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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.
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.
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.
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.
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.
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.
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