fiscal quarter compared with a year-earlier loss of $19.9 million, according to the report. Napster's revenue increased from $21 million to $28.1 million.

by MacNN Staff