p2pnet.net News:- iTunes owner Steve Jobs has admitted his Apple music store is a loss leader and said he’ll be happy if he gets his $$$ back.

“Most of the money goes to the music labels,” Jobs says in a Macworld story here. “We’d like to break even, make a little money. That’s why, when I look at Roxio Napster and all these other companies, I think they’re spending money on a business that can’t make money.”

Nonetheless, the world’s press has been singing the praises of Big Music’s online music stores, saying they’re terrific and that they’re revolutionizing the music industry, saving Big Music’s bacon in the process.

Neither is true. But that’s beside the point.

The Jobs quote dates back to last November, and it’s ironic that even then, Jobs should have mentioned Roxio an example of a company, “spending money on a business that can’t make money”.

The Napster castrato should be sitting pretty given that, thanks to the RIAA, it’s now locked into the system at Penn State and Rochester universities with even greater things to come - such as becoming part of the deal for anyone buying Hewlett-Packard computers.

But it would appear things aren’t looking too rosy after all.

Says the Mercury News’ Dawn C. Chmielewski, “in the days leading up to Napster’s re-launch in late October, HP suddenly - and without explanation - returned Napster’s $250,000 check and canceled the agreement to install a link to Napster’s online music service on its computers.

“Worse, in January HP announced a surprise partnership with Napster rival Apple Computer to feature the iTunes Music store on HP computers and sell Hewlett-Packard branded iPod music players.”

Apparently, no one involved had anything to say, but the deal’s collapse, “was one of several setbacks since the reintroduction of Napster, the pioneering song-swapping renegade, as a paid music service,” says Chmielewski.

Napster II is losing money and it would seem Mike Bebel is gone as Napster’s president, as are Lawrence Kenswil, “the lone board member representing Roxio’s largest shareholder, Universal Music Group,” Alex Luke, “the long-time vice president of music programming, who left shortly after the service’s launch to join the rival Apple service,” and Roxio’s chief financial officer, Elliot Carpenter, “who resigned for family reasons”.

Moreover, the Mercury story goes on, “On Wednesday, Roxio began laying off people at its Napster division. A Roxio spokeswoman said the company was ‘eliminating redundancies in the organization’ but declined to say how many people lost their jobs.”

Napster II lost $15 million in its first two months of operation and the most recent sales data reported to two of the major music labels show Napster with an estimated 12% share of the download market, compared to Apple’s 56%, Chmielewski says .

But, “Perhaps more telling is the state of Napster’s subscription business, which is widely perceived as more lucrative than selling 99-cent songs. That’s especially key for a service like Napster, which unlike Apple, derives no income from the sale of a branded music player.”

In an interview with the Mercury News, Napster II boss Chris Gorog said investors recognize the inherent value of the Napster brand and are patient enough to wait for the services to gradually attract customers and become profitable. They don’t expect an overnight sensation, he said. Indeed, Napster raised $22.5 million as recently as January.

“Differences over strategy have created tension with some music label veterans who came to Roxio through its acquisition of the Universal-Sony Music online music venture, pressplay,” Chmielewski adds.

“Indeed, the new Napster appears to be plagued by the kind of management turmoil that marked the old Napster.”

Indeed - especially when you consider all the problems BMG had with its unlimited access, subscription-based digital music distribution service when Napster’s still-warm corpse was first dug up …

This entry was posted on Saturday, February 21st, 2004 at 5:14 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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