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Future brightens for Napster
Subscription service raises its outlook for the fourth quarter, sending shares up more than 20 percent on the day.
Shares in digital music subscription service Napster jumped more than 20 percent today after the company raised its financial outlook for the fourth quarter on better-than-expected revenue gains.
The company said strong gains in the number of subscribers for its "all-you-can-eat" download service will push its fiscal fourth-quarter revenue in excess of $26 million, surpassing its previously forecast of revenue of $25 million. That, in turn, will lead to a lower-than-expected quarterly loss.
"Napster's premium subscriber growth was extremely strong during our most recent quarter, resulting in revenue that exceeded our expectations," Napster CEO Chris Gorog said in a statement.
Napster, one of the most recognized brands in digital music and once synonymous with the peer-to-peer (P2P) free-music bonanza, has hit rough terrain in recent months. The company laid off 10 employees in January and widespread speculation surrounded that the company was up for sale, with Google being mentioned as a possible suitor.
But the layoffs have helped the company keeps its costs down, Gorog said today, and the company's pricey marketing campaign during the latter part of 2005 appears to have paid some dividends.
As he has in all of his public statements in recent months, Gorog pointed to Napster's forthcoming Web-based initiative as a future driver of the company. The company has yet to release any specific details about the venture, only saying that it will provide music-related content to users and will be supported by advertising.
"We believe this will be a unique music destination, unlike anything currently on the Web," Gorog said today. "It is being designed to attract and retain millions of fans and provide them with superb music-oriented content while in turn creating a highly targeted and attractive demographic for advertisers."
The company will release its quarterly financial results on May 17.
After rising more than 12 percent in early-morning trading, Napster shares kept climbing for the remainder of the day, closing at $4.05, up 68 cents, or 20.2 percent, on the day.
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