Best Buy Coughs Up $54 Million For Napster

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."

Comments

... and somehow, they managed to make it suck more

[Anonymous Coward]

Good work, Best Buy. That takes effort.

Just a name...

[religious freak]

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

Re:Just a name...

[jep77]

Well it was either that or buy naming rights for a stadium. They may have made the wrong choice.

Re:Just a name...

[Ethanol-fueled]

Nobody did a good job of making money with the Napster name after Napster wasn't free anymore ;)

It hard to see how Best Buy will make Napster worse because Napster started to suck the second they became a pay service -- Unlike the Geek Squad, which I heard were respectable until they became Best Buy's monkeys. Note: You'd be surprised what the "Geek" Squad can't fix!

I know because I worked for a contractor that took care of Best Buy's warranty laptop repair and we were doing things like malware removal and OS/driver reinstalls.

Hey, blue-shirt bitches!

[Anonymous Coward]

That's a lot of Monster Cable money your bosses just threw away. Betcha they didn't buy a warranty, either.

Can anyone explain...

[Darundal]

...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.

Re:Can anyone explain...

[garcia]

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.

Re:Can anyone explain...

[Anonymous Coward]

Wow, it just goes to show how out of touch geeks are.

Ask an average non-geek about napster and they will know automatically that its a music outlet much like itunes. They won't know that it sucks, they won't know much about it at all, but it is a well known brand. So yes if marketed correctly it could be very profitable.

But it will still suck

Re:Can anyone explain...

[Registered Coward v2]

...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.

This is interesting

[nauseum_dot]

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.

Re:This is interesting

[UnknowingFool]

Seriously do you think Apple is scared of Best Buy? Apple isn't scared of Wal-mart which is larger, has a better IT infrastructure, and can get better deals with the media companies. The main reason Apple isn't scared is that iTunes Store exists only to sell more iPods and AppleTVs. It makes some profit but the company's future isn't bet on it. If iTunes Store were to shut down tomorrow due, it really would not hurt Apple. The problem for Best Buy leveraging downloads to sell mp3 players is that they offer nothing special and are really late to the game. Which DRM would they use? PlaysForSure? We all saw what happened to other MS partners. That would also eliminate their iPod customers as well. No DRM. They have to compete with Amazon and Apple with 700K singles compared to millions for each for Amazon and Apple. Would their integration be as easy to use as Apple or even MS Zune or would it be like every other player out there?

Re:This is interesting

[ajlitt]

Why is it impossible? Does POTS not run over 24 gauge twisted pair?

Re:This is interesting

[samkass]

When they, by using that ipod they sold you, tie you into becoming a subscriber (eventually) spending all your bucks for music, movies, tv shows and all your other media needs on *their* itunes infrastructure, making 30% on all your media, then that's way more worth for them than an ipod sale.

Are you saying that Apple is lying in their SEC filings? Because from everything they've reported to their shareholders, what you say is the opposite of true. Maybe someday the iTunes store will turn into a cash cow, but right now it's smaller and more or less break-even. As of the latest quarterly report, Apple was making at least twice as much revenue and better margins from hardware sales as store sales.

The big advantage Apple gets when you buy things from the iTunes store is that most of it only works with other iPods, so the next hardware purchase will likely also be an iPod (75%) instead of a SanDisk (15%) or one of the other bit players like Microsoft (2%).

Did you hear that, Steve Jobs?

[bigtallmofo]

In your face, Steve Jobs!! You and your lame iTunes store are screwed now!

Expect all kinds of innovation from this combined entity... Like 98.9 cent downloads. Store name that ends in "ster". More.

Re:Did you hear that, Steve Jobs?

[BitterOldGUy]

and the opportunity to purchase an extended warranty on your downloads for 49.95! Protects your investment!

Re:Did you hear that, Steve Jobs?

[cowplex]

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...

Stupid

[Bill, Shooter of Bul]

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.

Re:Stupid

[oahazmatt]

Is walmart's digital music service good? Is is profitable?

Wal-Mart has a digital music service?

In all seriousness, I did not know this. I never see it advertised anywhere.

Re:Stupid

[Otter]

I'd never heard of it either, but -- here you go.

$9.22 albums, DRM-free MP3s, can't purchase on Firefox or on non-Windows. Not bad, if you have Windows and IE. Does browser ID-spoofing work?

Nothing left to say

[Just Some Guy]

You know, I tried hard to think of something funny here. There's just not a punch line you can add to this.

To paraphrase Hank Hill, this acquisition is the feces that is produced when shame eats too much stupidity.

Re:I looked

[DanZ23]

You should look into Amazon's mp3 downloads. less than a buck a song, and totally DRM free. I get 99% of my music this way

Not The Real Napster of Course

[illectro]

Napster 2.0 is of course a Napster Branded music store created by Roxio.

All the engineers from napster went off to setup their own music sites, the most high profile children of Napster are of course Snocap, which was setup by Shawn after napster 1.0 died and later got acquired by imeem.com which was also started by napster engineers and has become the most popular web2.0 music site (over twice the users of last.fm).

There's also finetune and a few other small music projects that can trace some lineage to the original napster. Every single one of these descendants from napster are a whole lot more interesting and innovative than what the Napster brand ever did.

my dream

[Dan667]

Is for Best Buy to hire Larz to pimp Napster. Best Buy goes down the tubes like AOL/Time Warner. Larz goes bankrupt. And Shawn Fanning buys Napster for a dollar.

They could have just...

[mr_lizard13]

...downloaded it for free

Suckers!!!!