Napster: Microsoft, Windows Media Have Held Us Back

While continuing to profess that Microsoft's Windows Media and Digital Right Management (DRM) technologies will ultimately prevail in the market, Napster CEO Chris Gorog this week complained that his company's reliance on Microsoft has prevented Napster from effectively competing with Apple's iTunes Music Store and iPod. According to Gorog, Apple's seamless simplicity is hard to duplicate when different companies make the online service, MP3 player, and connecting software.

"There is no question that [Microsoft's] execution has been less than brilliant over the last 12 months," Gorog said during a talk at the Reuters Global Technology, Media and Telecoms Summit in New York on Wednesday. "Our business does rely on Microsoft's digital rights management software and our business model also relies on Microsoft's ecosystem of device manufacturers. It's a lot more complex to get organized properly than it is to build one device and one service as Apple has done."

Gorog's statements might be seen as sour grapes, since Microsoft recently picked MTV's upcoming URGE online music service to be integrated into Windows Media Player 11, its next major media jukebox software version. URGE was chosen over Napster, and even Microsoft's own MSN Music, because the company believes that only MTV has the cachet with young music buyers to overcome Apple's lead.

However, Gorog isn't exactly looking to separate Napster from Microsoft's technology. Indeed, he feels that the end-to-end ecosystem Microsoft has created in the digital media market will ultimately win out there just as it did the PC market. "It's always been painful at the introduction of new technologies. But it always takes shape like it's done in the past. Ultimately, the consumer electronics giants ... are all going to come to this Windows Media party. This is really going to be the ubiquitous format." Gorog added that Apple's early lead in the market was just that: An early lead. "To date, only 5 percent of [overall music] sales have migrated digitally," he said. "We are in the very, very early days of this."

Meanwhile, it's unclear whether Napster will be around to enjoy the purported shift to Windows Media technologies. The company is hemorrhaging cash, and it lost $17 million in the most recent quarter, up from $12.8 million in the same quarter a year before. Gorog denied, however, that Napster was looking for a buyer. "We have not ever sought any sale of our business," he said. "But we have received many enquiries from around the world and I think we well continue to receive many inquiries. We will do a deal if and when we feel it's in our shareholders' interests."