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Napster sidesteps credit cards

The online music retailer unveils prepaid cards so that people can download songs sans credit cards. The marketing move is designed to cash in on the holiday shopping season and to reach teens.

Online music retailer Napster unveiled prepaid cards on Monday, so people--particularly teens--could download songs without using credit cards.

The $14.85 card, which will offer 15 downloads, is set to go on sale in mid-November at 14,000 retail outlets. It looks like a credit card and has a scratch-off surface concealing a personal identification number to activate the card. The company is working with Interactive Communications, or InComm, a company that specializes in prepaid products, on the marketing plan.

Roxio, the new owner of the formerly free file-swapping service, has adopted the per-song and subscription model. At the same time, it is going a step further by establishing direct relationships with hardware and software makers. Last month, Microsoft announced that it would feature Napster on its Windows XP Media Center Edition 2004 operating system. And Samsung is co-branding its new portable player with Napster. Roxio has also announced that Napster will be preloaded on some new Gateway computers.

While gift giving is an obvious tie-in for the holidays, the prepaid system could help the company target a key customer base for downloadable music: teenagers.

"The prepaid card initiative is critical because it eliminates a significant barrier to the legitimate digital music market: how to involve teens and millions of other Americans who don't have credit cards," Napster President Mike Bebel said in a statement.

Under the prepaid card arrangement, Napster is able to avoid the fees credit card issuers charge merchants for handling the payment process. However, it remains unclear whether Napster will pay InComm a per-transaction fee.

Napster declined to discuss the economic terms of its InComm deal.

But according to Napster spokesman Seth Oster, "No cost will be passed along to the customer."

Roxio announced the music card before the Napster 2.0 software launch, set for Wednesday.