Following all that speculation regarding the future of subscription-based digital music service Napster, and reports that management there were trying to find new owners to take the company out of public ownership, US electronics retailer Best Buy Co has announced plans to buy the company outright for $121 million.
It is offering existing shareholders $2.65 per share, which is almost double the value of a share in the company on Friday, so presumably most people with a stake in the firm will take up the offer pronto. The deal has seemingly been approved by the Napster board, who have reportedly entered into employment contracts with Best Buy which will see them stay with the download service, which has struggled to compete in the iTunes-dominated digital music market, despite the Napster brand’s heritage.
As previously pondered, Napster’s subscription-based business model, as opposed to Apple’s pay-per-track model, has never quite caught the imagination of the mainstream digital music consumer, despite many in the music business believing all-you-can-eat subscription services are the future of the record industry.
Given that theory, there is an argument that Napster – who have been more successful than most in the albeit so far niche interest subscription market – could be well placed to capitalise on any shift in consumer preferences towards subscription systems. However, that market is about to come a lot more competitive, with big players like Sky planning similar services, and propositions like Nokia’s Comes With Music potentially threatening the Napster proposition by allowing users to keep downloaded tracks even when their subscription lapses (albeit with reported DRM and therefore handset / player limitations).
Either way, presumably Best Buy reckon there is some value in Napster’s brand, expertise and 700,000 signed up subscribers. As an electronics retailer with its own device brands they may see Napster as a way to lock consumers to digital music hardware bought in their stores – in much the same way iTunes locks consumers to iPods, and Comes With Music will lock people to Nokia phones. And, in fact, it may be the mobile potential of the Napster service that most interests Best Buy, especially in the UK given their recently acquired 50% stake in the Carphone Warehouse retail chain.
