Napster Hits Record Fourth Quarter Revenues of $29.1 Million and Completes Fiscal 2007 Leading the Industry in On-Demand Music Subscribers

LOS ANGELES, Calif.– Napster (Nasdaq: NAPS) today reported financial results for its fourth quarter and fiscal year ended March 31, 2007.

Net revenue for the fourth quarter of fiscal 2007 grew to $29.1 million, up 9 percent from $26.8 million in the prior year quarter and up from $28.4 million in the third quarter of fiscal 2007. Net loss for the fourth quarter of fiscal 2007 was $8.5 million, or $0.20 per basic and diluted share, compared to net loss of $9.5 million, or $0.22 per basic and diluted share, in the third quarter of fiscal 2007. Net loss narrowed $1.3 million in the fourth quarter of fiscal 2007 compared to the same quarter of fiscal 2006 excluding the after-tax impact of a $5.4 million gain from the sale of the consumer software division as recognized in the fourth quarter of fiscal 2006.

Net revenue for the fiscal year ended March 31, 2007 was $111.1 million, up 17% from $94.7 million in fiscal 2006. Net loss for fiscal 2007 was $36.8 million, or $0.85 per basic and diluted share, compared to net loss of $54.9 million, or $1.28 per basic and diluted share, in fiscal 2006.

“Napster concludes fiscal 2007 as the most popular on-demand music subscription service with healthy annual revenue growth and a significant decline in cash burn,” said Chris Gorog, chairman and CEO. “Looking ahead to fiscal 2008, the company will remain deeply focused on bottom-line improvement and will continue to capitalize on our strong market share position as we enter the new era of music-enabled cell phones. We expect this trend to be a substantial contributor to Napster’s future growth based on our partnerships with the leading wireless carriers and handset manufacturers worldwide.”

At the end of March 31, 2007, Napster’s total worldwide paid subscriber base was 830,000, including university subscribers, Napster Mobile subscribers, Napster Japan subscribers and the AOL Music Now subscribers who transitioned in March 2007. The number of paid subscribers grew 47 percent from the third quarter of 2007 and 37 percent year over year.

Napster ended fiscal 2007 with a total of $66.5 million of cash, cash equivalents and short-term investments.

Business Outlook
“We believe that Napster is very well positioned strategically in the market, and with the successful integration of the former AOL music subscribers into Napster we expect revenue will increase to approximately $31 million in the June quarter. Our fourth quarter cash burn from operations decreased to approximately $3.3 million, excluding our one-time payment to AOL, and we expect that quarterly cash burn will further decline in fiscal 2008, reflecting our focus on lowering expenses while maintaining our revenue growth trajectory,” said Nand Gangwani, Napster’s chief financial officer.

Corporate Highlights
Napster recently:

* Announced a joint marketing agreement with Motorola, where Napster will be Motorola’s exclusive in-box digital music service partner, to develop programs designed to make it easy for mobile consumers to join the Napster community and load tracks from Napster’s over three million-song catalog to ROKR Z6 and other future Motorola music-enabled and optimized handsets. The companies will also explore the creation of unique and exciting new bundled music experiences at retail for mobile music enthusiasts.
* Announced that it will soon launch the first deployment of its unlimited over-the-air (OTA) music subscription service through Napster Japan, a joint venture between the company and Tower Records Japan, with NTT DoCoMo, Japan’s largest wireless carrier.
* Joined with Circuit City Stores to offer a new digital music service, Circuit City + Napster, for consumers to explore and enjoy music.
* Partnered with AT&T Inc. to give customers free unlimited access for one year to more than 3 million song tracks through Napster To Go(R), allowing consumers to customize playlists on their PC and seamlessly transfer music to compatible wireless phones and music devices. AT&T is supporting the promotional offers with an extensive, integrated marketing campaign including national TV, radio, print and online advertising, and in-store merchandising at AT&T wireless retail locations.
* Migrated AOL’s Music Now paid subscriber base into Napster’s award-winning digital music subscription service. Napster is now the exclusive music subscription provider integrated into AOL Music.