Napster Posts Loss, Beats Wall St. Estimates

Online music service Napster Inc. posted a wider quarterly loss Wednesday but beat Wall Street estimates as a result of improved gross margins and increased subscriptions and a la carte sales.

The Los Angeles-based company posted a fiscal first-quarter net loss of $19.9 million, or 46 cents a share, compared with a loss of $2.6 million, or 8 cents, a year earlier.

Revenue grew 167% to $21 million.

Analysts on average had forecast a loss of 61 cents a share and revenue of about $19.9 million.

For the quarter ended June 30, paid subscribers, excluding university subscribers on summer break, grew to 402,000 from 356,000 in the previous three-month period.

Shares of Napster, which also announced a joint venture with Tower Records Japan to launch its first service in Asia, rose 3% after hours to $5 a share, after closing at $4.85, down 24 cents, in regular trading.

Some analysts were expecting diminished results from Napster in light of increased competition from Yahoo Inc., which launched a lower-priced music service in the spring.

“In light of the Yahoo pricing pressure, they had a good quarter,” said P.J. McNealy, analyst with American Technology Research.