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Napster replaces AOL Music Now
By Jim Welte - MP3.com
January 12, 2007 at 12:58:00 PM | more stories by this author

Internet giant scraps its own subscription service, which it relaunched last August, in favor of the cat.

If Napster is hoping to pretty itself up for a potential suitor, it appears to be succeeding.

AOL Music Now & Napster AOL Music Now & Napster

The digital music company, which has been exploring a sale of the firm since last September, is taking over AOL Music's music subscription service in a deal worth a reported $15 million. Napster is replacing the AOL Music Now subscription service, which AOL relaunched last August after acquiring Music Now from Circuit City in 2005.

The deal sent shares in Napster climbing nearly 8 percent on the day, up 30 cents to $4.12 on the Nasdaq, where it has ranged between $2.55 and $5.10 over the past year.

AOL will switch its 350,000 Music Now subscriber to Napster in the next 60 days unless customers opt out. AOL also will promote Napster with links to its service throughout its free music site, AOL Music.

AOL Music spokesperson Karen DeMarco told MP3.com that AOL Music will continue to operate its nonsubscription business, including live events, streaming audio, and editorial content. Napster is only taking over the company's subscription business.

That business has been in a state of flux over the years, as AOL purchased Music Now from Circuit City in 2005, using that service's technology to relaunch its own subscription service last August.

"We've been pleased with the performance of our AOL Music Now business, but we felt that we could provide a service that was more efficient and more in line with our overall strategy by going with Napster," DeMarco said.

Napster will re-create customers' personal Music Now music libraries, including their playlists, and it also will keep Music Now's pricing tiers and transfer prepaid track credits that subscribers have in their accounts.

AOL separately has a deal with iTunes through which AOL members can charge iTunes-purchased media to their AOL accounts.

As for Napster, the storied digital music brand said it will inherit about 350,000 subscribers from AOL's Music Now service.

"In our view, equally critical will be that Napster will be actively promoted on the AOL site," Kaufman Bros. analyst Barbara Coffey wrote in a note to investors.

Napster last week raised its quarterly revenue forecast because of a better-than-expected increase in subscribers, which is expected to reach 566,000.

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5 Comments

Oldest First | Newest First
Coooooooooooooool...
Posted 02/28/2007 4:11pm
Yay!
Posted 01/15/2007 8:09pm
I guess thats a good thing.
Posted 01/15/2007 11:49am
And Napster's investors.
Posted 01/13/2007 2:56am
thats good for aol users
Posted 01/12/2007 5:24pm
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