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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
I wonder how many of the board of that company also moved with the profitable portion of the company, leaving the employees and the unpopular directors and managers with the loss making portion?
Roxio commits corporate suicide. Film at 11...
You mean that the 3 copies of Toast that everyone pirated didn't keep them alive?
Board member #1: "Hey, let's sell our profitable division so that we can focus on one that will never make money ever."
Board Member #2: "Brilliant!"
Napster on the stock ticker... who would have thought that was going to happen 5 years ago?!
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.
2) Focus on money losing division
3) ???
4) Profit!
I like their moxie!
...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
I quit my lucrative job in IT to begin selling igloos to Eskimos.
Gamingmuseum.com: Give your 3D accelerator a rest.
I actually like EZCD better than RecordNow. Bummer it will be going away.
I was waiting for Napster to die again.
Cretin - a powerful and flexible CD reencoder
Adaptec != Roxio. Adaptec sold their EZ-CD Creator cd-burning software to Roxio, but they aren't the same company.
Hokey statistics and ancient misconceptions are no match for a good thought in your head, kid!
April 1st isn't for another 9 months.
Board Member #3: ??????
Board Member #4: "Profit!"
Microsoft will buy Ahead/Nero and integrate it into Windows we can call that category dead as well. Roxio - EZCD = t3h b4nkRup+ soonly.
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!
...that they use to make their media software so gosh-darn reliable and redirect it towards making napster more impossible to uninstall.
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?
would be to get Apple together with Toast and Jam. Hopefully, Steve will gobble them up. It makes me hungry just thinking about the possibilities...
...going out of business faster.
Sounds like the old Napster.
I had to rub my eyes to make sure the news was real... I bet there is a really good story behind this. What does Roxio have that Apple and Microsoft don't? Roxio has links with every CD/DVD hardware manufacturer. It's software is embedded in XP. How does the market for online music compare to that of CD/DVD recording software (hmm, its sort of related...). The answer I bet will be in the Sonic Solutions documentation. What are the caveats to the sale? The folks at Roxio aren't dumb... they've done quite well.
Visit Tim's Journal, yes?
What if Microsoft bundles a DVD/CD - burning program with LongHorn? Then this might not be such a bad idea for Roxio. The software is great but if microsoft is playing the browser-war with burning software then its potentially a good thing for the ROxio company.
Also to consider are new DRM rules. Roxio could have to do major upgrading to the software to enable proper DRM and even then Microsoft/MPAA could decide its not good enough.
What is a great product now does not mean that it will always be the best. You have to admit that CD/DVD burning software is kind of a one-trick-pony-kind-of software that does not have great potential for growth. Sooner or later Microsoft will start to integrate burning capabilities like Apple.
Also another thing to consider is with growing HD sizes CD burning I am assuming is decreasing. also with MP3 players, which I am assuming will lead to MP3 car players, CDr's could potentially.. gasp.. die. Leaving ROxio with a sinking ship.
Just some thoughts as to why they would do this drastic move
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.
iTMS isn't the first in the download-for-pay market, though. I doubt Apple's leadership would let the store eat through all their money before killing it anyway.
Wishful thinking on your part.
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!
In other news, Sonic Solutions has acquired the former assets of Roxio, and has changed its name to "Roxio." The remainder of Sonic Solutions assets have been sold to the former Napster, now changing its name to "Sonic Solutions."
What I want to know is whether Sonic was smart enough to grab the "Roxio" brand name along with the software?
[ReidNews]
you know, throw/kick the ball as far as you can toward the goal and pray someone on your side makes a great play with it.
"Calculated risk" is indeed a business model. Almost every business that isn't funded by a trust is based on risk of losses. It's not like they are shuttering the profitable business, they are cashing it out and throwing everything into what is obviously a make-or-break play. Maybe CD burners are boring. Maybe there are no great business opportunites left worth fighting over. Maybe someone is rich enough to want to play with some money.
It isn't insane, it's just risky. I happen to think it is insanely risky, but that's just me. Still if I were sitting on a cool $80M with everything to lose and not much to gain I would give myself a nice salary, make a great try at stardom, and if it went down badly I'd buy an island in the South Pacific and retire to study beaches and waves.
And how insane is that, really?
=^..^= all your rodent are belong to us
Agreed, but I only used EZCD Creator to burn CDs or sessions. Never DirectCD. You are correct. DirectCD, does cause lots of issues on systems.
What if Microsoft bundles a DVD/CD - burning program with LongHorn?
Windows XP already has CD burning capability. Guess what? It's licensed Easy CD Creator code from Roxio. Check the Version info on C:\Program Files\Common Files\Adaptec Shared\CreateCD\CreateCD50.exe (the folder name is left over from when Adaptec owned Easy CD Creator).
James Napster, Kirk Napster and Robert Napster were all unavailable for comment at the time of going to press.
Lars Napster was available for comment (as usual) but since no-one ever listens to the loudmouth twat drummer anyway, we didn't either.
The band are about to embark on their "Going All Thrashy Again Was A Bad Career Move" World Tour 2004 to promote their new album "Yes, It Has Got A Black Cover Again But There Are A Few Ballads On It Honestly".
Their latest single "Nothing Else Still Matters" reached number 98 of the US top 100 before finally giving up trying and going home.
Gentoo Linux - another day, another USE flag.
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.
Some may not agree with this, but it seems to me a somewhat foresighted decision to sell their burning software division, as disk-burning is rapidly being incorporated into free venues, such as online music store software, winamp, etc.. Not to mention windows xp's disk-burning incorporated into the OS. I don't use it, but the masses do whatever happens when they pop in the blank disk. I can't imagine OEM's continuing to pay roxio to include their software either when they will have so many free alternatives, and I won't be surprised if the music stores take a proactive approach to getting their software included with cd burners. (If it isn't already, haven't bought one in a while)
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 don't know the numbers, but it all might make sense. Say that they might make a total profit of 80 million on their CD stuff after about 20 more years. My guess is that just about all computers ship with burners stuff already. So they cash out today and make enough money to retire, but they don't. They would get bored. So, they decide to try something new and exciting. They might even get to hang out with rock stars. Oh, what about the guy who just started in the code room and won't get rich? He obviously didn't get to take part in the decision. Everyone doesn't want to be Bill Gates, though most might like to try it for a little while.
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
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.
A dozen question marks, four numbers, four parentheses, one ellipsis, and an exclamation point. Mathematically, such a joke really shouldn't have been that funny.
--LordPixie
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.
The writing was on the wall, along time ago.
Nero came out with a nicer and more functional product. Adaptec knew this was coming, and made the $$$ when the timing was right. Roxio thought a revamped GUI' and a bunch of unusable clutter, was what the consumer wanted and was wrong. Now the Chicken has come home to roost, and it has lain a big, old fat, egg... Adaptec had a good product @ EZCD v5 and from that point on, it was and still is crap. Nero added mpeg encoding, dvd utilities, audio burning and packet cd writing when EZCD was going through thier company change. Also o top it off they (ahead.de) made it simple to use...NERO didn't break windows operability in the process either. WindowsXP native drag and drop burning is a farce, and it only takes on use of NERO to discover that.
I don't know if Nero makes a version for Apple Products, but I do know Nero is OEM Bundled, with just about every Burner I have purchased, and my friends as well. It's a shame that Roxio is hanging it's finacial Hopes, on the Napster Nail, and I am sure the Next thing we will be hearing is how they are a failing company and get sucked up by Symantec, or some other gobbling, IP Grabbing Pirahna left from the Bubble Popping.
My cat's picked up a Hammer. HEY! Put down that Hammer. Put Down that Hamm...THUNK!
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 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...)