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Napster Is Best Buy For Best Buy

Retail chain acquires $121 million MP3 store

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Best Buy will have some music to offer alongside all that portable gadgetry soon. The company announced this morning the acquisition of Napster for $121 million in cash.

Napster Is Best Buy For Best Buy

Along with Napster comes 700,000 digital entertainment subscribers, its Web-based customer service platform, and mobile services, and, by the sound of it, probably all of Napster’s 140 employees. Execs at the top, under conditions of the merger agreement, will continue to run what will be by the end of the fourth quarter a wing of Best Buy. As for the rest, the company says it doesn’t plan to make any significant changes and will not relocate. 

Best Buy cited Napster’s comprehensive and easy-to-use music platforms like streaming, subscription, and individual sales as what made the company attractive. No doubt digital content has a lucrative future, as demonstrated by Apple’s iTunes. Likely the company will be able to (and would be smart to) offer promotional deals on music alongside featured mobile technology in the future.

Brian Dunn, president and COO of Best Buy says as much. “Over time we hope to strengthen our offerings to consumers, who we believe will increasingly seek devices and solutions that enable them to access their content wherever, whenever and however they want.”

One can imagine buying an MP3 player and being able to load a selection of songs to it before leaving the store. But from the words of executive VP Dave Morrish, they may have broader plans. “We can foresee Napster acting as a platform for accelerating our growth in the emerging industry of digital entertainment, beyond music subscriptions. We’re very excited to add these capabilities to leverage our existing relationships with the labels, the studios, and the hardware providers.”

It harks back to Blockbuster’s temporary and eventually withdrawn bid for Circuit City. We may be seeing the emergence of a trend where electronic retailers and content providers increasingly team up as a real world answer to virtual world business models.

The price of $121 million seems kind of light for a company that brought in $127 million just last year, but as Best Buy was happy to point out, Napster actually posted a $16 million loss last year, which was a marked improvement over losing $36.8 million the previous year.
 

 

Napster Is Best Buy For Best Buy
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  • Craig

    @Jason

    This could be a large risk for Best Buy.  Napster has the base set that if reworked could become a profitable powerhouse on the likes of itunes.  It may never reach that high of a mark but could become a more household name again with the marketing efforts backed by Best Buy.   At the same time Napster could be heading downhill and this last ditch effort may blow up in Best Buys face.  How do you think they are going to improve the service and do you think this was a smart investment?

    Craig

    www.budgetpulse.com

    • Jason Lee Miller

      Craig,

      Far be it from me to make that kind of prediction. I think it makes sense on a certain level but I’m not privy to Best Buy’s overall strategy. I can only imagine that iTunes doesn’t have to be the only player in this market and with the right management moves, Napster can become profitable. Best Buy’s spending available cash, but not a lot of it thanks to Napster’s poor profitability in the past. I think they got a deal: a recognizable, iconic brand name in a growth industry. Pair that with ability to offer music in-house in the age of the declining CD (where Best Buy used to make money), and it positions them to regain losses to iTunes. So, yeah, I think it’s a good move. How it turns out for them? No clue. They’ll have to match or undercut iTunes to stay competitive, though.

  • Craig

    I agree, I think it was a risk worth taking with the asking price being relatively low.  Best Buy has grown substantially over the past 5 years and I can imagine they will have a nice business plan revolved around Napster complimented with a full charge marketing plan to improve its visibility and to take an aim at itunes.

    Craig

    www.budgetpulse.com

  • http://www.pactotransportes.com.br transportadora

    It doesn

  • http://www.transrocha.com Transportadora

    Good man..
    im back other time…
    need speak with u.. cya!

  • http://www.telasdeprotecao.com Telas de proteção

    I did not know that Napster was so strong

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