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AOL flogs MusicNow to Napster for $15m

Napster gains 350,000 rentiers

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AOL is ripping out its MusicNow service and replacing it with Napster. which is paying $15m for the privilege. The ISP will integrate Napster's service into AOL Music, its free, advertising-supported site, and wants to swap over 350,000 subscribers to its new partner.

Customers have 60 days to opt out of being transferred, but prices, ID and password details remain the same and this, coupled with inertia, should mean that most make the move. That's the hope anyhow - less than a year ago AOL's MusicNow had 450,000 paying subscribers. Numbers have fallen since June 2006, when the company "stopped marketing the service as part of a shift away from fee-based businesses", the New York Times reports.

Napster currently has 566,000 subscribers worldwide, of which an unspecified number are counted through university deals, and through Napster Japan, a new joint venture company. So today's deal represents a huge leap in its customer base.

It also means that the loss-making subscription service knocks out a big rival - said to be lossmaking too. And maybe it can now conduct its search for a buyer at a more leisurely pace. Last September the company hired the investment bank UBS to look for a "new strategic partnership or the sale of the company".

This month, Napster announced that revenues for the December quarter were ahead of target. It expects to announce sales of $28m, when it posts its Q3 figures on 8 February. ®

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