1 The success of our Napster service depends upon our ability to add new subscribers and reduce churn.
2 Our online music distribution business has lower margins than our former consumer software products business. Costs of our online music distribution business as a percentage of the revenue generated by that business are higher than those of our former consumer software products business. The cost of third-party content, in particular, is a substantial portion of revenues we receive from subscribers and end-users and is unlikely to decrease significantly over time as a percentage of revenue.
3 We rely on the value of the Napster brand, and our revenues could suffer if we are not able to maintain its high level of recognition in the digital music sector.
4 We face significant competition from traditional retail music distributors, from emerging paid online music services delivered electronically such as ours, and from 'free' peer-to-peer services.
5 Online music distribution services in general are new and rapidly evolving and may not prove to be a profitable or even viable business model.
6 We rely on content provided by third parties, which may not be available to us on commercially reasonable terms or at all.
7 We must provide digital rights management solutions that are acceptable to both content providers and consumers.
8 Our business could be harmed by a lack of availability of popular content.
9 Our success depends on our music service's interoperability with our customers' music playback hardware.
10 We may not successfully develop new products and services.
11 We must maintain and add to our strategic marketing relationships in order to be successful.
12 The growth of our business depends on the increased use of the Internet for communications, electronic commerce and advertising.
13 If broadband technologies do not become widely available or widely adopted, our online music distribution services may not achieve broad market acceptance, and our business may be harmed.
14 Our network is subject to security and stability risks that could harm our business and reputation and expose us to litigation or liability.
15 If we fail to manage expansion effectively, we may not be able to successfully manage our business, which could cause us to fail to meet our customer demand or to attract new customers, which would adversely affect our revenue.
16 We may be subject to intellectual property infringement claims, such as those claimed by SightSound Technologies, which are costly to defend and could limit our ability to use certain technologies in the future.
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