Napster Raises Estimates on Stronger Subscription Sales

by , 3:00 PM EST, March 3rd, 2005

Napster raised its fourth quarter revenue guidance Thursday by a million dollars, citing robust growth in its subscription service. The news sent shares of Apple plummeting, dropping as much as 7% earlier today in extremely heavy trading.

Napster said it expects revenue to come in at about $15 million for the quarter ending March 31.

"Since the launch of Napster To Go, we have experienced exceptional demand for all aspects of our business. Our new marketing campaign is already delivering strong returns by generating unprecedented interest in both our regular and portable music subscription offerings," said Chris Gorog, Napster chairman and CEO in a statement. "A positive reception to compatible MP3 players from iriver, Creative and Dell is also fueling demand."

Shares of Napster are trading up about 10 percent today, while Apple is trading down about 5 percent. Napster's announcement came just one day after Apple announced that it had sold 300 million songs to date, with one analyst saying he expects Apple will have sold 85 million tracks in the current quarter and could start reaping a steady profit from the iTunes Music Store in 2006.

The Mac Observer Spin:

If 85 million tracks is right, Apple will have posted revenue of about $85 million from the iTunes Music Store, compared to Napster's $15 million. Granted news that Napster is experiencing faster growth than it had anticipated is positive, but shares of Apple didn't jump after the company sold more songs in the first week of iTunes opening than it expected to sell in that entire month.

Not to mention, if the subscription model does prove threateningly popular, Apple could surely accomodate such a system with the iTunes Music Store and tap into an installed base of over 10 million iPod users, all of whom presumably already use iTunes and have the Store just one click away.