They provide the service for free to anyone who wants it, and then they spend what must be many many thousands of dollars defending themselves. Whence comes all this money? What am I missing here?
-Ed
They provide the service for free to anyone who wants it, and then they spend what must be many many thousands of dollars defending themselves. Whence comes all this money? What am I missing here?
-Ed
“How does Napster make money?”
Volume! Volume! Volume!
No, seriously though.
-Ed
Ummm… Napster doesn’t currently “make money” (how bourgeois!) except for the millions raised from venture capitalists and partners on the promise of a brighter more profitable tomorrow. It’s a great idea and has allowed me access to tunes I would probably never otherwise have gotten. I would have paid a reasonable fee for the service but between Napster’s clueless hubris and the record companies panicky greed it remains to be seen if it will survive in any form.
It is strange that they never even ran banner ads while you’re waiting for your downloads.
I guess they were hoping that with enough volume someone would buy the site for the advertising potential, but you’re right it still seems stupid.
Think how much they could have made selling portable MP3 players to people who don’t live in towns and buy electronics by mail all the time. Also fan gear, posters, all sorts of derivative markets.
I found out little bits of things from the horse’s mouth, but don’t have time to dig right now.
Tell you what, I’ll give you a link, but you’ll have to promise to tell us if you find out anything more substantial.
http://www.napster.com/pressroom/
Company Profile
Overview
Napster is the world’s leading file sharing community. Napster’s software application enables users to locate and share media files from one convenient, easy-to-use interface. It also provides media fans a forum to communicate their interests and tastes with one another via instant messaging, chat rooms, and Hot List user bookmarks.
Founded: May 1999
Number of Employees: 50
Funding
Napster, Inc. recently closed a $15 million Series C venture capital funding round. The round was led by Hummer Winblad Venture Partners, with additional investments from Angel Investors LP and other existing investors. As part of the investment in Napster, Hummer Winblad partners Hank Barry and John Hummer joined the Board of Directors and Hank Barry assumed the role of interim CEO.
The reason that the big (read basically all of the) record companies don’t get behind Napster and just demand that it charge $20 per month or something is that they’re aware that this still would not equal the amount of money they’d be losing.
CD sales would plummet to horrendous levels, now that it’s perfectly legal, and as CD burners and portable MP3 players (and those in cars) continue to drop in price. I think Napster and BMG proposed setting aside 1 billion USD for the larger companies over the next few years, which was immediately scoffed at. They gross something like 4 times that per year, so that’s like promising a prosthetic arm if I can just chop the real one off for fun.
The big 5(?) are waiting until they feel confident that they can watermark songs so they cannot be digitally copied, forcing everyone to live with making analog tape dubs if they want to make backups or give them to their friends. (This last bit is, and I don’t care how many times people argue with me on this, illegal. Look at the warning and READ it.)
So the biggies want to sue Napster out of business and wait for technology to catch up so they can all agree to liscence their material to places like emusic.com. With the reduced costs of physically copying, shipping, storing, and taking returns on music, I’m sure there’s a price they can find at that point that will make them enough money.
Um, as a teacher of the SAT II Writing, I’m embarrassed. That should be *license".
But atleast I didn’t write the story on the Wednesday Cardinal game:
"Now the Cardinals head to Houston with a win and piece of mind. "
Makes you shudder.
Isn’t it interesting, if Napster is SO popular, and being used by MILLIONS of people, that a record number of albums were sold last year? The recording industry has posted major gains in sales in the last two years. Could this be attributed to Napster? If not…there’s sure no DECLINE in purchasing due to Napster.
Jman
*Originally posted by Et tu *
**It is strange that they never even ran banner ads while you’re waiting for your downloads.I guess they were hoping that with enough volume someone would buy the site for the advertising potential, but you’re right it still seems stupid.
Think how much they could have made selling portable MP3 players to people who don’t live in towns and buy electronics by mail all the time. Also fan gear, posters, all sorts of derivative markets. **
So they’re stupid not to be the giant capitalist marketing money-grabbing corporation they could be? Maybe that’s not what they want - it’s not the be-all-and-end-all and it’s not everyone’s Ultimate Goal.
