Napster's board has unanimously accepted a takeover bid from US retail behemoth Best Buy, worth $120m. Thus ends a bumpy four-year ride as an independent company.
Like Frankenstein's monster, the reanimated Napster was constructed from the parts of formerly deceased music companies. Software vendor Roxio acquired the assets of the bankrupt rebel P2P outfit for just $5m in late 2002, and acquired the remains of Sony's unsuccessful music service PressPlay six months later. After the injection of electricity, and $20m, Napster went live five years ago this month.
Promoting a rental music service has been hugely expensive. Faced with marketing expenses that at times reached 85 per cent of its total spending, Napster has not been profitable. It has been better at managing its cash than many suppose, however: In its most recent quarter, Napster lost $4.4m on revenue of $30.3m - yet ended the quarter with around $70m in cash.
Yet the market trend isn't promising.
Revenues are static, year-on-year, and much of Napster's steady revenue (and 700,000 subscribers) comes via higher education deals, where a subscription is compulsory. If the mooted plan to legalise P2P in US universities through collective licensing becomes a reality, than that revenue source is set to disappear.
Not surprisingly, then, Best Buy's president talked up Napster's "platform" and mobile potential in a prepared statement - and said nothing about its consumer brand.
"Best Buy is uniquely positioned to benefit from Napster's digital entertainment distribution platform. We are looking forward to combining our digital media capabilities with Best Buy's resources and global network to extend our digital content platforms," he said.
I think we get that message.
As an indication of how hard Napster tried to convert the public to paying for rented music, here's a poster campaign from 2005:
That worked out well, then.
Best Buy recently pumped $1bn into a joint venture with Carphone Warehouse to expand the mobile phone chain into consumer electronics. ®