Napster Inc. said Wednesday (Nov. 8) its second-quarter loss narrowed from a year ago, beating Wall Street estimates as the online music service saw a boost in revenue.
The company, which said in September it was exploring a possible sale, reported a net loss of $9 million, or 21 cents per share, for the fiscal quarter ended Sept. 30.
That compared to a loss of $13.6 million, or 32 cents per share, during the same period a year ago.
Net revenue for the most recent quarter was $25.5 million, up 9 percent from $23.4 million last year.
Excluding a nonrecurring benefit from prepaid download cards that expired without being redeemed, revenue for the latest quarter was $24.9 million, the company said.
Analysts surveyed by Thomson Financial expected a quarterly loss of 27 cents per share on sales of $25.5 million in the latest period.
Napster hired UBS Investment Bank in September to advise it regarding a possible partnership or sale.
Napster Chairman and CEO Chris Gorog declined to take any questions on the matter during a conference call with Wall Street analysts.
The company said it closed the quarter with a paid customer base of 518,000, including 31,000 subscribers at universities.
Excluding the university subscribers, the company’s premium subscriber base increased 20 percent from the year-ago quarter, the company said.
Napster said the number of unique monthly visitors to the music service’s ad-supported Internet portal rose 42 percent during the quarter, a metric the company considers key in finding new subscribers.
The bulk of Napster’s revenue is derived from monthly subscriptions for unlimited downloads. It also sells individual tracks a la carte and music downloads for Microsoft Corp.’s Windows Media Player-enabled mobile phones.
Gorog was optimistic about the mobile music frontier.
“We believe the dramatic growth projected for music-enabled cell phones will provide a very significant growth driver for Napster going forward,” he said.
The company has been beefing up its Napster Mobile service, entering separate deals recently with wireless carriers Cingular Wireless LLC and Japanese mobile phone company NTT DoCoMo.
Gorog cited some analysts’ projections for a rise in the use of mobile phones with built-in music players as the handsets become more common.
Some believe such music-capable phones could compete with Apple Computer Inc.’s iPod, the best-selling portable music player.
“It would be difficult to overestimate how important we believe the Windows Media Audio music phone ecosystems will be to catalyzing the growth of our business,” Gorog told analysts.
For the six months through September, Napster’s net loss totaled $18.8 million, compared to a net loss of $33.5 million in the six-months ended Sept. 30, 2005.
Looking ahead, Napster expects third-quarter revenue to exceed $27 million. Wall Street had projected sales of $28.5 million during the period.
Ahead of the earnings report, Napster stock fell 9 cents, or 1.98 percent, to close at $4.45 on the Nasdaq Stock Market.
Napster shares were up 6 cents, or 1.35 percent, to $4.51 in aftermarket trading.
