Napster (NSDQ: NAPS), which last week quietly announced increase in its subscription music service, has now announced it will convert its downloads store to MP3 only by Q2 of this year. This will only be for single and album downloads, NOT its subscription music service. Napster’s downloads are probably small, though it does not break out those revenues separately...it also said in the statement that it would continue to focus primarily on its subscription business.

It did not say which labels will come on board, but three labels—Vivendi’s (EPA: VIV) Universal Music Group, Warner Music Group (NYSE: WMG) and EMI—have started selling MP3 format music downloads through Amazon.com (NSDQ: AMZN) and other retailers, and Sony (NYSE: SNE) BMG is expected to come on board soon. More in the release.

WSJ: The company is yet to finalize agreement with some of these four music labels. CEO Chris Gorog said the company expects the move to MP3s to boost its download business, but he said the larger significance is the promise “to break down the dominance of the closed iPod-iTunes system.”

• Napster Increases Service Prices; Market in Wait-And-See Mode
• Sony BMG Joining Amazon Music Store; Final Major To Try DRM-Free: Report