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Roxio To Concentrate on Online Music Business
DevGhost writes "Roxio Inc. said on Monday it would change its name to Napster and focus on the money-losing online digital music service, selling its profitable CD and DVD software division to Sonic Solutions for $80 million."
This is what happens when you let an MBA run an organisation.
Norman Cook's Ode to Sl
First Adaptec, then Roxio, now Napster.
Boy they're sure good at picking business models. Funny how an individual who changes professions every few years is viewed badly upon by creditors, yet companies who go through disposable business plans the same way are "innovative".
On the good side though, I think this will be their last name change before Chapter 11(, Inc.). Seriously, what part of focus on the money-losing online digital music service, selling its profitable CD and DVD software division doesn't sound like the bubble all over again.
Bah... whatev. Just as long as someone keeps supporting Toast, I won't yell too loud.
...but how does it make sense to sell the profitable part of a business and keep the unprofitable part? "Focussing" on the unprofitable part to try and fix it, yeah, I can see the sense in that, but getting rid of the bit that keeps the money coming in while you sort the problems out?
Insanity!
Game dev and music blog
Roxio commits corporate suicide. Film at 11...
First there was the dot.com bubble... then it burst...
now corporations are intent on seeing that movement continue. Watch for the new dot.com suck. First SCO making a side business of OS production and concentrating on making their own customers hate them, now Roxio going for an even bigger/quicker dive.
Next up, watch Dell decide to sell off their computer production business and go into making bathmats. or something.
What idiots - sounds just like the good old dot.com days. I worked at a company like that where there was a single mainstay product that was profitable, and a bunch of junky websites that were not. Roxio sounds just like that, only they just threw out their single profitable tentpole.
And now they are throwing themselves solidly in the path of several oncoming trains in Apple, Microsoft, and Sony.
Short this pig!
Linux IT Consulting and Domino Development in Michigan
Why are we and the editors assuming this is bad? I'm sure they have people who know the details and have predicted future markets to justify this. Just because one is profitable and one is losing now doesn't mean it will be the same 5 years from now. Hell, if the headline 20 years ago said IBM would sell off it's profitable typewriter business and focus on it's losing computer word processing business would everyone have said it would be stupid?
Read the fuckin' summary. The CD/DVD burning division -- which makes DirectCD and the AWESOME toast application -- is profitable. Meaning, it makes profit.
Roxio is SELLING the profitable part of their business to concentrate on the stuff that's not working.
Why? Because they're dumb.
Hey freaks: now you're ju
Raises capital- ie money you can use to invest or buy things to make more money.
Someone no doubt sat down and figured out how much money Napster could potentially make, and how much Toast etc would make.
It could be that profits are leveling off (since OS X supports CD/DVD burning decently, that wouldn't be surprising) and so the company is taking a chance. Selling off their existing products gives them a lump of cash to use for working on Napster- something like, say, a stupid Superbowl commercial.
Please help metamoderate.
If you pay your bills on time and have reserves (money in the bank), changes in profession aren't viewed badly upon. It's when you're changing your profession and you've had late car payments and you've got $3000 to live on...
Let's say Napster needed $50m in cash in the next three months to be able to put together a plan to become a major contender in online music distribution networks. Maybe they need to pay $5m to each major label, get a huge server farm, whatever. They know what they need, but they don't have any capital. Selling the profitable division is a good business idea if through this change, Napster can become wildly profitable.
Whether that is going to happen or not, I don't know. Napster has name recognition on one side, but then again you don't think "legal downloads" when you think Napster.
If, however, Napster spends most of the $70m in cash that it's going to get on Super Bowl ads, then yes, they learned nothing from the
Small potatoes make the steak look bigger.
it's hard to say for sure. They may have very legitimate reasons for doing this. The CD/DVD software side of the business might be in decline and headed for unprofitability, so they're cashing out while they can. They may also have deals and/or plans on the napster side they're not disclosing publicly that make this decision rational. Those deals with universities are an example. Another possibility is that they have a completely different (and very profitable) project they want to try and need the cash to be able to do it.
Of course, another possibility is that they're complete morons who are giving themselves a cranial enema. Only time will tell.
Uhhh... Microsoft bundled a CD burner with XP, and since it sucked SO HARD, ahead and roxio were able to sell their software - and also, because windows users are SO used to getting crappy "features" - which explains the abudance of image viewing programs out there - that they assume they need a commercial add-in to supplement Windows - and I don't see this not happening in "Windows 2010: The Year Microsoft Released Longhorn." (more aptly put, Windows 2012: The Year Microsoft Released Longhorn XP1 and People Started Using It, but found it boring and dated next to Looking Glass Release 4.1, and vowed never to buy anything from those bozo's again)
2) CEO and major board members retire wealthy, leaving mess for someone else to worry about.
3) Tell next victim how the previous company tanked without your guidance.
Sounds like MBA standard operating practices 101, the college class than can be substituted for ethics. The next CEO will just inflate earnings, claim huge savings by outsourcing, hide losses and try to bail before their caught.
