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Ad happy Napster turns Q3 profit to loss

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Despite adding tens of thousands of customers, Napster continued to cough up tons of cash in its third quarter.

Napster's revenue increased 94 per cent year-over-year to $23.5m. Its net loss, however, grew to $17m from a profit of $12.8m in last year's Q3. Management preferred to focus on the addition of 66,000 premium subscribers to its music rental service rather than dwelling on the mounting losses.

"Napster had a strong third quarter, adding substantially to our premium subscriber base which now totals in excess of 500,000," said Chris Gorog, Napster's CEO. "We have grown our premium subscribers 110 per cent year over year confirming strong demand for Napster's subscription product." The company announced that it plans to roll out a free version of its service this year that will rely on advertising revenue.

Marketing expenses continue to chew through the company's cash stockpiles. Napster shelled out $15.4m on marketing last quarter as compared to $9.2m in the same period last year. Through the first three quarters of its fiscal year, Napster has lost $50.5m, while spending $42m on marketing.

During a call with financial analysts to discuss the third quarter results, Gorog downplayed speculation about Napster being acquired. ®

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