Napster Teams Up With Target

Starting on February 15, consumers can plug into Napster's digital music service by purchasing a "Napster Burnpak" from retailer Target, part of Napster's continuing creative marketing push to take on market leader Apple Computer's ITunes.

Napster and its parent company, Roxio, of Santa Clara, California, announced on Wednesday an agreement with Imation (a provider of removable data storage media), Case Logic (a portable media storage company), and Target, based in Minneapolis, to offer the service in a format it believes will appeal to consumers. The announcement came Wednesday at the Consumer Electronics Show in Las Vegas.

The Napster products will be available at all of Target's 1227 U.S. stores, as well as at Target.com, and will include a prepaid Napster download card (worth $15), a Napster 2.0 and Roxio software pack, blank Napster-brand optical products from Imation that feature unique "value-added" promotional codes for redeeming free music downloads, and Napster-brand CD cases from Case Logic, the companies say.

Pricing for the products will be released closer to the product's launch date, a Napster spokesperson says.

One-Stop Shopping

By combining its brand with Target's ability to reach consumers, Imation's storage media products, and Case Logic's carrying case, Napster hopes to offer an "all-in-one, one-stop shopping" product that will provide stiff competition for both Apple's ITunes and Wal-Mart's online music store, the spokesperson says.

ITunes and Napster are already the market leaders, says Mark Mulligan, a senior analyst with Jupiter Research in London. "If anything, Napster has a broader, richer appeal with its capabilities to burn music onto CD, for example, but ITunes has had a head start with IPod," he says.

Napster has been innovative in its effort to catch up with ITunes, Mulligan says, pointing out the company's deal with Pennsylvania State University, which offers students a "free" version of the service that is paid for in part by the student's information technology fee to the university.

"Napster can take a bit of the market from ITunes and push further into the subscription market, but ITunes is established at the moment as being the a la carte digital music store and is likely to consolidate its position this year," he says.

Such new products as the IPod Mini, which Apple announced Tuesday and plans to begin selling in the United States next month for $249, will help the company protect its share of a market that has become extremely important to Apple's bottom line, Mulligan says. "Apple is trying to learn from its painful PC experience where it saw its dominance of the market melt away [to Microsoft]," he said.

The IPod Mini is currently too expensive, Mulligan says, but he believes that the company will lower its price to differentiate it from the original IPod.

Format Wars

One problem for both Napster and ITunes in the foreseeable future involves both companies' insistence on using their own exclusive formats, Mulligan says. "Somewhere along the line, there will have to be a high degree of interoperability between the formats, because otherwise it will limit the appeal to consumers if they have to play different music on various devices," he says.

Since Apple is already in the dominant position, Napster will most likely be the company that ends up offering the greatest interoperability. "What Napster really needs to be pushing toward is things like Windows Media Player [from Microsoft], and being the service that plays music on all other digital non-IPod players," Mulligan says.

The next battleground in the digital music market is Europe, where both Apple and Napster are rushing to bring their music services. Apple again has established a toehold with its IPod, and Mulligan expects to see one or both services in major European markets such as Germany and the U.K. by the second quarter of this year.

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