WinInfo Daily Update, March 2, 2006: Napster: Microsoft, Windows Media Have Held Us Back

Napster: Microsoft, Windows Media Have Held Us Back

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In the News

Napster: Microsoft, Windows Media Have Held Us Back

by Paul Thurrott, [email protected]

While continuing to profess that Microsoft's Windows Media and Digital Rights Management (DRM) technologies will ultimately prevail in the digital music market, Napster CEO Chris Gorog complained this week that his company's reliance on Microsoft has prevented Napster from effectively competing with Apple's iTunes Music Store and the iPod. According to Gorog, Apple's seamless simplicity is hard for Microsoft and its partners to duplicate, because different companies offer online music services, MP3 players, and connecting software, none of which work as seamlessly together as Apple's offerings.

"There is no question that \[Microsoft's\] execution has been less than brilliant over the last 12 months," Gorog said during a talk at the Reuters Global Technology, Media and Telecoms Summit in New York on Wednesday. "Our business does rely on Microsoft's Digital Rights Management software and our business model also relies on Microsoft's ecosystem of device manufacturers. It's a lot more complex to get organized properly than it is to build one device and one service as Apple has done."

Gorog's statements might be seen as retaliatory, since Microsoft recently picked MTV's upcoming URGE online music service to be integrated into Windows Media Player 11, its next major media jukebox software version. Microsoft chose URGE over Napster, and even over the company's own MSN Music because Microsoft believes that only MTV has the cachet with young music buyers to overcome Apple's lead.

However, Gorog isn't exactly looking to separate Napster from Microsoft's technology. Indeed, he feels that the end-to-end ecosystem Microsoft has created in the digital media market will ultimately win out, just as it did in the PC market. "It's always been painful at the introduction of new technologies. But it always takes shape like it's done in the past. Ultimately, the consumer electronics giants ... are all going to come to this Windows Media party. This is really going to be the ubiquitous format." Gorog added that Apple's early lead in the market was just that: an early lead. "To date, only 5 percent of \[overall music\] sales have migrated digitally," he said. "We are in the very, very early days of this."

Meanwhile, it's unclear whether Napster will be around to enjoy the purported shift to Windows Media technologies. The company is quickly losing cash: It lost $17 million in the most recent quarter, up from $12.8 million in the same quarter a year ago. Gorog denied, however, that Napster was looking for a buyer. "We have not ever sought any sale of our business," he said. "But we have received many inquiries from around the world and I think we will continue to receive many inquiries. We will do a deal if and when we feel it's in our shareholders' interests."

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