Poor Microsoft (Nasdaq: MSFT). Just days after positioning its fledgling Zune Pass as a superior value to Apple's (Nasdaq: AAPL) iTunes Music Store, Best Buy's (NYSE: BBY) Napster is introducing new math.
"One costs a lot, and one costs a little," celebrity financial advisor Wes Moss proclaims in the new Zune Pass ads. He points out how Zune's $14.99 monthly music subscription plan offers unlimited music access. He then compares it with a 120-gigabye iPod that would require $30,000 in piecemeal purchases from iTunes to load it up with 30,000 songs.
The comparison was flawed on many levels, but now even Microsoft's math has blown up in its face. Napster is rolling out a new service this week for unlimited PC-based streams for just $5 a month. It also comes with five free MP3 downloads every month. Sure, the Zune Pass offers 10 free song downloads, but Napster's tracks are free of digital rights management.
Yes, Napster's service is limited to online streaming. You'll have to pay $14.99 a month if you want to make it truly portable through a wide range of media players. Then again, Zune Pass is really only portable through Zune players. Have one? Probably not. The device is a distant third in sales behind Apple's iPod and SanDisk's (Nasdaq: SNDK) Sansa.
In short, we can bring Moss back to compare Zune Pass with the new $5 Napster plan.
"One costs a lot, and one costs a little."
An Apple a day
Microsoft isn't the only one that should worry. Look over that value proposition again. Five songs for five bucks is what you would probably wind up paying for downloads through Apple's iTunes. If you can get the same five songs, along with online streaming of Napster's 7 million-track catalog, why not just go with Napster?
Sure, the iTunes ecosystem is ironclad. It is convenient and ubiquitous. It rocks. However, if Microsoft is even somewhat effective in getting Apple-holics to consider its streaming plans, it would simply be setting up the volleyball for Napster's value-minded spike.
Because these are unrestricted MP3s that Napster is dispensing, they will play on that iPod you're cradling.
Time to get Sirius
Napster's not just aiming at Apple and Microsoft. The $5 monthly plan includes access to 60 commercial-free music stations and 1,400 programmed playlists, for those moments when you want to discover new music instead of simply replaying your favorites.
Sirius XM Radio (Nasdaq: SIRI) is charging $12.95 a month for Web-streamed programming, and it isn't including any downloads in the deal (not yet, anyway). Sirius XM offers plenty of proprietary content as a welcome differentiator, but here comes Napster, pricing its service as if it were a foot-long sandwich.
How did Napster do it? It bowled one ball but managed to land strikes in three lanes.
Your move, everyone else
If there is anything surprising about this story it's that Best Buy is the one pulling the strings. It acquired Napster last year in a $121 million deal.
Best Buy sells quite a bit of Microsoft software and Windows-propelled computers. It's a leading retailer of Sirius and XM satellite receivers. It is also so important in Apple's eyes that it became the first third-party chain to sell iPhones, beyond Apple and AT&T (NYSE: T) shops.
The consumer electronics chain has played a weak hand in digital music until now. It has been nearly three years since it teamed up with SanDisk and Rhapsody parent RealNetworks (Nasdaq: RNWK) to launch the Best Buy Digital Music Store. You probably missed it, though it's still there.
Buying Napster for just a little more than the service's cash on hand seemed like a decent value, but now it's being repositioned into a decent opportunity.
Napster may not succeed in taking down the bigger giants, but you can almost predict what will happen.
- Microsoft will have to roll out a more aggressively priced Zune Pass service.
- Apple will have to finally throw its hat into the music subscription services ring.
- Sirius XM will need to beef up its digital offering. It can either offer free downloads -- ideally of proprietary content to really stand out -- or team up with an existing subscription service to offer a more complete package.
Napster is moving the cheese the way it did during the brand's renegade peer-to-peer days. The only difference now is that it's moving it legally and brilliantly.
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