But then, maybe they would do, but the complicated legal issues are holding them back. Do a search here on “napster” and i’m sure you’ll find plenty of people who’ve asked the same question and argued about the same points.
Fran
*Originally posted by Francesca *
So they’re stupid not to be the giant capitalist marketing money-grabbing corporation they could be? Maybe that’s not what they want - it’s not the be-all-and-end-all and it’s not everyone’s Ultimate Goal.
But then, maybe they would do, but the complicated legal issues are holding them back. Do a search here on “napster” and i’m sure you’ll find plenty of people who’ve asked the same question and argued about the same points.
Fran **
Okay, moderator, please.
It took a total of 9 replies for this to turn into an argument. For the record, Francesca, I did do a search here on Napster, and I couldn’t find any discussion about the question that I asked. Allow me to rephrase that original question:
Given that I couldn’t possibly give less of a crap whether what Napster is and does is illegal, hurtful or just plain wrong, I’m curious, from a totally disinterested perspective, how it has come to be that they seem to have so much money at their disposal.
The venture capitalist model was given to me by a lawyer friend of mine, and appears to be the closest thing to a logical explanation. Even so, are these investors on crack? Is there any viable way to look at this service and believe for even a second that somehow, somewhere down the road, it will become profitable at all, let alone profitable enough to sink millions into it?
I cheerfully invite anyone with opinions on this topic to start a new thread, somewhere else.
Conspiracy theories, however, are welcome.
-Ed
Venture capitalists put up money in the hope they’ll get a big return for their investment. It’s sort of like playing the slots, though the slot machine takes a lot more than a few quarters to pay off.
The thinking in the case of Napster was probably, “They have millions of users; that’s bound to be profitable.” Since it was a given that any Internet business was going to be a big success (at least, until recently), people lined up to give them money. The shaky legal ground was not a consideration.
What no one seems to have noticed was that for Napster to be profitable, it would have to be getting income from somewhere. The only sane options would be for it to be a subscription service, or for it to be selling ads. But the common wisdom now is that Internet ads don’t work (I’d argue that the standards they’re using – click throughs – is highly unrealistic; all advertising is a failure if you assume it has to force people to immediately run out and buy the product in order to succeed). That leaves subscription, which probably won’t succeed. Neither case will get the returns the venture capitalists would like.
Bottom line: look up “tulipmania,” “The Mississippi Bubble,” or “Extraordinary Popular Delusions and the Madness of Crowds.”
The idea was that Napster would become a internet version of those mail order CD clubs. (BMG/ColombiaHouse) eg You pay 20$ a month to download 10 CDs and then Napster pays the record company fees out of this. This would be just like the mail order club, but the charges would be less for the customer because the customer pays production, shipping, storage, etc… by using the internet to accomplish those tasks.
There was no logical reason for the record companies to say OK to mail order CD clubs, but slam a digital internet version of the same thing.
There was no logical reason for the record companies to say OK to mail order CD clubs, but slam a digital internet version of the same thing.
Because the mail order CD club isn’t making a copy of the CD, or, if they are, they pay the record company for the privilege. If the CD club were burning CDs without permission, the copyright holders would go after them, too.
Napster is making copies without permission of the copyright holders. That’s a violation of the law, and always has been.
[QUOTE]
*Originally posted by RealityChuck *
**
There was no logical reason for the record
Napster is making copies without permission of the copyright holders. That’s a violation of the law, and always has been. **
Minor nitpick:
Napster is NOT making copies of anything. They are merely providing space for mp3’s and a search engine to find what you are looking for. Their end-users are deciding what to put on there. This loophole (which appears to be closing), is what’s allowed them to stay operational this long.
As for the OP, like most “new economy” companies, they don’t make any money, and probably had no real idea or plan on how to ever turn a profit. The M.O. for these types of companies was to get your idea out there before someone else does and worry about how (or if) you could actually make money later.
