NEIL CAVUTO, HOST: It used to be known as Roxio (search), but now you can just call it Napster (search). The digital music company making its Napster debut on NASDAQ. The new ticker symbol is NAPS. It is hoping to be a pure play music download service, taking on Apple's infamous iTunes.
Shares of Napster getting nipped just a bit, the stock dropping four percent. But if you got into Roxio a year ago, you would have doubled your money.
So what happens now and what does this mean for industry rivals going forward? Let us ask Chris Gorog. He is the chairman and the CEO of Napster.
Chris, welcome. Congratulations, NASDAQ debut.
CHRIS GOROG, CEO, NAPSTER: Thank you, Neil. It's great to be here.
CAVUTO: All right. This is all the rage now, downloading music. But the big caveat with you is you can't do it with an iPod.
GOROG: That's right. You can't use an iPod with a Napster today. But you can use Napster with virtually any other MP3 player on the market.
CAVUTO: iPods rule.
GOROG: What Napster's all about is choice. If you buy an iPod, you're stuck in a very limited world of iTunes. That's the only place you can go. So you cannot participate in a music subscription service like Napster that allows you, for $9.95 a month, instead of 99 cents a download, to have unlimited access.
CAVUTO: Yes, but in a way you can get around it. You can download music under the sites and put them onto a CD and then download that onto an iPod. So there are ways of...
GOROG: Well, you can, but you cannot move all of your tracks on an MP3 player, like you can at Napster, without paying 99 cents.
CAVUTO: What do you say to those legion of iPod fans don't seem to care? I mean, that was one of the hottest selling Christmas gifts around.
GOROG: Well, I'll tell you what. They'll seem to care pretty soon. This quarter, we're releasing a product called Napster To Go. For $14.95 we'll give you unlimited downloading and unlimited portability.
CAVUTO: Fourteen ninety-five a what?
GOROG: Fourteen ninety-five a month. Unlimited portability to your MP3. It would cost you $10,000 on iTunes to put 10,000 tracks on an iPod. Whereas, with Napster to Go, $14.95 a month, you can put 10,000 tracks on your favorite MP3 player without paying a dime.
CAVUTO: Do you know anyone who has downloaded 10,000 songs?
GOROG: I know a lot of people who will be as soon as they get Napster to Go.
CAVUTO: How long would it take you to listen to that much music?
GOROG: Well, I'll tell you, I've got a couple of thousand on my MP3 player now.
CAVUTO: What do you use? What's your MP3 player?
GOROG: I use a Samsung Napster 920. It's a beautiful device.
CAVUTO: Why did people think, fairly or not, Chris, that the iPod and now incarnations like the iPhoto are the standard. And all this other MP3 stuff is not? Is it just better marketing on Apple's part?
GOROG: Well, you know, it took awhile for the Windows media audio MP3 player manufacturers to get their act together, but they really have now. There's some really beautiful devices, great industrial design, great functionality. They're being very well reviewed.
CAVUTO: So some of these that are by Dell and some of the others, are they making inroads?
GOROG: They're making very good inroads. LDJ is selling quite well now.
CAVUTO: But there's still a lot of people who are illegally downloading music, right?
GOROG: Yes, unfortunately, there are. There's still a lot of pirates out there. But you know, 82 percent of our users come from us from having used the illegal peer-to-peer networks. And that's because they're sick and tired of getting the viruses and the spyware and the pop-up ads and all of that.
CAVUTO: It doesn't happen on Apple. You don't get any of that virus stuff with Apple.
GOROG: Yes. Nor do you get it on Napster.
CAVUTO: Yes. So the future of downloading music is here. I mean, for record stores and the message this might or might not send, what is it?
GOROG: Well, the future of online music is analysts have projected that it will be a multi-billion dollar business over the course of the next few years. Most analysts agree that subscription is going to be the biggest piece of that. That is our core business at Napster.
CAVUTO: And who gets the money from these subscriptions?
GOROG: Well, obviously, we share the revenue with the record labels.
CAVUTO: It's got to be a dwindling little pie.
GOROG: And they in turn share their revenue with the artists.
CAVUTO: So I'm curious with the 99 cent song deal that you and Apple and some others have on a per song basis, I mean, how much of that lands in your pocket?
GOROG: Well, we have about 10 percent margins in the single download business. But in the subscription business, we have about three to four times that.
CAVUTO: OK. Chris Gorog, thank you very much. Congratulations on your debut today.
GOROG: Thank you very much, Neil.
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