Napster Operating Loss Narrows

Napster Inc., an online music service, said Wednesday that its loss from continuing operations narrowed in its fiscal third quarter as sales increased more than threefold.

The loss from continuing operations was $16.4 million, or 47 cents a share, compared with $17.9 million, or 64 cents, a year earlier, the Los Angeles-based company said.

Sales increased to $12.1 million in the period ended Dec. 31 from $3.6 million.

The company, which sold its Roxio software unit to Novato, Calif.-based Sonic Solutions on Dec. 17, increased the number of subscribers by 50% in the quarter to end the year with 270,000. Napster accounted for the results from Roxio as discontinued operations.

The company reported third-quarter net income of $12.8 million, or 36 cents a share, including profit of $29.2 million, or 83 cents, from the discontinued operations. Napster had a net loss of $25.6 million, or 92 cents, a year earlier.

This month, Napster said it would spend $30 million to promote Napster to Go, a monthly subscription service that lets customers download an unlimited number of songs from an online catalog, to compete with Apple Computer Inc.’s iTunes and Microsoft Corp.’s MSN online store. The service charges customers a monthly fee of $14.95.

The company said it expected revenue to increase to $14 million in the fiscal fourth quarter.

Shares of Napster fell 79 cents to $7.86 on Nasdaq. They have gained 85% in the last year.