Online music service goes for Germany
Signaling it’s still a strong competitor in the digital music biz dominated by Apple, Napster is expanding into Germany and Monday closed a private placement of 7.1 million shares that will bring in an additional $52 million in cash.
Those funds, combined with the $80 million the company recently landed for selling its software business and the $20 million it had on hand as of Sept. 30, gives it a healthy cash cushion.
Napster said it plans to use its new funds primarily to market its Napster to Go service, which will allow users to take music they acquire via a monthly subscription, rather than on a pay-per-download basis like iTunes, onto mobile devices.
Napster also revealed it may use its growing cash horde for acquisitions. Many analysts have said the online music market is ripe for consolidation.
At the Midem music confab in Cannes, Napster CEO Chris Gorog told Daily Variety that expansion through acquiring other digital music services is “not out of the question” but added that for the time being, Napster is concentrating on building as fast as it can.
Gorog also said at the conference that Napster may offer a video subscription service, although no definite plans have been made.
Gorog expects the German service to launch before the end of this year and revealed that Napster will next expand into France.
Besides the U.S., Napster is already doing business in Canada and Blighty.
To expand its business, the company has focused primarily on subscriptions, which have bigger margins but have been thus far less popular than 99¢ downloads. As of Dec. 31, it had 270,000 paying subscribers, most of whom were paying $9.95 per month to access Napster’s library of more than 1 million tracks. Some 44,000 subs were paying a discounted rate as part of university programs.
Since the beginning of the year, when Napster became a public company focused solely on digital music, its stock has declined 15%.