Napster Japan, a joint venture between the U.S.-based Napster and Tower Records Japan, will shut on May 31, drawing to a close the first digital music subscription service in Japan.

Napster Japan released the information on its Web site, saying that its parent company's move to a DRM-free model could not be implemented in Japan and therefore the costs of operating would be too high. Japanese labels are known to be highly protective of their copyrights and have rejected all attempts to incorporate DRM-free models for any digital business.

A highly placed industry source says Napster was unable to grow its subscriber numbers to a profitable level. Napster Japan did not make their figures public but it is understood their share of the digital music market was tiny.

The source adds, "One of Napster's biggest problems was that major labels and certain major Japanese artists refused to license to them, resulting in the situation where their offer was not so satisfying to music fans."

The U.S. retail chain Best Buy acquired Napster in September 2008 but has shown little interest in Asian markets, and some believe this is part of the reason Napster Japan will close.

Napster Japan started its subscription-based digital music service in October 2006 but it never gained popularity with consumers or with the industry. A music business source comments, "The Japanese industry is not sold on the subscription model. The accounting is less clear than the per unit model; it seems to lead only to drastic reduction in income for content [rights] holders."