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Best Buy To Acquire Napster In $121M Deal

Best Buy will buy the money-losing Napster music-download and -streaming site for around $121 million, including Napster’s international operations and mobile-phone services.

“We can foresee Napster acting as a platform for accelerating our growth in the emerging industry of digital entertainment, beyond music subscriptions,” said Dave Morrish, Best Buy’s connected digital solutions executive VP. The chain will use the purchase to “leverage our existing relationships with the labels, the studios, and the hardware providers,” he added, calling Napster and its 700,000 subscribers “an outstanding addition to our already robust portfolio of partners and offerings in the digital music space.”

Information on Best Buy’s future relationship with Rhapsody, which currently powers the Best Buy music-download site, was unavailable. Information was also unavailable on whether Napster would continue to power the co-branded Circuit City/Napster download site.

The deal also seemingly runs counter to Best Buy’s burgeoning relationship with Apple. The latter’s iTunes store remains the leading music download site despite growing competition from AmazonMP3, the e-tailer’s low-cost, DRM-free (digital rights management) offering.

The transaction, expected to close during the fourth quarter, has been unanimously approved by the board of directors of Napster.

“This transaction offers Best Buy a recognized platform for enhancing our capabilities in the digital media space and building new, recurring relationships with customers,” said Best Buy president/COO Brian Dunn. “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.”

Napster offers streaming services as well as a la carte downloads and subscription-based downloads compatible with WMA MP3 players and with select cellphones. The company also recently launched MP3-format downloads free of DRM technology, and the company powers over-the-air music-download services for select cellular carriers, including AT&T and Cellular One.

Napster’s fiscal 2008 revenue of $127.5 million was up 15 percent over the prior fiscal year, but the company posted a loss of $16.5 million, which was down from the prior year’s $36.8 million loss.