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LOS ANGELES (AP) –Napster Inc. closed out its fiscal fourth quarter with subscriber rolls at an all-time high and a new marketing approach meant to keep costs down for the online music retailer.

Still, the company said its loss widened during the quarter due to the impact of a one-time gain in the year-ago quarter.

Napster said Wednesday that its net loss was $8.5 million, or 20 cents per share, in the period that ended March 31, compared with $4.4 million, or 10 cents per share, in the year-ago period.

Excluding the after-tax impact of a $5.4 million gain from last year’s sale of Roxio, its CD-burning software division, Napster narrowed its fourth-quarter loss to $1.3 million.

Revenue rose 9 percent to $29.1 million, compared with $26.8 million in the same quarter last year.

Wall Street’s consensus estimates anticipated a loss of 20 cents a share and $27.9 million in revenue, according to Thomson Financial.

Napster’s results were released after markets closed. Its shares fell 15 cents, or 3.7 percent, in extended trading after they rose 9 cents to $4.07 in regular trading Wednesday.

During a conference call with analysts, Napster Chairman and Chief Executive Chris Gorog boasted the company was in its strongest position since launching a little over three years ago.

”As we head into fiscal 2008, we are acquiring customers cheaper and keeping them longer. We are growing revenues while reducing expenses. We are attracting more world-class partners than we ever have before,” Gorog said.

Napster said it closed the quarter with a worldwide paid subscriber base of 830,000, including subscribers at universities and some 225,000 former AOL Music Now users.

The number of paid Napster subscribers rose 37 percent from the year-ago quarter, the company said.

For the fiscal year, the company reported a net loss of $36.8 million, or 85 cents per share, compared with a loss of $54.9 million, or $1.28 per share, during the previous year.

Total net revenue increased 17 percent to $111.1 million from $94.7 million in fiscal 2006.

The company said it ended the fiscal year with $66.6 million in cash, cash equivalents, foreign currency conversion in-transit and short-term investments.

Looking ahead, the company said it expects to post a net loss in the first quarter between $6 million and $7 million, or between 14 and 16 cents per share. It projects revenue of $31 million.

In recent weeks, Napster has entered into marketing partnerships with AT&T Inc., Circuit City Stores Inc. and Motorola Inc. The deals should help Napster cut back on its marketing dollars and help drive new subscribers to its service, the company said.

Already, the partnerships have helped Napster cut back on advertising spending. The company posted lower operating expenses than in any previous quarter.

Napster is also banking on adding customers as the number of people using music-enabled mobile phones grows.

”We believe music phones will replace standalone MP3 players, and Napster stands to gain substantially from this shift, as we will, for the first time, have a massive device ecosystem to attach to,” Gorog said.

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Napster Inc.: http://www.napster.com

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