There's a sucker born every minute.
So they decide to get some cash and shares ("Roxio will receive $70 million cash and $10 million in Sonic shares") and look to invest in a business where growth is possible - and that's on-line music distribution.
So long as they don't fritter away their cash pile they should be able to turn a handsome profit and achieve significant growth.
On-line music distribution has the potential for big bucks because companies are able to charge, and consumers willing to pay, CD-prices for something as cheap as electronic files - the consumer pays for the PCs, MP3 devices and even the distribution channel (the 'net). Roxio/Napster gets to globalise a low-cost business model (bling!), leverage the Napster brand both on-line and badging the p***-poor, but cheaper, iPod alternatives (bling!), consumers feel cool (bling!) and the record industry gets to pay its (mainly) US stars big bucks for doing as little as the do now (bling!).
It's bling-bling all round! Hooray!
Of course, I will miss talking to those record shop sales staff who, over the years, have turned me on to all kinds of different music (Television, Foo Fighters, etc.) - and cool UK bands will have trouble acessing these new 'net-based distribution channels without a fight - but hey, who needs human interaction and good (i.e. not-rap;) music when we can let Napster rip us off in the comfort of our own homes!
Here's another take on WHY:
They don't want to be sued and/or have their software declared illegal.
If I were a CEO and I saw the RIAA/MPAA filing numerous claims against my competition, I would be pretty scared too. Think: 321 Studios. Call it potential gain vs potential loss.
Honestly, look at where the burning software market is going. The best selling/most popular products are the ones that do something that the people who love copyright want to stop. Here are some examples:
- Copying 'protected' CDs (SafeDisc, etc)
- Copying DVDs to CD
- Copying DVDs to DVD
- Burning audio to CD (especially despised when burning DRM'ed files)
Seriously, the best burning products are the ones that are next in line to be sued out of existance. Why? Because they let the consumer do what they want with their media.
Remember, the 4-letter AA's don't honestly think they can stop all copyright infringement, but they also know they can stop a lot of it by taking the software that does it easily/cheaply/effectively off the shelves.
Induce Act anyone?
Just some food for thought.
You must have used a different Roxio than I did. Even the platinum version is canned crap. Nero beats it pants down (as in, beats the pants off of it.)
Toast is quite good, but I would guess that the CD burning support in OSX is not as crappy as the CD burning support in XP, which is just licensed from Roxio anyway. Easy CD Creator sucked ass when Adaptec sold it, and it sucks now that Roxio sells it. It's poor at mastering and poor at burning.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
Here's Entrepreneurship 101: The successful entrepreneur turns a Risky Venture into a Cash Cow. She then sells the Cash Cow, when it has matured, to the professional manager. And starts a new Risky Venture. The difference between enterpreneurs (whom the /.ers envy) and professional managers (whom they scorn) is called management style.
Most entrepreneurs have neither the patience nor the inclination to manage a mature company. Those who recognize this in themselves move on to bigger and better things.
Examples of entrepreneurs: Steve Jobs, Michael Robertson, Wayne Huizenga.
a small company however many ways you look at it
I don't see a Fortune 500 (#236 I believe) as a small company in any way at all... how do you consider Apple Computer "small"?
Apple is not spending their (now over $4.5bn) cash on the music business. THe iTMS is turning a (and I quote from the latest financial call) "a small profit".
This is a service that was intended to just about break even, with the view to selling more iPods. So far, this service can only be called an unmitigated success in itself, and looking at the over $1bn of revenue that will come from the iPod in this year alone, the entire music division is doing incredibly.
BOOM napster sneaks in with the same products and services but just a little cheaper and suddenly Apple goes chapter 11
This is just ridiculous, maybe "sneak in with same products" is the best the Roxio management can come up with in place of a proper business plan, but no matter how many times you say "BOOM" it doesn't make it happen. You neglect to explain HOW on EARTH little Roxio/Napster can "sneak in" with the "same products" when Apple is a multi-billion dollar consumer product company and you can bet your granny that there are hoardes of extremely bright people over in Cupertino working on versions of the iPod that would make the current ones look like a 1980's walkman. What resources does Roxio/Napster have to compete with the resources that Apple both has and is willing to throw at this market?
Plus there's the headstart factor, every day that goes by Apple cements itself into the lead, evey million songs that are sold is another million songs that will be played through Apple's iTunes software or Apple's iPod player cement cement cement goes Apple's foundation bulding machine. And on top of this no other service comes close to the integration and quality of the whole music service from Apple.
So please, explain a little more about how Roxio/Napster, which has just become a totally profitless organisation is going to ensure that "suddenly Apple goes chapter 11"
Sheesh.
This sig has been deprecated.
Wonder if they are taking odds in Vegas on how long they will last........
It's either on the beat or off the beat, it's that easy.
I moderate therefore I rule!
--
Selling iceboxes to eskimos is easy if you know anything about marketing. It's all in the positioning. Instead of iceboxes, you have to call them "bear-proof meat lockers".
