Napster recently issued its fiscal first quarter earnings scorecard, which featured record revenues, lowered cash burn, and continued profit and subscriber concerns. Revenues topped $28.1 million, a 34 percent increase over the prior year quarter, and a 5 percent jump sequentially. The figure includes a one-time revenue amount of $1.9 million from “prepaid card breakage,” which refers to dollar amounts that are unused by cardholders. Meanwhile, net losses from continued operations were -$9.6 million, a sizeable reduction from a deficit of -$19.7 million from the year-ago quarter, but a drop of $300,000 sequentially. The company also pointed to lowered cash burn, and a stockpile of $97.8 million, down from $104.2 million during the earlier quarter.
The quarter also witnessed the launch of an advertising-supported, Napster.com destination, a significant shift in business model for the company. The destination allows music fans to stream a full-length track up to five times for free. That taps into the lucrative advertising market, though early returns could suggest cannibalization of total subscribers.
The company posted a paid subscriber total of 512,000, a seven-percent drop over the prior quarter total of 606,000. The company pointed to seasonal rollout of university-based subscribers as one reason for the drop, and it may take several quarters to truly understand the impact from both a subscriber and revenue standpoint.
i would not be surprised if theirs and all other pay-to-download services see a steady decrease in users and downloads.