Strong subscriber growth may have helped Napster
Napster's third-quarter sales jumped 20.6% to $28.4 million, and it ended the quarter with 566,000 subscribers. Lucky for Napster, that doesn't even take into account the subscribers it's getting from acquiring Time Warner's
Of course, profitability is still an issue for this former piracy play gone legit. In the third quarter, Napster's net loss was $9.5 million, or $0.22 per share -- which, granted, is a far sight better than the same time last year, when its loss was $17 million, or $0.40 per share.
You can get a closer look at Napster's quarter with our related Fool by Numbers, where you can get an idea of the whole picture. For example, although Napster does have $80.9 million in cash, that's down 27.4% on a year-over-year basis. It has ratcheted down its capital expenditures, but that doesn't mean it's positive in free cash flow, either. On the other hand, its margins did improve across the board.
It's good to hear that Napster narrowed its quarterly loss, but investors -- especially risk-averse ones -- might want to wait as the music battle continues to play out. After all, it's difficult to assess unprofitable companies, and Napster has plenty of competition -- even above and beyond the elephant in the room, Apple
That competitive horizon is why Napster sounds like risky business to me, from an investing standpoint -- at this juncture, anyway. Things may be looking up, given the deal with AOL and growing subscriber count, but Napster's long-term success relies on its ability to wrestle music sales from big-time competition, and that's a major battle.
For related Foolishness, tune into the following articles:
- Here's the third quarter's numbers in brief.
- Catch up on Napster's deal with AOL.
- Read about a lawsuit against Napster and several other giants.