Napster (NASDAQ: NAPS), a music-download service, reported Q4 and full-year results on Wednesday. I must admit, for a very low single-digit stock, the results seemed pretty cool.

For the fourth quarter, revenues increased about 6% to $30.8 million and the net loss for the quarter came in at $0.10 per diluted share; this was much better than the loss of $0.20 per diluted share seen in last year's comparable quarter, which also included $0.03 attributable to discontinued operations. Briefing.com says this performance beat Wall Street's expectations by three pennies. For the full fiscal year, the top line increased a nice 15% to $127.5 million and the bottom-line loss was $0.38 per diluted share versus a net loss of $0.85 per diluted share in fiscal 2007. Perhaps even more important is the fact that Napster is, according to the release, generating positive cash flow, an achievement the company has kept up for four quarters now.

Of course, the big story this week is Napster's attempt at upping its game against competitors such as Apple (NASDAQ: AAPL), Wal-Mart (NYSE: WMT), and Amazon (NASDAQ: AMZN) by opening a music-download site dedicated to the sale of MP3 tunes (I wrote an post on the subject, and so did Richard Driver). This is meant to broaden the company's appeal by going after consumers who don't necessarily dig the subscription model. I'll tell you, though, it's going to be a long while before Napster supplants the dominance of the iTunes store.

Sony-Ericsson, the fourth-largest handset company, has announced it will open its own music store for consumers who buy its handsets. According to MarketWatch, the service "will be available in 30 countries worldwide by the end of 2008, starting from May. It will offer more than 5 million music tracks."

With Nokia (NYSE: NOK) and Apple (NYSE: AAPL) already in the same business, it is hard to see how the new Sony-Ericsson initiative will find customers. A number of cellular carriers have services of their own, which means that they compete with their own handset suppliers. Companies outside of the cellular business have also created music download stores for portable devices. The most notable new player in that market is Amazon (NASDAQ: AMZN).

The multitude of download services is not likely to make those getting in late much money. And having so many services in the market will confuse the consumer.

Douglas A. McIntyre is an editor at 247wallst.com.

Billboard reported yesterday that Target Corp. (NYSE: TGT) has entered a "special promotion" with Sony BMG, owned by Sony Corp. (NYSE: SNE) and Bertelsmann Music Group, to launch a digital music service offering high quality MP3 files for just one artist and one album: John Legend and his Live from Philadelphia album. The album comes without the anti-piracy Digital Rights Management software and sells for $10; there is no option to purchase single tracks. The CD version of the album is currently available at Target, as an "only at Target" special.

Song BMG seems ready to make the headlong entrance into high quality MP3 sales, even if this deal is a special promotion for an album only available at one retailer. Target is one of the limited companies also offering Sony BMG's new album cards that let buyers download high quality DRM-free MP3s. Sony BMG also entered a new agreement with Amazon.com (NASDAQ: AMZN) last week to sell the same quality tracks in the new MP3 store the online retailer has opened.

An interesting aspect of this promotion is that the album in question is available "only at Target" in both physical and now digital formats. This is not an unfamiliar method of selling an album: the Eagles' Long Road Out of Eden was only released in Wal-Mart (NYSE: WMT) stores and on the company's website. Previous albums released in only one physical retailer also saw release in various digital stores, like Collective Soul's Afterwords, released at Target and in Apple (NASDAQ: AAPL)'s iTunes Store. The verdict on this method is quite good, after Billboard chart regulations were changed in late October, which allowed the Eagles' album to hit number one above the most recent Britney Spears release, which was available in numerous outlets and online.

A commercial on this year's Super Bowl will promote free music downloads from Amazon (NASDAQ: AMZN)'s new MP3 store. The company has lined up the four largest record labels to offer music without digital rights management. Apple (NASDAQ: AAPL) only has a similar relationship with one -- EMI.

According to The New York Times, "Consumers who buy Pepsi drinks will receive points that can be redeemed for music downloads at a special section of the Amazon site. Amazon and Pepsi, a brand of PepsiCo (NYSE: PEP), will give away up to a billion songs."

The deal may be born from the music industry's hatred of Apple as much as from any love for Amazon. Industry estimates indicate that over 70% of all song downloads come from iTunes. That puts Apple in a position to dictate pricing and revenue sharing to the major music labels. With CD and physical album sales falling, that leaves music publishers in a bad position.

The dark side of the alliance with Amazon is that it has to work well. If music companies fail in their attempt to get around Apple, they may have to come crawling back to be "friends" with Apple again. That set of meetings may not go well.

Douglas A. McIntyre is an editor at 247wallst.com.

Amazon.com (NASDAQ: AMZN) and Sony BMG, a joint venture of Sony Corp. (NYSE: SNE) and Germany's Bertelsmann Media Group, announced yesterday that Amazon's new MP3 store will soon carry the label's entire catalog. This move makes Amazon.com's MP3 store the only digital store to offer consumer's Digital Rights Management-free MP3 tracks from all four major labels, with Sony BMG joining privately-held EMI Group, Warner Music Group (NYSE: WMG), and Vivendi (OTC: VIVEF)'s Universal Music Group.

Previously, Sony had announced a new promotion of album cards, which would allow listeners to download DRM-free MP3s, but it was limited to only about three dozen albums. The new agreement brings the entire catalog to Amazon.

