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Napster's Q4 loss swells as costs surge

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Napster's loss nearly doubled during the fourth quarter despite a solid rise in revenue.

The music rental company brought in $17.4m during the fourth quarter - a 188 percent year-over-year rise. Napster's net loss, however, swelled from $12.2m in last year's Q4 to $24.1m this year.

Napster spent a whopping $16.3m on sales and marketing in the fourth quarter up from $3.4m last year. And, unlike rival Apple which makes billions on its iPod device, Napster was unable to turn a profit on hardware sales that arise from its partnerships with the likes of iRiver and Creative. Napster brought in just $322,000 in hardware and license revenue, while spending $445,000 to subsidize the business.

"Napster maintained its position as the most innovative and fastest growing online music subscription service by ending its first fiscal year with revenue of $46.7m and 412,000 subscribers," said Chris Gorog, CEO at Napster. "We recently delivered on our commitment to expand our service and grow our audience with the availability of our Napstertones mobileproduct, which makes the hottest ringtones and exclusive Napster graphics and wallpaper available to almost 70 million cellphone users in the US."

Napster's net loss for the full year was $51.4m - up from a loss of $46.4m in 2004.

Napster expects "modest growth" in its first fiscal quarter of 2006, pegging revenue to come in between $19m and $21m. A slowdown in internet usage and lack of sales to university students during the summer months were cited as reasons for the cautious outlook. ®

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