Napster`s sales sing a new tune in foreign markets

While continuing to re-build its brand through innovative services and co-marketing deals with store chains, Napster Inc. is holding its own in the competitive U.S. digital music market, where its sales for the third quarter ended Dec. 31 grew 94% over the year-ago period to $23.5 million.

But now there’s another bright spot for the brand once known as the pioneer of illegitimate file sharing. Though tiny by comparison to the U.S. market, Napster’s sales outside the country are growing faster. Q3 sales more than doubled year-over-year to $3.05 million from $1.45 million, and now Napster is positioning itself to build global sales even more.

Napster’s web sites outside the U.S. serve Canada, the U.K. and Germany, though since the latter launched in mid-December 2005 its impact so far has been slight. This year, German sales will be complemented by a fourth foreign site to open in Japan. Napster also sells hard goods like MP3 music players in foreign markets through online sister sites hosted by Vcommerce Corp., which also handles fulfillment.

And the digital music innovator isn’t stopping there. It recently signed a deal with telecommunications provider Ericsson for Napster Mobile, which will serve the international demand for downloading songs, ringtones and images to handheld devices.

While high profile because of its colorful-and illegal past-Napster is still just one competitor in the global digital music market. Sales of music via the Internet and mobile phones reached $1.1 billion worldwide last year, reports the International Federation of the Phonographic Industry, a trade group, up from $380 million the previous year. The group reports that music fans downloaded 420 million single tracks from the Internet last year, 20 times more than two years earlier, while the volume of music licensed by record companies doubled to over 2 million songs. Digital music now accounts for about 6% of record companies’ revenues, up from practically zero two years ago.