1 The success of our Napster service depends upon our
ability to add new subscribers and reduce churn.
2 Our online music distribution business has lower mar-
gins than our former consumer software products
business. Costs of our online music distribution busi-
ness as a percentage of the revenue generated by that
business are higher than those of our former con-
sumer software products business. The cost of
third-party content, in particular, is a substantial por-
tion of revenues we receive from subscribers and
end-users and is unlikely to decrease significantly over
time as a percentage of revenue.
3 We rely on the value of the Napster brand, and our
revenues could suffer if we are not able to maintain its
high level of recognition in the digital music sector.
4 We face significant competition from traditional retail
music distributors, from emerging paid online music
services delivered electronically such as ours, and
from ‘free’ peer-to-peer services.
5 Online music distribution services in general are new
and rapidly evolving and may not prove to be a prof-
itable or even viable business model.
6 We rely on content provided by third parties, which
may not be available to us on commercially reason-
able terms or at all.
7 We must provide digital rights management solutions that
are acceptable to both content providers and consumers.
8 Our business could be harmed by a lack of availability
of popular content.
9 Our success depends on our music service’s interoper-
ability with our customers’ music playback hardware.
10 We may not successfully develop new products and
services.
11 We must maintain and add to our strategic marketing
relationships in order to be successful.
12 The growth of our business depends on the increased
use of the Internet for communications, electronic
commerce and advertising.
13 If broadband technologies do not become widely avail-
able or widely adopted, our online music distribution
services may not achieve broad market acceptance,
and our business may be harmed.
14 Our network is subject to security and stability risks
that could harm our business and reputation and
expose us to litigation or liability.
15 If we fail to manage expansion effectively, we may not
be able to successfully manage our business, which
could cause us to fail to meet our customer demand
or to attract new customers, which would adversely
affect our revenue.
16 We may be subject to intellectual property infringement
claims, such as those claimed by SightSound
Technologies, which are costly to defend and could
limit our ability to use certain technologies in the future.
Finances
Despite growth in subscribers and revenue, Napster has
experienced significant net losses since its inception and
according to the SEC filing Napster (2005), ‘we expect to
incur net losses for at least the next twelve months and
likely continue to experience net losses thereafter’. Since
1 April 2003, Napster have incurred approximately $97.8
million of after tax losses from continuing operations. A
summary of the finances is presented in Table 5.3.Sources: BBC (2005), Napster (2005), Wikipedia (2005), The Register
(2005) and Wired (2002)Summary
Summary
1 Evaluating the opportunities provided by the Internet for varying the marketing mix
is a useful framework for assessing current and future Internet marketing strategy.
2 Product. Opportunities for varying the core product through new information-based
services and also the extended product should be reviewed.
3 Price. The Internet leads to price transparency and commoditisation and hence lower
prices. Dynamic pricing gives the ability to test prices or to offer differential pricing
for different segments or in response to variations in demand. New pricing models
such as auctions are available.
4 Place. Place refers to place of purchase and channel structure on the Internet.
There are three main locations for e-commerce transactions: seller site, buyer site and Question
Evaluate how Napster has varied each element of the
marketing mix to compete with traditional and online
music retailers.