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Bertelsman Seeks to Buy Napster
jbc writes: "SF Gate is one of several places carrying the story that Bertelsman, which already invested a significant amount of money in Napster, is now looking to buy Napster outright. This is based on an interview with Bertelsman CEO Thomas Middelhoff that was published last week in the German newspaper Die Welt."
You can have it, we're finished playing with it by now. :)
It'll probably end up like that Simpsons episode where Germans buy the Springfield nuclear plant from Mr. Burns, then when they realize it's completely broken down and profitless, they're forced to sell it back for a fraction of what they got it for...
By owning it, Bertlesmann can easily enforce the licenses on any BMG artist. With a label owning Napster, it lens it some legitimacy, and other labels may follow suit and sell licenses for their artists as well.
An interesting experiment, indeed.
If I weren't nailed to the penis, I'd be pushing up the daisies!
Perhaps Bertelsman is taking a different strategic view of what is going on? They see the "other 4" going down an increasingly miserable road and decide that they are going to differentiate themselves by trying a sort-of napster like model (where piracy becomes a cost of doing business - like software). That's my guess.
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- 386 12mhz, 20mb HDD, 640k RAM and a copy of Commander Keen
This comes on the heels of dozens of other mergers since the 1996 Telecom Deregulation Act. While I agree that Napster is not terribly relevant these days, it does look like the media titans are gradually getting more savvy about the Internet. Will they buy up the current crop of music-trading networks next?
Michael Powell of the FCC is actually actively lobbying to tear down the rules against greater concentration of media mergers. And of course the RIAA and the companies that are buying up all the radio stations (Clear Channel, Infiniti, etc.) are helping to shut down webcasting. Pretty soon the media landscape could look something like this...
As long as we're selling things that no one uses anymore, I've got a stairmaster, 3 type of ab machines, and an upright piano that you might be interested in...
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Kind of interesting that Napster can now be bought for just 15 million dollars (or 80 + 15 million what have you). Compare that to them offering to pay the music industry a billion dollars just a short while ago, this pretty much says it. Naspster is dead.
-- Kircle
Bertelsman, which already invested a significant amount of money in Napster, is now looking to buy Napster outright.
I wonder if they'd be interested in buying a 1982 AMC Spirit with a blown engine. My neighbor's got one just sitting there, and these people sure sound like suckers to me.
--saint
well how about the US First Amendment? seeing that congress does not want to use it any longer *cough*SSSCA/DMCA*cough* :-)
I am the Alpha and the Omega-3
Enough is enough, no more April Fools jokes!!
When that happens in real life, instead of selling the company back, everyone sells their old stock certificates and t-shirts for camp value.
If there were to be an exception, though, it would be napster - for one moment, the most visible symbol of online freedom.
that record companies will sue Napster's ass off then buy them back so that they will have a brand name + infustcture (sp) for their own music distrubition channel?
kawai
The only way napster could get people to pay for a service provided freely by others is to make a vast improvement. Looking at what they have now, they offer no new features over Gnutella clients, except perhaps chatting and "paying the artists" which isn't enough to make most people pay for it. The only reason to use it is to clear your conscience. Just buying the cd (used, possibly) is cheaper for that.
Usually exercise machine purchasers fall into three categories:
Many adults like myself take a civil disobedience type approach to music sharing. I buy as many CDs (if not more) than I used to, but I unabashedly use these services to make sure those CDs I buy are going to be worth it. People that fall more or less in this category (I think) are waiting for a good digital music policy from the major labels(although there seems to be no light at the end of this tunnel).
However, as I've seen with my little sister and her friends (and others of the pre-teen to teen age group), they have "grown up" on free music whenever they want it, so "why buy the CD?". At this young age, none of them had given any thought (nor had I at that age) to Intellectual Property and the other issues regularly discussed in the heyday of Napster.
It is the difference between "The artist certainly has rights, but the industry is subverting the process to their substantial benefit, and this must be altered." and "Hey, we have a right to free music, how dare you take it away?"
