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Last updated on April 17, 2014 at 17:30 EDT

Rhapsody Acquires Napster In Stock Deal With Best Buy

October 4, 2011

Online music service Rhapsody announced on Monday that it has acquired Napster from Best Buy, which will receive a minority stake in the combined company.

The specific terms of the stock-based deal, which is expected to close around November 30, were not disclosed. 

“This deal will further extend Rhapsody’s lead over our competitors in the growing on-demand music market,” said Rhapsody president Jon Irwin in a statement.

“There’s substantial value in bringing Napster’s subscribers and robust IP portfolio to Rhapsody as we execute on our strategy to expand our business via direct acquisition of members and distribution deals.”

“This is a ‘go big or go home’ business, so our focus is on sustainably growing the company,” he said.

Napster was launched in 1999 as a peer-to-peer file-sharing service, but was ordered closed down by the courts in 2001, after which it declared bankruptcy.   Roxio Inc. acquired the Napster name in 2002, and later sold to Best Buy for $121 million in 2008.  At the time, Napster boasted some 6 million tracks, the largest selection of music among online music services.  However, months later the company posted a larger-than-expected quarterly loss as its numbers of paid subscribers fell.  The company was estimated to have less than 400,000 subscribers when Best Buy acquired it. 

Rhapsody described Napster as the second-largest U.S. digital music service, but did not disclose how many subscribers Napster currently has.

The combined Rhapsody and Napster will face fierce competition from newer rivals like Spotify, Rdio and MOG as well as from established services such as Apple’s iTunes, which has dominated digital music sales.

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Source: RedOrbit Staff & Wire Reports