The major point here is that Amazon's store now offers tracks that are playable on virtually any platform or device, from Microsoft (NASDAQ: MSFT)'s Zune and Apple (NASDAQ: AAPL)'s iPod to various off-brand players. In a press release given to Ellen Livshin of OutCast Communications, Amazon.com Vice President for Digital Music Bill Carr revealed this very fact: "Our Amazon MP3 customers will be able to choose from a full selection of DRM-free music downloads from all four major labels and over 33,000 independents that they can play on virtually any music-capable device." U.S. Sales head for Sony Thomas Hesse echoed these sentiments and added that the label is "excited to be working with Amazon as they continue to build new markets for digital music."

I've remarked before that the Amazon.com MP3 store would increase competition and drive the digital market forward, and with this announcement it seems that many predictions about the online music realm are being realized, albeit much earlier than expected. Many had pointed to mid-year as the time when DRM technology would disappear completely, but as we can now see, that timeline will be January, at least for one store.

The move is also a potentially devastating blow to Apple's iTunes Store, which had headed up the move away from DRM but has not great success, managing to score only the EMI catalog early last summer. Whatever the case may be, the Amazon.com move will increase the competition and hopefully begin the revitalization process the music industry needs. All they have to do is promote it and get consumers interested.

It seems that whenever you talk to someone about the music industry, the discussion eventually comes to the steep decline that has occurred in the past few years as the growth of digital downloads has affected the sales of CDs. Whenever I think about that decline, it's hard to see it simply because I still purchase a large quantity of CDs and only a handful of downloads per month. Still though, when I do download an album it always (and I mean always) comes from Apple Inc.'s (NASDAQ: AAPL) iTunes Store, primarily because I own an iPod.

While that may sound like a complaint, it really isn't because I have always found the iTunes Store very usable and the iPod very convenient, but the reality is that not everyone shares that opinion. For some users, the question of accessibility has become a major issue, and iTunes dominance in the market affects how accessible they view the market. This is not without warrant of course -- no matter the success of Apple with the iPod and iTunes; it is still a dominating product in a shrinking field. This view does not even take in the account of CD users.

With the beta launch this week of Amazon.com's (NASDAQ: AMZN) MP3 store, Apple finally has a competitor that will be able to challenge iTunes with sales and prices, not to mention that the DRM-free (Digital Rights Technology) downloads will be playable on the iPod, among other portable devices. Amazon's DRM-free tracks are not limited to music from EMI Group PLC and numerous independent labels, either. Certainly both of these differences will aid the new Amazon "iTunes" store, but the very fact that it remains an online store adding an MP3 section means that it should fare well against a store dedicated strictly to media digital downloads.

Universal Music Group, a division of Vivendi SA (LSE: VIV), announced plans yesterday to test the sale of tracks without Digital Rights Management technology with vendors Amazon (NASDAQ: AMZN), Google (NASDAQ: GOOG), and Wal-Mart (NYSE: WMT), according to Reuters. Notably absent from the trial is Apple Inc. (NASDAQ: AAPL)'s iTunes Store, but DRM-free MP3 tracks will still be playable on the iPod, in addition to various other players.

Universal's trial run is set to last through January, allowing the largest of the four major music companies to "analyze such factors as consumer demand, price sensitivity and piracy in regards to the availability of open MP3s."

With the test run, Universal joins EMI Group PLC (LSE: EMI) as the only two of the four major music labels to offer DRM-free tracks for sale. Warner Music Group (NYSE: WMG) has remained staunchly in favor of the technology, while Sony (NYSE: SNE)'s BMG Music Entertainment has made hints that it may too explore DRM-free tracks, but remains with the protective technology.

Apple's absence from the trial could hint at record labels' displeasure with the company, or perhaps it's simply a method to ascertain a test run away from the third-largest music retailer. iTunes has offered EMI's DRM-free tracks as part of a new "iTunes Plus" service since late May. Those tracks run 30 cents higher than DRM-encoded tracks, but it is not known whether Universal will adopt a similar price scale during its trial.

According to Billboard, the Recording Industry Association of America is pushing the major labels to "discuss whether a new physical format is needed as an alternative to the CD." Although the RIAA is attempting to make sure that any new format is shared among the labels, I can't help but wonder what the point is.

I've repeatedly noted the demise of the CD and the growth of digital sales in the three months I have blogged here. Frankly, I don't think the RIAA has the labels' best interest in mind by pursuing a new format to replace the CD. That format clearly already exists in digital downloads. Why not seriously re-invest in the CD as a marketable format, rather than seeking yet another competing format?

Remember when the CD came out? People cried out about the death of vinyl. They've been crying about the death of the CD for a while now (I'm in that group), but let's face it: Digital formats are here to stay. The MP3 and other media files that can be played on pocket devices like Apple Inc.'s (NASDAQ: AAPL) iPod and cell phones are easy to access, and though the transition from CD to digital file is slower than the switch from vinyl to CD was, it is still occurring (imagine what the iPhone may do to this situation). None of this counts to satellite radio subscribers who need neither a CD nor a portable player because their radio receiver is portable (this may be a generalization -- the few people I know that have XM or Sirius have stopped purchasing CDs and don't own MP3 players).

If the RIAA is worried about the compact disc, a new physical format is not the answer. Any new format will face the same competition with digital files that the CD is facing now. Either re-invest and change the CD or make the transition to digital files smoother.