Comments for Best Buy Acquires Napster: But Why?

Best Buy Acquires Napster: But Why?

2008-09-15T16:24:21Z

Electronics retailer Best Buy today announced that it plans to acquire music retailer Napster for $121 Million. According to the Wall Street Journal, the deal values Napster at $2.65 a share, almost double its closing price on Friday. However, while Napster was a major success story when its name was still synonymous with illegal P2P file sharing, it never quite caught on with users after it turned into a legitimate business. Judging from the press release, Best Buy is mostly interested in Napster's mobile business, where, with the help of Best Buy's marketing power, the company might just be able to create a profitable niche for itself.

]]> Users never really warmed up to music subscription services. Napster, for example, only had about 700.000 subscribers and, according to a recent report by Jupiter Research, its subscriber numbers have actually been falling. Most consumers still prefer to own their music, even though subscription services, with their all-you-can-eat plans, often offer a good value for those who tend to have a high turnover in their music collection. In May, Napster started selling DRM-free MP3s, but judging from this sudden sale of the company, few users must have chosen Napster over Amazon's MP3 store or Apple's iTunes.

It's All About Mobile

Best Buy must think that it can push Napster to be a profitable part of its company, but over the last few years, the company never turned a profit. Best Buy, of course, does have a considerable amount of marketing power both in its ubiquitous big-box stores, as well as through TV and print advertising. Judging from the wording of the press release, it seems Best Buy is mostly interested in Napster's mobile business. In the mobile business, Apple doesn't have the dominant market position it has in the regular MP3 player market, so by positioning Napster there, Best Buy might be able to carve out a lucrative niche for the service.

Bundles

Chances are that Best Buy will start bundling Napster with anything from toaster ovens to overpriced Monster cables in the coming months. The holiday season, after all, is right around the corner and if Best Buy still wants to get some value out of the acquisition this year, they will have to act fast.

Comment from Mohamed Marwen Meddah on 2008-09-15

2008-09-15T19:47:13Z

I'm not too sure this is such a smart move; Napster is no longer what it used to be back in its illegal P2P file sharing heydays, even the brand has pretty much dwindled.

Yeah, they can try to push it through their stores and through bundling it with anything and everything, but I don't think it will work that well anyway.

Not sure if the mobile part of it could work and make the deal worth it, but my feeling is that it won't be as good as they wished for.

Comment from Nat on 2008-09-15

2008-09-15T21:00:03Z

I guess the winner for this deal is none other than Napster.

Nat
www.workersinc.com

Comment from Alex on 2008-09-15

2008-09-15T23:54:53Z

Napster might not be the file downloading force that it was 8 years ago, but still, almost every internet user knows the name and knows how to use it. How many other P2P clients can you say that about?

That being said, not sure if the brand is worth $120 MM, maybe half that.

Comment from John Dingler, artist and patriot on 2008-09-15

2008-09-16T00:00:14Z

BestBuy already had a music service, so now it will have two of them. But why? The article does not give a compelling reason.

Comment from Calif Super Lotto on 2008-09-16

2008-09-16T18:22:23Z

Well they really want to have their own digital music store as apposed to working off of Rhapsody which hasnt been working to well for them so this will be interesting to see how this plays out.