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Napster reconnects with free

Digital music subscription service launches ad-supported Web product that allows users five free plays of every song in its 2M-song catalog.

Digital music subscription service Napster unveiled its long-awaited, ad-supported Napster.com product today, looking to reconnect with the one thing that most people associate with its moniker: free music.

Everybody likes free.

Napster.com will offer users five free streams of every song in Napster's 2M-song catalog, with the obvious goal of tempting more subscribers with the taste of free music. In its original incarnation, Napster was the free peer-to-peer (P2P) network that helped usher in the digital music revolution in the late 1990s.

The service, available to both PC and Mac users, will allow a user to listen to a song five times for free in Napster's browser-based flash player. After five plays of a song, a user would then have to download the individual song for 99 cents or sign up for the $9.95 "all-you-can-eat" subscription service to hear more than a 30-second preview of that song. Users can also pay $14.95 per month for the added ability to transfer music to certain portable devices.

Users will not have to provide credit card info but only a valid e-mail address to register.

"Napster was born of the idea of eliminating all barriers to discovering, enjoying, and sharing music and of putting the power in the hands of fans," Napster CEO Chris Gorog said in a statement. "With a vision to empower music fans in a legal environment, with an open, all-inclusive platform, we are very excited to share our new free music experience at Napster.com."

Napster said last month that its subscription service surpassed 600,000 subscribers, but the company has lost more than $73 million over the last two years, according to equity firm American Technology Research, and has struggled to regain the cachet its free-music P2P ancestor had.

Napster laid off 10 employees in January and faced widespread speculation that it was up for sale, with Google being mentioned as a possible suitor.

During the company's earnings conference call in January, Gorog began mentioning the Napster.com service, saying that it would help to boost subscriber numbers and add an advertising-based revenue stream to the company's bottom line. Gorog said Napster.com receives an average of 2 million visitors a month.

He provided few details in the months that followed, but the company's bleak future began to brighten last month when it raised its financial outlook for the fourth quarter on better-than-expected revenue gains. That news sent shares in the company soaring more than 20 percent.

The new service features ads from the likes of Disney (for its summer Pixar movie Cars), Guitar Center, House of Blues, Touchstone Pictures, and Samsung. Napster is sharing ad revenue with the major record labels, and the company also pays the labels each time a song is streamed, so it is betting that the increased streaming expense will pay off in additional revenue from both ads and new subscribers. The service also integrates with NapsterLive, which features live sessions recorded exclusively for Napster by artists like Kelly Clarkson, Train, and John Legend.

Napster Live

In his blog today, Jupiter Research analyst David Card noted that the launch of Napster.com comes not long after rival Rhapsody launched its Web-based service, which allows users 25 free streams total per month.

But Card pointed out two unique community-related features that Napster.com included in its offering.

NapsterLinks lets users send friends links to songs on Napster's tryout list.

The links can be shared via e-mail, instant messages, blogs, and other forms of online communication. Clicking on a link launches the song on Napster's Web site and music player.

The second feature is Napster's attempt to jump on the user-generated content bandwagon, Narchive is a not-yet-unveiled Wikipedia-like take on the All Music Guide database, allowing users to add their own content to the site's artist and band pages.

"Napster is mimicking Rhapsody's Web services play, but in a fashion that seems more MySpace- or community-friendly," Card wrote. "It seems pretty easy to paste Napster Links to any personal page, a wiki, or an e-mail."

Rhapsody parent RealNetworks said last week that it has 1.4 million subscribers for its music properties, which includes Rhapsody and its RadioPass subscription services. Napster hopes Napster.com will help it cut into that lead, as well as the daunting lead of Apple's iTunes.

"I think I'd interpret this as a well-executed, aggressive free trial strategy rather than Napster business model version 3," Card wrote.

Shares of Santa Clara, California-based Napster surged nearly 10 percent in premarket trading today, and were up nearly 3 percent to $4.75 by midday.