Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
Napster 2.0, the reincarnation of the former free music file-sharing service, expects fast growth through more clients like Penn State University, which is paying Napster’s tab for students. But it has a long way to go to catch rival iTunes.
Napster 2.0, Roxio Inc.’s reincarnation of the former free music file-sharing service, reports 300,000 sales of digital songs in the first week after its Oct. 29 launch. Napster expects fast growth through more clients like Penn State University, which is paying Napster’s tab for all of its students. “We’re in negotiations with a number of other universities,” Roxio CEO Chris Gorog says.
But Napster has a long way to go to catch up to rival iTunes form Apple Inc., which reports it has sold more than 17 million songs since launching iTunes in April, including more than 1 million songs during its first week. Competition between the two leading digital music providers has led to jousting over market share figures. Apple reported yesterday that it had an 80% share of all legally purchased downloads over the past week. But Gorog contends that Apple declined to include Napster’s first-week sales, which would bring iTunes’s share to 62% with Napster’s at 23%. “The way we see it, we did 36% of Apple’s digital music business in our first week,” Gorog says.
Napster also reported, in addition to the 300,000 individual sales of songs, that thousands of subscribers to its premium membership service downloaded or streamed more than 2 million tracks during the first week. By year-end, Napster expects to have more than 80,000 subscribers to its premium service, which charges $9.95 per month for an unlimited number of music streams or downloads.
Like Apple, Napster charges 99 cents per individual downloaded song or $9.95 for a full album of a particular artist’s music. But Apple doesn’t offer a monthly subscription service.
In the deal with Penn State, which goes into effect for about 18,000 students in January, the university will cover Napster’s $9.95 premium service fee for each student as part of the information technology fee it already charges students. “This will be the first step in a new, legal approach designed to meet student interest in getting extensive digital access to music,” said Penn State president Graham Spanier, who co-chairs the Joint Committee of the Higher Education and Entertainment Communities along with Cary Sherman, president of the Recording Industry Association of America.
Spanier said Penn State would test how the Napster service works and elicit feedback from students before proceeding to roll out the service next year to all of its 83,000 students on 24 campuses. The university also hopes to work out a Napster deal for its 150,000-member alumni association, he added.
The Penn State project could prove an even bigger windfall for Napster, because it may set the stage for other universities to follow, says Napster president and COO Mike Bebel. “Penn State is paving the way for universities around the country to ensure that a legitimate marketplace for online music thrives,” he said.