And obviously, this demographic is too large to ignore.
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You can have no business model, no immediate prospects for profit, be crippled by lawsuits, and have the little service you offer stifled by court order - yet still walk home with $15 million extra in your pocket.
I bet Shawn Fanning has no regrets.
Bertelsman bought myplay on May 30th, 2001. Fast forward to early 2002, Bertelsman closed myplay's offices, laying off all but a couple of engineers in charge of wharehousing the software.
Is this some new tactic to buy and close music software companies?
- You don't know how to maintain a station wagon either!
<state the obvious> Napster is not the phenomenon, filesharing is. </state the obvious>
However, that they are ready to pay between $15 and $30 million USD makes me wish I had written a peer-to-peer with central DB software client. Yikes.
Conversion Rate Optimisation French / English consultant
So, first the music industry (BMG included) pummels Napster into oblivion with lawsuits, then once the company has had enough injunctions to keep it from operating at a profit, and once their stock is on the verge of being downgraded to junk status, they buy them up.
Isn't there a law against that already?
The first record company to properly embrace the internet may be the first to recieve money from me when I end my boycott of the RIAA.
.WMA format' or 'you cannot legally burn it to a CD.'
It's possible that they'll revamp Napster and turn it into something interesting. For example, what if they put up a server with tons of bandwidth and a ton of interesting songs available, complete with a reasonable per-song price. That'd be far better than any other record label is producing nowadays and would be a step in the right direction.
I just hope they don't put stupid restrictions on it like 'you have to use
Maybe I'm being over-imaginitive, but it'd be nice to see a music company show some interest in the new market created by the internet, instead of trying to shut it down.
"Derp de derp."
It will never work. Napster is a dead cow, the brand name in this case is tied with keywords like "controversy" and "piracy" in the mind of the average consumer -- and "server down"/"lame" in the mind of the l33t. So buying it for its brand name is not too smart. And the code was not much to begin with. Why bother?
1) Lift up toilet seat
2) Empty wallet into toilet
3) Flush
4) Repeat as you feel is necessary
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Oh yeah, .com economics. I'd almost forgotten. Actually, this looks a lot like a sort of weird poker game:
The one thing that I would bet on will be that the first thing Bertelsman does is to have a good hard look at Napster's accounts and figure out what the hell did happen to that $80 million. They can't have spend it all on lawyers and a crackpot crippleware scheme, surely? Surely!
If you were blocking sigs, you wouldn't have to read this.
The problem of the day is the decentralization of power. Groups like the RIAA, and individuals like Senator Hollings have caused this to be be problem of the day (for us, at least ... there are others with much more urgent problems, but we are us).
.. buy direct!" works, but the number of such is quite limited. Direct purchase of music over the internet? Possible. CDs seems a more likely format than MP3s, if only for quality reasons.
I would be quite pleased if I saw a decent way to implement the decentralization of authority. Since I don't, I look at every social challenge to centralized authority as a possible good thing. The RIAA is going for maximal visciousness and to hell with the bystanders anyway, so there is no reason to consider how they feel about things. Therefore, the question to me becomes:
How can the musicians be supported without simultaneously supporting the RIAA?
This doesn't mean how can I as an individual support some particular musicians. I could clearly send them a check. It's how can we structure social interactions so that musicians are supported, and the RIAA is not. The clear and obvious answer "Support you local musicians
There exist problems here. Musicians are frequently coerced into signing exclusive agreements. Etc. So maximally popular groups will tend to be those that have the most advertising dollars spent on them. But this doesn't equate with the maximally talented groups. Perhaps groups that aren't picked as "STARS!!" could sell CDs directly on the web (from their home page) with the MP3s being used as cheap advertising? It might work.
I think we've pushed this "anyone can grow up to be president" thing too far.
It's like wanting to buy Windows 3.1.
Or Windows XP, for that matter.
