Napster: Going DRM-Free, Too. But Not For Subscription Service

Napster will start selling its download catalog in MP3 format sometime this spring, the WSJ says. A nice arrow in the quiver of anti-DRM movement, but completely irrelevant for moribund Napster -- because the company isn't in the business of selling digital downloads.

Instead, Napster derives almost all of its revenue from its subscription service, which lets consumers rent its entire catalog for a monthly fee. It's a great idea with limited appeal, even though Napster (NAPS), RealNetworks (RNWK), Yahoo (YHOO) and others have struggled for years to make it mainstream. That business also depends on DRM restrictions, and Napster isn't getting rid of those.

Could going DRM-free boost Napster's download revenue? Maybe, although we're skeptical that most consumers are aware of DRM. But even if it does, it won't help the company significantly, since selling individual songs is a low-margin business at best. Napster CEO Chris Gorog tells the WSJ that the move should help "to break down the dominance of [Apple's] closed iPod-iTunes system," which is nice, but we worry that by the time that AAPL's dominance is over, Napster will be long gone.