Napster Inc does not plan to cut the price of its online music subscription service despite new competition from Yahoo Inc, Chief Executive Chris Gorog said on Monday (May 16). "We are not positioning our product as a discount product. I think Yahoo has," Gorog told fund managers at the J.P. Morgan technology investment conference. Internet media giant Yahoo Inc introduced its service last week at $4.99 per month, undercutting Napster services which cost $9.95 or $14.95 per month. "We frankly have no idea what the impact will be," Gorog said in response to questions by fund managers on how Napster would respond to Yahoo's challenge.
Napster is the legal "pay-to-play" successor to the Internet phenomenon that sparked the Internet music downloading craze.
The Napster executive said he would wait to see whether Yahoo's move had an impact on its business and but ruled out cutting prices on its own music services for now.
Since entering the subscription market 16 months ago, Napster has grown to be the No 2 digital music service behind Apple Computer Inc's iTunes, which focuses on downloads.
Napster launched in Britain last year and already sees 12 percent of its revenue from that market. Gorog said the firm would enter Germany by the end of this year and said he was targeting France and Japan next.
Napster reported 412,000 subscribers to its music services at end of 2004 and has not updated its subscriber count since then. "It's up," he said in response to a question by Reuters, but declined to give details.
Napster is waiting for movie studios to become more liberal in their video usage licensing policies before taking its online music subscription model into the video business, now dominated by companies such as Netflix Inc and Blockbuster Inc.
"(Two years) - that might be a timeframe to think about for videos and movies," Gorog said. "We think certainly within the next 24 months, the major studios will be unleashing a great deal more content," he said.
Napster is no stranger to the movie market. Two years ago it bought Pressplay, a joint venture created by Universal Studios and Sony Pictures. Gorog said that the two movie studios had invested something approaching $125 million in network equipment to deliver movies online.
Gorog also said Napster would begin "permission marketing," which allows users to retain control of what sorts of marketing messages are sent to them as Napster subscribers.
Gorog said he saw a long future ahead for media subscription services. "We think people are going to start valuing their ownership of media a lot less," Gorog said. "This is going to happen on movies too," he said.
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