Napster has played its second ‘get out of jail card’ and found a buyer after it began to flounder in its second life. In its first generation Napster was an operation that sponsored piracy over P2P networks, and then it went legit.
Now one of the biggest US retailers in Best Buy has paid $121 million for the operation which had been put up for sale a few weeks ago as subscriptions declined. Napster was doing fine in selling music subscriptions until each of the strong players aligned with mobile operators. Best Buy will use the Napster brand to build out its online brand.
Back in 2006 Napster was approached by anonymous buyers looking to acquire it. At the time it hired UBS to evaluate the offer and was said to have $97 million in the bank at the time and revenues of $100 million. Napster still has $67 million in the bank, making the price for the business a mere $54 million. Napster revenues for its last complete financial year were $127.5 million, but it made a significant loss, around $16.5 million on this.
Almost exactly a year ago a backlash of music services realigned against Apple’s iTunes, with RealNetwork’s Rhapsody tying up with MTV and going onto Verizon handsets, while Nokia was preparing the launch of the Nokia Music Store and Sony Ericsson its PlayNow portal. We said at this time that any music service that did not have the support of a cellular operator was going to go into a decline, and that included Napster.
Apple is already up against the subscription based Rhapsody service through RealNetworks’ partners, including Best Buy, SanDisk and TiVo. SanDisk is the second biggest retailer of MP3 players in the US, and they could all become further integrated into the service and the new brand.
Best Buy will also be acquiring Napster’s 700,000 digital entertainment subscribers, and “intends to use Napster’s capabilities and digital subscriber base to reach new customers with an enhanced experience for exploring and selecting music and other digital entertainment products over an increasing array of devices,” the company said.
The 140 Napster employees will all stay put in Los Angeles or the time being. Presumably Best Buy, which has previously sold subscriptions for other music services including RealNetworks Rhapsody, will now turn its focus to Napster.