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Napster going whole hop in marketing push

Online music company eyes subs market

Digital music company Napster is embarking on a $30 million marketing campaign focusing on new technology that allows users to take its million-plus song library on portable devices for $15 per month.

Service, dubbed Napster to Go, has been testing since September but is launching as the centerpiece of Napster’s offering. Company hopes users will respond to the value proposition of a low monthly fee to access a huge library of music, rather than paying 99¢ per song to Apple’s iTunes to download music onto an iPod.

But convincing consumers, who are used to paying a set fee to own music instead of renting it, will be the major challenge for Napster.

“Communicating the benefits of subscriptions is without a doubt our most important challenge,” said Napster CEO Chris Gorog. “But the opportunity is tremendous since digital music has not yet reached mass adoption.”

Company will spend $30 million over the next four months to market Napster to Go, starting with a Super Bowl commercial.

Apple has steadfastly refused to get into the subscription business, maintaining that users would rather own their music. So far, that view has proved compelling. ITunes is generating more than $1 million per day in sales, whereas Napster was making less than $2.7 million per month in subscription revenue as of Dec. 31.

Subscriptions generate significantly higher margins for online musicstores than a la carte downloads, however, and have thus been a focus for most iTunes competitors.

Portable subscriptions only became possible recently due to an upgrade to Microsoft’s Windows Media technology, which is used by most digital music companies other than Apple. It allows portable devices to automatically disable playback of rented songs unless users continue paying a monthly fee.

While the software has been available since the middle of last year, only recently have a significant number of portable devices that work with portable subscriptions come into the market, from manufacturers such as Dell, Gateway and Samsung.

Napster, which has yet to make a profit, will plunge further into the red to fund its new marketing initiative. But company recently raised more than $50 million in a private stock placement. Combined with the $80 million it made selling its software business in November, that gives it a comfortable cash cushion.

Competitor Cdigix, which offers online media subscriptions only on college campuses, is launching a similar subscription service.

Other companies, including Yahoo! and Microsoft’s MSN, are expected to follow suit in the next few months.

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