Napster Is Free Again, Sort Of

Napster took a nostalgia trip back to its freewheeling, copyright-flouting early days on Monday by introducing an advertising-supported service that allows visitors to listen to songs and albums for free from its library of more than 2 million music files.

But in keeping with its paid business model, the company is only permitting users to listen to songs five times each before they are prompted to become paid subscribers to the service or buy the song for $0.99 on an à la carte basis.

If users don’t pay, Napster will only play a 30-second clip of the song after the first five listens. The new service doesn’t require the installation of a separate music player. Users also get free access to artist profiles and over 150 preprogrammed playlists.

The service delivers songs in .swf Flash format at a rate of 32 kilobits per second (Kbps), which is lower quality than the 128 Kbps that Napster typically employs to stream music. Napster also normally uses the Windows Media format for its music. The company hopes that users will upgrade to become paying subscribers to get better sound quality and avoid ads.

Napster is attempting to compete with the leader in the digital music market, Apple’s iTunes Music Store, by going back to its roots as a free service.

Crowded Field

The company also finds itself in an increasingly crowded field, facing off against Yahoo Music, eMusic, Rhapsody, The Orchard, MSN Music, Wal-Mart, and many other sources of legal digital music, along with many copyright-flouting services.

But because it faced legal headaches and charges of copyright infringement from that strategy and now partners with the same music companies that practically put the original Napster out of business, the company is trying to find a middle ground between free and paid music that it hopes will satisfy the record companies.

“We have always strived to get back to what the original Napster did in terms of offering easy access to everyone, but now in a legal way to ensure that the artists get compensated,” said Napster COO Laura Goldberg.

The record companies actually helped Napster come up with a business model that would enable it to take advantage of the digital market, she said. Investors also approved, with shares of Napster rising $0.15 to $4.78 in recent trading.

Linking to Napster from MySpace

The Los Angeles-based company also introduced a new feature called NapsterLinks, which lets users add links to free Napster music to their email messages, instant messages, blogs, and web sites. The links can go to specific songs, albums, or artists on Napster.

Ms. Goldberg envisions users putting the NapsterLinks into their pages on social network sites like MySpace and Facebook. “It’s a great way to get viral traffic to Napster,” she said.

Napster also said it plans to offer a feature called Narchive, a public music archive where anyone can contribute to a “People’s History of Music.” Intended as a kind of Wikipedia of music, users can share their personal stories, photos, and memorabilia on the site.

“We wanted to find something that would be dynamic and that would capture the spirit of music,” said Ms. Goldberg. “It will be a very vibrant community.”

The company plans to offer the Narchive as a beta site soon. The site will also include content from professional music writers, such as Michael Feineman, along with photos from photo archivist Michael Ochs.

Time will tell whether Napster can convert users who try the service for free into paying members. Free users will get access to all the music that paid subscribers can access, but they have to view ads and hear the music at a lower stream rate.

“While increased web site traffic is positive, the key for [Napster] will be the percentage of new visitors [Napster] can convert to subscribers—a percentage which is historically low,” wrote AmericanTechnologyResearch analyst P.J. McNealy in a research note. “We believe today’s news will be well received and we are incrementally more positive on [Napster].”

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