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Sub growth spurs revs for Napster

Paid subscriptions jumped 50% in third quarter

Digital music company Napster saw a spike in revenue last quarter thanks to healthy sub increases, but high costs kept its net loss flat.

Revenue was $12.1 million last quarter, ended Dec. 31, the third on Napster’s fiscal calendar, up 30% from the previous quarter. Net loss narrowed just slightly to $16.4 million.

Company launched its online musicstore in the middle of the third quarter 2003, when it was primarily a software provider, making year-to-year comparisons difficult.

Growth was driven primarily by a 50% jump in paid subscribers during the quarter to 270,000. About three-quarters of Napster’s rev comes from monthly subs, with the rest generated by its small pay-per-download offering.

Based on third-quarter trends and high hopes for its portable subscription service, which Napster launched last week, company raised its revenue guidance for the current quarter to $14 million.

While it didn’t provide net income guidance, losses are expected to widen as Napster is spending $30 million over the next four months to promote the Napster-to-Go portable service (Daily Variety, Feb. 3).

After falling 9% to $7.86 before earnings were reported, Napster shares were up 4% on Wednesday in after-hours trading on the better-than-expected guidance.

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