Napster and Yahoo are fighting hard to become the world's second online music service.
Apple's iTunes leads the pack with 82 per cent of the music download market, leaving Napster, Yahoo, Microsoft, Loudeye and RealNetworks fighting for the remaining 18 per cent, according to Piper Jaffray.
Despite the difference in market share, the analysts see Napster as an outperforming stock, and observe the company to be effectively defending itself against Yahoo.
We believe the Napster brand is the company's core asset and we expect that in the next two quarters we will see increasing partnerships, which will improve profitability," the analysts said.
Looking forward, analysts expect one of two scenarios: either the service will grow more popular, or it will be acquired by a competitor or a company looking for an easy way to get into the music market.
Piper Jaffray analysts expect Yahoo to continue to offer subscription services at a discount rate.