XM Satellite Radio and digital music provider Napster Inc. Wednesday said they would launch a service that lets XM subscribers buy music they hear on XM radio, sending Napster shares up 7 percent.
The agreement comes one day after XM, which leads the nascent pay-radio market over rival Sirius Satellite Radio Inc., said Korea's Samsung Electronics Co. Ltd. would later this year sell two miniature music players that also receive satellite radio stations.
The plan calls for the joint launch of "XM + Napster" in the fourth quarter of 2005 in conjunction with the availability of new XM/MP3 digital music players that let users bookmark songs they hear on the radio for future purchases online.
After the MP3 player is connected to a personal computer, the new service will match the marked XM titles with songs in Napster's catalog so that they can be purchased.
"We believe this partnership provides Napster with a new avenue for both increased a la carte (digital music) track purchase and subscriber growth," Piper Jaffray analyst Gene Munster said in a note to clients.
Subscribers can also use the XM + Napster service to organize playlists using other songs from personal digital libraries and transfer these unique playlists to the XM players.
Currently, XM's MyFi portable radio sells for about $299.
XM subscribers without the new MP3 devices can also tag songs for purchase online through XM Radio Online, a Web-based service.
Analysts have long said satellite radio service was likely to converge with music players and other portable devices. Sirius in February said it had discussed with Apple Computer Inc. the possibility of adding its service to Apple's popular iPod music player, but Apple Chief Executive Steve Jobs did not see the need at that point.
After launching its wearable MyFi device in October, XM Chief Executive Hugh Panero said he believed one day a portable satellite player would be combined with portable players that store music, such as an iPod.
