Napster Is Best Buy For Best Buy
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.
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It harks back to Blockbuster’s temporary and eventually withdrawn bid for Circuit City.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.