Napster jacks up subscription prices

As if by magic just after posting about how good Napster was at only $10 a month they sent me an email announcing they are putting their subscription rate up from $9.95 to $12.95 a month at the end of January. Grrrrr! There is no comment about the mobile device support option which is usually $5 a month extra, but that could be because I don't have it as an option.

You can lock in another year at the old rate with a code (see below) but what happens if they got bust before the end of the year? Last I heard they weren't exactly doing well financially - at least not making a healthy profit. I'm pretty sure, in the event one of the other subscription services would probably snap them up for a customer base and honor current subscriptions - but I'm not sure I want to take that chance.

Anyway, here is the email they are sending out to current members...

Dear Member,

We wanted to let you know about an important pricing change to your Napster membership.

For the first time in over four years, we are increasing the Napster monthly subscription fee from $9.95 to $12.95. This change will take place beginning on January 30, 2008. As a valued member, we would like to extend a special offer to keep your existing monthly rate.

If you switch to an annual subscription now, you can lock in your existing rate of $9.95 per month. With this special offer, you will be billed $119.40 – a $36 savings over the new monthly rate – for a full year of Napster.

To take advantage of this special offer, follow these simple steps:

1. Go to home.napster.com
2. Sign in to your Napster account using the "Sign In" link in the top menu bar
3. Click on "My Account" in the top menu bar, then click on the "Napster Cards and Codes" area
4. Enter promo code NAPSYEAR8 and click on the "Submit" button
5. Confirm your account information and click on the "Submit" button

Now you can continue enjoying the world's largest online music catalog of over 5 million songs and all the great benefits of your Napster subscription at the same great price. Plus, every week we're adding new music, playlists, videos, radio stations, and continually adding new features and enhancements to make Napster even better.

We value you as a customer and thank you for your ongoing support. If you have any questions, feel free to contact us by going to www.napster.com/support.

Sincerely,

The Napster Team

Update: I went to Digg and found someone had also just posted about this along with some background information on Napster - at current burn rate they only have 18 months left and their CEO just resigned. See Napster Raising Prices. Is it Going Out of Business?

Update 2: As of their November 1st press release Napster state they have 750,000 subscribers - lets see what the February 1st release says. My guess is revenue will be up because of people doing the one year buy in and that will look good for their cash flow too, but at the expense of revenue in future quarters. It will also be at the expense of subscribers since clearly a lot of people are calling up to cancel. My guess is they will lose at least 10% which I suppose they are guessing will be more than compensated for by the 30% price hike.

So it will be extremely interesting to see what happens with their subscriber numbers in the next two reports - the February one may not reflect changes from this month depending on their reporting "tactics" (they might report the max during the quarter or something like that). But by the May report we'll definitely know if their strategy worked or backfired badly. It could also be that they are trying to pump up this next earnings release to boost their stock price and make them look like a better target for acquisition.