I thought it had to be April Fools Day when I read the post, which to me sounded a bit like "Microsoft sells Office, Windows and Linux Bashing divisions to Apple, concentrates on PocketPC, TabletPC and FrontPage Express licensing."
But on second thought, maybe this makes sense. Writing CDs and DVDs used to be slow and cumbersome. The operating systems didn't support it, so Roxio and other software filled a niche. These days more and more people own computers that can burn natively. The market for this software is likely to shrink, or at the very least become commoditized. Watch Longhorn get iTunes-like music burning support. The Easy CD Creator market is doomed, and perhaps Roxio decided that their best bet for growth is to copy Apple.
In order to maintain the income that the CD-Burning unit provided you would only have to make 7.5% off the $80M. I'd propose that there many less risky ways to see 7.5% off $80M then trying to maintaining the profitability of 2nd rate CD-Burning software. I don't think Roxio products will ever see another $80M in profit. I'd question whoever was willing to pay $80M for a company that only makes $6M profit / year. As for focusing on Napster, it's a recognized brand and the online music market is big now and is growing.
As if we haven't seen enough :)
eBay is to Yahoo Auctions
as
iTunes is to Napster
First-Past-The-Post wins... And conversely market share wins.
Ebay wins because it's the best place to go to get market value for your product. If you want to sell something, your best chance is eBay. More bidders = more sellers = even more bidders = even more sellers, etc etc...
iTunes wins because it has the most consumers for the record labels. It has the purchasing power over the record labels, not Napster. iTunes can get the record companies to drool over their market share.
09 F9 11 02 9D 74 E3 5B D8 41 56 C5 63 56 88 C0
...is there was a nasty legal battle between Gracenote (nee' CDDB) and Roxio (a spinoff of Adaptec). Gracenote sued Roxio for infringing on their patents involving CD identification. Roxio's Easy CD Creator used a different lookup database but it was claimed the patent was still violated.
If you want to read up on it, Google for GraceNote and Roxio. About a month after the inital suit was filed, Roxio countersued (standard procedure - it beats rolling over). Later, there was a long-term license agreement but rumor has it Roxio did not come out on the long run.
I think most of the negative posters get this full well. We just happen to believe that the odds of Napster becoming even modestly profitable are somewhere between slim and none. $80 million is a drop in the bucket to much of their already established competition. Right now even the winners are at best just scraping by.
Vote Quimby.
I thought that Apple has their online music business mainly to sell the iPods. They barely break even on the iTunes, but earn a healthy margin on the additional iPods they sell.
Is Roxio planning to sell their own players? Otherwise their strategy doesn't make sense to me.
I've read all 150+ comments on here so far, and have yet to see one thing noted:
Part of the deal is they get a crap-load of stock in SonicBlue.
SonicBlue has hardware/software out there in virtually every thing that reads/writes CDs/DVDs, as far as embedded systems go (like your home CD-Recorder or DVD-Recorder, and players, and such).
Someone should google around for SonicBlue's profits, and see what type of a good thing it's going to be for them to still be making money off the stock part of SonicBlue, WHILE using this mega cash infusion to put some work into securing hopefully good stuff on the Napster side of things.
"Champagne for my real friends - and real pain for my sham friends!" http://ericblade.postalboard.com/
This article is exactly what's wrong with today's media. Instead of simply telling the facts as they are, the reporters try to make themselves a little more interesting than the competition and embed their own opinion in the story. So its only natural for 90% of the potss on this page to be blasting Roxio for this very "stupid" move (after all why WOULD you sell your profitable division to focus on the one that's losing money ?!! That just doesn't make sense !). On top of this, this reporter isn't even backing up his claims. Since when has online digital music service been a "money-losing" business ? I bet you the guys at Apple wouldn't agree with this... Bottom line is I'm sure the people at Roxio have a valid reason for doing what they did. And without looking in detail at the company's financial records and their history (a succesfull business model in the past doesn't mean it will stay that way) we should just refrain from commenting on Roxio's decision and stay clear of these articles that try to pass themselves as news.
A million monkeys and this is the best sig they could come up with...
This one's easy... MBA 101..
Here is how you make profit from this:
Just you need to look at it the right way (this is serious)!
What is important is NOT the financial health of the company, which will go bankrupt in 5 years (even the management knows this... but thats not what's important).
Rather, they now have 80M in cash...
Guess what that means!
Massive exec salary and bonus time! (until you go through the 80M).
Put a big hunk of the money in management salary trusts (happens all the time..that way the stockholders/creditors cannot get it when the company goes bust), and management gets rich.
In 5 years, company goes bust, fire all the employees.
Management takes $30M or $40M of it in 'exec compensation' over the 5 years... Retire in the Caymen Islands.
Fuck the company... fuck the employees... who cares..we got rich!
Happens all the time these days.. the new american way.
(I kid you not..in 5 years, when we read the story on Roxio/Napster this is exactly how it will have played out...)