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Napster Posts Record Revenues and Positive Cash Flow


WEBWIRE

LOS ANGELES – Napster (Nasdaq: NAPS) today reported financial results for its fiscal first quarter ended June 30, 2007.

“Napster hit record revenues of $32.3 million, posted its first quarter of positive cash flow and substantially narrowed its loss on a sequential and year-over-year basis,” said Chris Gorog, chairman and CEO of Napster. “Generating positive cash flow is a significant milestone for Napster as we continue our drive toward profitability. Napster has substantially lowered its subscriber acquisition costs, and the benefits are clear in our results. With Napster now generating cash and with over $67 million on our balance sheet, we believe we are in a strong position to drive our business forward for the foreseeable future and are well positioned to maximize the opportunity presented by the hundreds of millions of Napster-compatible cell phones that are projected to hit the market.”

Net revenue for Napster’s first quarter of fiscal 2008 grew to $32.3 million, up 15 percent from $28.1 million in the prior year quarter and up from $29.1 million in the fourth quarter of fiscal 2007. Net loss for the first quarter of fiscal 2008 was $4.2 million, or $0.10 per basic and diluted share, compared to a net loss of $8.5 million, or $0.20 per basic and diluted share, in the fourth quarter of fiscal 2007 and to a net loss of $9.8 million, or $0.23 per basic and diluted share, in the first quarter of fiscal 2007.

Napster ended the first fiscal quarter with $67.1 million of cash, cash equivalents and short-term investments, an increase of $600,000 from the prior quarter.

Excluding the anticipated decrease in university subscribers, Napster’s paid subscriber base decreased a net 2.5% in the first quarter reflecting normal summer seasonality. First quarter subscriber results incorporate the loss of 40,000 university subscribers partially offset by certain foreign mobile subscribers that had not been reported to Napster by its partners as of March 31, 2007.

Business Outlook

“We expect to deliver another cash flow positive quarter in our second fiscal quarter with revenues of approximately $30 million, reflecting a 20% year-over-year revenue increase during the slower summer season. We are projecting a significant up-tick in revenue growth in the second half of our fiscal year as our marketing partnerships and mobile initiatives gain traction. Specifically, we expect revenues to increase to at least $33 million in the December quarter,” said Nand Gangwani, Napster’s chief financial officer.

Corporate Highlights

Napster recently:

* Announced a broad marketing campaign with Toshiba America Information Systems, Inc., Digital Products Division, that will put Napster To Go at the fingertips of customers who purchase Toshiba Satellite(R) and Qosmio(R) notebook computers in the United States. Napster will be pre-loaded on Toshiba’s notebook computers for one-click access straight out of the box.
* Launched Napster Mobile’s unlimited over-the-air (OTA) music subscription service with NTT DoCoMo, Japan’s largest wireless carrier. The service is now available across the complete line of DoCoMo’s 904i handsets, including new Napster-compatible products from Mitsubishi, Fujitsu, NEC, Panasonic and Sharp. This marks the first-ever deployment of the ground-breaking Napster Mobile service that seamlessly integrates OTA subscription and the PC-based Napster To Go subscription service for one price.
* Announced that Napster Mobile has been deployed with nine carriers across Asia, the U.S., and Europe on a wide range of top handsets.
* Announced with Ericsson an agreement with Swisscom Mobile, the largest Swiss mobile operator, to become that company’s exclusive mobile music service provider with Napster Mobile. The service will give Swisscom Mobile subscribers access to the easy-to-use Napster-branded mobile music service and its extensive music selection.

Conference Call Information

The Napster first-quarter teleconference and webcast is scheduled to begin at 2:00 p.m. PDT on Wednesday, August 1, 2007. To participate on the live call, analysts and investors should dial 800-257-7087 at least ten minutes prior to the call. Napster will also offer a live and archived webcast of the conference call, accessible from the “Investor Relations” section of the company’s Web site at http://investor.napster.com.



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