Napster goes DRM-free

Company focused on attracting subscribers

DENVER -- As promised, Napster has stripped DRM from all paid downloads on its digital music service in favor of unprotected MP3s. As of Tuesday all 6 million songs in the Napster catalog are now available to purchase without DRM protection. The company first announced plans to make the switch in January.

The new MP3 files will be of higher quality than the DRM version (256 kbps compared to 192 kbps). But will still cost only 99 cents. And unlike other digital retailers also making the switch over to DRM-free files -- such as Wal-Mart -- Napster has the support of all four major labels as well as all its existing indie label and aggregator deals.

Most notably, Sony BMG is on board, replicating the "agency" model it started using with the AmazonMP3 store.

The move gives Napster the largest catalog of legal MP3s on the Internet, far outpacing the 2 million songs on AmazonMP3. However Napster at heart remains a subscription service.

"We're really focused on subscription and driving subscribers as our business model," Napster COO Christopher Allen said. The MP3 store, he said, is designed to not only sell more a la carte singles, but eventually convert customers to its monthly subscription plans.

"It's a way for us, through MP3s, to get some exposure to our subscription service," he continues. "They may be initially attracted to the MP3s... and I think it will result in more subscribers over time."

The profit margin on a monthly subscription fee is much better than that of an a la carte download, which is why Napster will continue making subscription its core model. The company is gambling that the proliferation of Internet-connected devices -- such as mobile phones, home stereos and eventually car radios -- will some day convince music fans that a monthly subscription to access all the music they want from any device is more compelling than buying it.

Until that time comes, however, selling digital music in an interoperable format like MP3 is a fairly compelling offer. Napster still allows users to listen to any song in its library in full for free up to three times. Adding the option to purchase any song as well in a manner that is fully interoperable with any device is considered a much-needed development.

"It's great that they're doing it," Jupiter Research analyst David Card said. "Back in the day, they originally thought selling singles and albums would be a good way to get people used to their product and then upsell them on subscriptions. That just has never played out. But part of the reason was that when you bought those songs, they couldn't play on the most popular device-the iPod. So this will be a chance to really test that, because the service isn't crippled anymore."

The DRM-free move however has not yet made it to the Napster Mobile service, which is the default mobile music service for several wireless operators worldwide, including AT&T Mobility (which also counts eMusic as a digital music provider). As of now, music purchased via Napster mobile will still be encoded in the Windows Media DRM.

But Allen said that will change "soon." Like all other mobile music services, Napster Mobile operates a "dual-delivery" model-sending one copy of any song purchased from a supporting mobile phone to the users PC, and another to the phone itself, both wrapped with Windows DRM.

Allen said Napster and its carrier partners are currently testing a new system that would send a DRM-free version to users' computers, and another copy to the phone without the Windows technology. Napster president Brad Duea has previously stated such a system would make Napster Mobile available to 12 million phones compared to the 12,000 it is today.

Napster said it would continue to support all Windows Media DRM files purchased to date, unlike the now-defunct MSN Music service. However there is no program or promotion to let customers replace their previously purchased DRM-laden files with the new unprotected versions.