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Best Buy Coughs Up $54 Million For Napster

Posted by ScuttleMonkey on from the so-i-heard-you-got-robbed dept.

MarketWatch reports that Best Buy has decided to toss $54 million into an acquisition of Napster. All told, the deal amounts to around $121 million, with about $67 million headed towards getting cash and short-term investments from Napster's balance sheet. "The deal will give Best Buy an online digital music retail outlet as well as a subscription streaming service that has about 700,000 subscribers. That could help Best Buy to compete against retail giant Wal-Mart, which has its own online digital music offering."

11 of 164 comments (clear)

  1. Just a name... by religious+freak · · Score: 3, Interesting

    $54 million for just a name? Sounds a little high to me.

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  2. This is interesting by nauseum_dot · · Score: 5, Interesting

    I think this could eventually give Best Buy some leverage in selling electronics because they will package downloads with the sale of mp3 players. I think they may be putting together enough clout to give Apple a good scare.

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    1. Re:This is interesting by xenocide2 · · Score: 2, Interesting

      Wal-Mart is known for their massive infrastructure at corporate, logging the sales of their product and warehouse inventory in real time (or very close). At one point my alma mater received a donation of an 82 processor system from them; Pentium Pros, presumably ousted for Xeons by 2000. I don't envy the graduate student employed to make such a beast run to where it's worth having powered on!

      I'm sure there's dumbass field technicians out there that you'd have to interact with as a tenant of Walmart, but I only hear praise for their internal IT machine. Which side of the Cat-5 debate were you on?

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    2. Re:This is interesting by Grishnakh · · Score: 2, Interesting

      The few times I ever go to Wal-Mart, I don't see any benefit from these IT people, even if they aren't bungling. Instead, all I see is a lot of hassle in shopping there, from spray-paint cans that are locked away (unlike at Lowe's) and require a 30 minute wait to get a manager to open the display case, to a store that looks dingy and nasty, to horrible customers who let their 8 kids run wild all over the store, to parking lots where people who can't drive constantly run into each other.

      I almost never shop at Wal-Mart any more because it's such a miserable shopping experience. If I want cheap stuff, I go to Target instead. Maybe it has something to do with my particular area, but around here the Wal-Marts are all like a zoo, and seem like a good place to get attacked by gang members, whereas my local Target is clean, and the customer base seems much less dangerous than the one at Wal-Mart.

    3. Re:This is interesting by UnknowingFool · · Score: 2, Interesting

      The main reason Apple is the biggest player is they figured out that the average customer would like the process to be as easy as possible.

      How do you sync your iPod with your computer? 1) Plug in your iPod. There is no #2 if you accept iTunes defaults. I was one of those who bought earlier and got a Diamond Rio. Syncing up that thing to my computer took 4 or 5 steps some of them complicated.

      How do you get your music on your computer? 1) Put in your CD or 1) Click on iTunes Store and browse, 2) Click on purchase. 3) Enter in your method of payment info. 4) Wait for the dowload. With other services there were like 2 or more extra steps.

      If I'm the typical iPod/iTunes customer, I have like over 2,000 songs on my iPod. Maybe 10 of them are iTunes. The rest were from CDs. Of those 10, they were impulse buys or singles only or laziness in not going to the store to buy the CD or a combination of the three. So iTunes has made $10 dollars off me. If I were to switch to Zune or Creative, I would not weep for that $10 loss and nothing really stops me except I like my iPod.

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  3. Stupid by Bill,+Shooter+of+Bul · · Score: 3, Interesting

    Investors are always saying stupid things like " this could help them compete with Walmart which has its own digital music service". Is walmart's digital music service good? Is is profitable? Does it do anything now, or will it ever, to contribute to the companies bottom line in any way what-so-ever?

    Most of the time, just like this time, its just ridiculous.

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    1. Re:Stupid by morgan_greywolf · · Score: 2, Interesting

      Not bad, if you have Windows and IE. Does browser ID-spoofing work?

      No, but this does the trick. ;)

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    2. Re:Stupid by oahazmatt · · Score: 2, Interesting

      Actually I haven't shopped at Wal-Mart in a long time. A primary factor in that decision goes back to when I had bought a CD from their music section and afterward realized they had "sanitized" the lyrics without giving any notice to the purchaser, as if they were doing me a favor.

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  4. Re:Can anyone explain... by garcia · · Score: 4, Interesting

    but the Napster brand is, at least last I knew, pretty much useless as a brand. If I am wrong, someone please correct me.

    Well, give them a chance, maybe they'll start giving out free music again, just like Napster was when the brand actually meant something more than stocks and dollars changing hands.

  5. Re:Can anyone explain... by Registered+Coward+v2 · · Score: 3, Interesting

    ...how this wasn't a giant waste of cash and a sign that Best Buy is run by PHBs? Honestly, I understand the reasoning (online is where music distribution is, at this point, which cuts into their bottom line), but the Napster brand is, at least last I knew, pretty much useless as a brand. If I am wrong, someone please correct me.

    Napster is a well known brand - and brand awareness is valuable - most folks have no idea whether Napster is good or not - but they know teh name.

    Best Buy essentially hedged its bets on the future of music distribution. WalMart is pushing to reduce the price of music it sells - as well as floor space dedicated to CD's. Wal-Mart's clout is driving the retail CD sales industry and labels are forced to play ball or risk losing significant sales volume; especially since WM really doesn't care if the carry a specific CD since it's contribution to revenue is small unlike the labels where a 10% sales drop can be very expensive. This is forcing the labels to rethink distribution, and Best Buy needs a foot in the door as the market evolves. It isn't just about online purchases but in stor kiosks and cheap memory cards / CD burns to sell a broder catalog at a much lower costs to the store - read higher margins.

    Napster gives them a quick and cheap way to get into the business without screwing up the Best Buy brand (I won't touch taht with a 10 foot pole) since problems will be associated with Napster, not BB. As it grows and the bugs get worked out they can transition to a BB branded service.

    Finally, it also gives them a way to move into the iPhone market *if* they can get a purchase app on the iPhone. Once they get it (Napster) up and running they are no longer trheatened by online purcases reducing CD sales as tehy have a foot in that market as well. In fact, depending on teh margins, they may prefer it.

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  6. Re:Did you hear that, Steve Jobs? by cowplex · · Score: 3, Interesting

    Here's the thing - that may be what they do.

    What's the big stink nowadays in digital music distribution? DRM - especially backups. If BestBuy did this right, they could sell a "warranty" for their songs - for $49.99, you can protect say 1000 songs. That way, if they are deleted or lost or whatever, you can simply use that warranty to recover them!

    While the readership here at /. might see through this obvious scam, Joe Sixpack sees it as a good deal. Consumers are already used to warranties on their physical goods, and with a little bit of clever marketing I can see consumers getting taken advantage of with a "warranty" ploy.

    But here's the rub: we have been raging against lock-in and recoverability for quite some time now - enough to alert the less technical consumer. BestBuy comes out with a warranty on music, and markets it right, the consumer sees the problem as fixed and buys stuff from BestBuy.

    I know you were joking, but really a music warranty could be a viable business model. Let's hope it doesn't happen...