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76,000 as of Apr 1.
Of course, you seem to have an odd view of success. When KPMG said, on March 19, 2002 that XMSR's need for additional financing "raises substantial doubt about our [XMSR's] ability to continue as a going concern", the stock dropped 13%.
> Granted, that $300K/month is not even close to enough to keep XM-Radio afloat, this does not imply complete failure of the music-rental business model. In fact, it is direct evidence that it could be successful, provided the economics are right.
Sure, anything can be successful, provided the economics are right.
1) We spend gazillions of dollars building a satellite radio system,
2) The economics become right!
3) Profit!
As you correctly point out, their current revenues aren't even close to keep 'em afloat. Given how far away they are from profitability, I'd say that's an indication, not that it could be successful, but that the economics are wrong. How wrong? Well...
They project that they'll end the year with 350K subscribers. But even $3.5M per month - call that $50M/year - is a far cry from profitability when you're spending >$280M/year (indeed, $130M in last quarter of 2001! $53M on sales and marketing, $40M on operating costs!) to keep the business running.
Source: XMSR 4Q announcement
Let's see. It cost them $135M to run the network last quarter. They took in $500K in revenue - $245K from subscribers, $294K from advertisers, on 27000 subscribers. *giggle*
They have about $200M in the bank.
If it costs them the same $135M to run it this quarter (1Q02) and they had 76000 subscribers, then I'd be hard pressed to see them get more than triple that. But I'm feeling generous - so let's quadruple the revenue - that's still only about $2M of revenue. Hey, double it to $5M for all I care.
If my guesses are right, that leaves 'em with $200M - 130M = $70M in cash as of April 1st.
In a business that's costing them $130M per quarter.
Unless I've grossly overestimated the business model (but "system operating costs" and "sales and marketing" don't look like one-time startup costs to me), or grossly underestimated subscriber growth (as in, by an order of magnitude - but even 350,000 subscribers at my generous $22/month estimate will only give $23M per quarter), XMSR will have to get more financing (issue more stock, get a loan, issue bonds or convertible debentures) before summer, or they'll no longer have the cash to pay the bills.
We'll find out in a few weeks when their first quarter report comes out.
Personal opinion - XMSR is cool tech. Sometimes, being first to market with new tech is an advantage (Amazon, eBay). But other times, particularly in industries with high startup costs, it can kill you (ILEC-vs-CLEC, all the dead DSL companies, and now most of the telcos). The early bird may get the worm, but the second mouse gets the cheese.
As always, do your own due diligence. I have no position (long nor short) in XMSR. The ramblings of a geek on Slashdot are no substitute for professional investment advice.
I dind't realize it was BMG that was doing that.
Well that sucks. I think you're right. If they're protecting the CD's, then that means that the MP3 version of a song has value aside from the CD version. (even though it doesn't, not that I'd pay for.)
That probably means that even if you have the CD version of the song, they'd still expect you to pay for the Mp3 version. That doesn't fly so high with me. I'm willing to pay a modest fee for them to deliver it to me, but the cost of an album's worth of Mp3's better not exceed the album.
I wish I could just buy a 'certificate' for a song. If I put a CD in my drive, then the songs on the CD earn a free certificate. Then I'd be free to download MP3's all I want, provided I can show I have a license for them. The certificate price of individual songs should be pretty cheap though.
That way, no matter how I recieved a song (i.e. copied a friend's, downloaded from the web, or bought a collection on CD), I could pay the company who produced it. If they're willing to treat me like an honest person, I'll respect them by paying for it.
"Derp de derp."
Napster was first, is most familiar to users, and has the largest market share (even after being dormant for a few months). It's still the best designed, easiest to use music downloading application. It set a standard which will now be hard to compete with.
Eventually, one of them had to do it. Bertelesman took the initiative. Sony, Universal, and Time-Warner snoozed on this one- and lost.
Does Napster have any (puke) software patents that Vivendi might want to get its fingers on?
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