Crenk

Napster has hinted that the company is up for sale again, saying in its response to a dissident shareholder group that the company is once again exploring possible strategic alternatives, and has retained UBS Investment Bank to assist in the process. The company hired UBS two years ago to explore a possible sale, but no deal emerged. Napster informed shareholders of the move in a letter that also said the company believes that three proposed dissident board candidates are “unqualified.”

The company said the dissident candidates “have offered no specific business plan, other than suggesting a vague review of Napster’s business,” and also “have no significant ownership in Napster and, in fact, have been frequent sellers of Napster stock.”

Napster instead urged shareholders to re-elect its current slate of independent directors.

I predicted something like this happening to Napster back in December of last year. Napster has a business model that was rapidly decreasing and they didn’t even look like changing it. The company has a great brand, but they are still just moving in the wrong direction. A download store was never going to be right for this brand, they should have done something ad supported and in the same market as Imeem, build a community around this great brand. I so wish I had control of this brand!

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I made my prections for 2008 about 2 weeks ago and already Napster seems to have listened to me and they are now more open to DRM free solutions. Napster just announced that they will be abandoning DRM completely in its music download store in the second quarter of this year. Napster will still however apply copyright protection to its subscription service, but when a user purchases an a la carte download the files will no longer be in DRM WMA format, but in Mp3 format.

This is a very positive move for Napster because they are currently in approximately 5th in download store ratings, behind iTunes, eMusic, Amazon and Rhapsody. This move and forward thinking is slowly getting pushed upon online download stores from the major record labels, and it is very refreshing to see Napster is trying to improve their position in the market and jumping on board the DRM free before some of the others.

Insound.com has been acquired by Warner Music Group. Well the site was actually acquired by The Alternative Distribution Alliance, which is an independent distributor owned by Warner. This is quite a good acquisition for the ADA because Insound has a very good back end infrastructure that can be exploited by ADA to provide their own digital store. The site itself will continue to be operated by co-founder Matt Wishnow, hence a good deal for both parties involved.

Napster in a very interesting move has raised their monthly subscription fees. In true Napster style this was done in an email sent to subcriber, which stated the non-portable subscription rate will increase from $10 per month to $13. A 30% increase! Although this price change is Napsters first in four years, I really cant see this doing them any favours in the market that they are drastically behind in at the moment. These prices changes will take affect on January 30. I made a very bold prediction and said that they will be heading towards the dead pool by the end of 2008, so im very keen to see how much of an affect this price increase will have on the company.

Napster have announced that they are dumping their desktop client and re-launching with a new web-based version. Napster customers will now be able to listen to their music from any computer anywhere in the world. This will hopefully enable Napster to also develop embeddable widgets that can push their products on possible web enabled devices.

Napster is still going to be based as a subscription model, which most industry experts think is holding back the company, because it makes Napster incompatible with the iPod. Consequently Napster has lagged behind Apple’s end to end iTunes system which reportedly controls 70% of the digital music market.

UMG has announced they are now happy with iTunes and the revenue split, so it is only a matter of time before DRM free becomes standard and Napster will really need to gain some market share before Apple.

If you would like to see a slideshow of the new Napster service, please head over to Crave.