There’s a start of some money hinted at here:
http://dailynews.yahoo.com/h/nm/20010402/en/music-prince_1.html Presumbaly these artists pay good money for the Promotion.
excerpt from Yahoo daily news report
Prince to promote new song on NapsterBy Derek Caney
NEW YORK (Reuters) - Rock legend Prince plans to premiere a new song on Napster (news - web sites) on Friday, becoming one of the best-known artists to embrace the controversial Internet song-swapping service as a means of promotion.
Prince, whose hits include
When Doves Cry,''
1999’’ and ‘‘Cream,’’ said Monday that Napster users will be able to copy and share his new song ``The Work - Pt. 1’’ free of charge and will be offered a link to the performer’s music subscription service.The song is slated to be released later this year on Prince’s forthcoming album ``The Rainbow Children.’’
Earlier this year, Dave Matthews, whose hits include ‘‘Crash’’ and
Ants Marching,'' also promoted his single
I Did It’’ on Napster, which allows Internet users to copy songs from other people’s computers for free, in many cases without the permission of the artists, labels and publishers.
:
:
Also, there are ads running at the side-bar pages of the Napster site, and on their message board. Since it’s such a targeted audience, they must be able to get more money than most sites.
[Moderator watch ON]
Just a reminder, folks, this is General Questione here. Granted that Napster is a topic that lends itself readily to debates, that’s not what this thread is about. The OP is asking a factual question about Napster, and as long as we stay on that topic, we should be fine.
I do seem to recall seeing this same question asked once before, but I’m not going to try to search for it now.
Just found some more sources of revenue.
http://www.napster.com/help/win/faq/index.html#co-1 (information is sort of buried. Search for the word “money”)
[ul][li]They sell music at a site called http://cdnow.com/[/li][li]They sell ads for their music promotion pages http://artist.napster.com/[/li][li]They sell ads for their website and message board.[/li][li]They sell ads on their Featured Music Update newsletter.[/li][li]They own a huge mailing list, so they should be able to make money from that, although I personally have never gotten a music ad from any source and I’m on their list.[/li][/ul]
As to being more specific, they don’t want to say. Here’s their official answer:
from Napster link above
General Company Information
Q: How does Napster make money?A: Napster, Inc. has not chosen to make its business model public at this time. Napster, Inc. is a privately-held company.
Q: Can I get a T-shirt or a sticker?
A: We are not currently distributing any Napster merchandise through retail channels. But keep an eye on our homepage for updates.
aubries
I’m going to take a swing at answering the OP, hopefully with out starting a fight. The downside is that I don’t know how napster planned to make money (right now, they don’t make any), but I’ve got a pretty well informed guess or two. And just for grins, I’ll try to use the correct marketing lingo.
RealityChuck was correct, for the most part. The idea is to grab market, and, more importantly, mindshare, in an attempt to build a sticking site with a loyal and well defined user base. (wow, that was fun. No more of that). Once you’ve got people coming back you can:
charge for a premium service, most notably by “certifying” songs - so when you try to download a song, you get the one that the title implies you’ll get, rather than a renamed song (it is my understanding that this can be a pretty big problem with napster).
Buy this CD buttons, that would allow immediate purchase of a CD, either the way MP3 did it, or have the CD shipped to you.
Storage space on their servers for you songs, for a small fee (once again, this is an MP3.com ripoff).
Promotions. This can be frightenly huge. For instance, Amazon has the “people who liked the last 5 books you bought would also like…” feature. This is even easier to do with napster. And it would not be difficult to…tweak…this to…slightly increase the visibility of a new song.
Research data. A few companies make money selling this, and this is pretty valuable info. Not my field, so I can’t give any clues to how it is used.
Banner ads.
Odds are that napster had not yet figured out a way to monetize the eyeballs (sorry, I’ll stop now), but that they have a few potential revenue streams.
I’d like to point out that I am guessing, and may be shouted down now.
They make plenty of money. There’s lots of stuff shown above, but if you have the latest version v2.0 BETA 9.6, you’ll see huge ads on the browser itself.
Bigs ads for Crash Test Dummy, Dispatch, Ray Lynch, including links to their sites and Hot searches for their titles.