Best Buy Napster

Best Buy just purchased the music website Napster for $121 million in cash. Napster, as we all know, really started the headache for the music industry back in the late 90′s as people could share music from their libraries. It was eventually shut down and later replaced with a more respected business model that included charging for the music.

Napster is a subscription-based service now. You pay $12.95 a month and have unlimited access to over 5 million songs. Napster has also gotten into selling DRM-free (Digital Rights Management) downloads on the site as well. With over 700,000 current subscribers, they are bringing in over $9 million a year.

This is a pretty good move for Best Buy. One other side note is that Napster has $67 million in cash. So, the price tag was essentially $121 million – $67 million = $54 million. As Best Buy decreases their floor space for cd’s that aren’t selling, they are making room in a virtual sense with this acquisition. We read daily of new websites trying to obtain the proper licensing rights from the labels in order to sell music downloads. Best Buy just purchased the right to not have to go through all that. Napster already did it.

This also establishes Best Buy as a company looking to change with the times. While other retailers just continue to decrease floor space for cd’s, Best Buy has actually done something that relates to how people are now consuming music. It will be fun to watch how Best Buy uses this acquisition to its benefit by connecting in-store and web-based purchases.

In other news, Best Buy’s second quarter profit was announced today and it is down 19% to $202 million. Revenues were up however at $9.8 billion.

Stay tuned,
Erik
erikrostad.com