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updated 4/20/2007 6:16:37 PM ET 2007-04-20T22:16:37

Online music retailer Napster Inc. said Friday it is teaming up with electronics retail chain Circuit City Stores Inc. to launch a new digital music service.

The co-branded service, called Circuit City + Napster, will be powered by Los Angeles-based Napster’s subscription service, but will offer some exclusive tracks on a weekly basis not available to Napster users.

Financial terms of the deal were not disclosed.

Unlimited access to the service costs $14.95 a month. New subscribers will receive the first month of access free and five free song downloads.

Individual song downloads can be purchased for 99 cents each. Prepaid download cards will also be available in-store and online in bundles of 15, 25 or 60 tracks.

Individuals can sign up for the service beginning April 29.

At least for now, the new service won’t be tied to any specific digital music player sold at Circuit City, said Napster spokeswoman Becky Farina.

Richmond, Va.-based Circuit City’s foray into online music follows a similar move by rival electronics chain Best Buy Co.

The Minneapolis-based retailer launched a digital music store using RealNetworks Inc.’s Rhapsody service last year.

The partnership with Napster should help Circuit City generate revenue and cement establish itself as a destination for online music, not just CDs. That’s key, because many music retailers that relied on selling CDs have gone out of business as CD sales have tanked since the early part of this decade, said Phil Leigh, senior analyst at Inside Digital Media.

“Best Buy and Circuit City have recognized the trends here,” Leigh said. “In Best Buy’s case, they sell more CDs than Circuit City, but it was clear their CD business was shrinking.”

For Napster, the deal gives the company a new storefront and a fresh marketing push that may help boost its subscriber rolls. In February, the company reported a total worldwide paid subscriber base of about 566,000.

Earlier this year, Napster stepped up its efforts to boost subscriber count by striking a deal with Time Warner Inc.’s AOL Music that made Napster the exclusive music subscription provider for AOL.

Still, Napster remains far behind market leader Apple Inc.’s iTunes Music Store, preferred by many because it is the only digital music service that works with the popular iPod music player.
“I would expect this to work out pretty well,” Leigh said of the co-branded Circuit City-Napster service. “But it’s not going to change Apple’s position in the marketplace.”

Circuit City shares rose 53 cents, or 2.9 percent, to $18.76 Friday on the New York Stock Exchange. Napster shares rose 3 cents to $4.14 on the Nasdaq.


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