Best Buy To Acquire Napster
Best Buy has announced it will purchase digital music service Napster Inc for $121 million in hopes of attracting more customers and possibly luring some away from Apple Inc’s iTunes.
Napster and Best Buy are betting they have a better chance by combining rather than competing with each other.
Best Buy said on Monday it would pay $2.65 per Napster share, nearly double its closing price on Friday. Napster shares jumped 87 percent in early trading to $2.54.
The acquisition will include Napster’s 700,000 digital music subscribers, Web-based customer-service platform and mobile capabilities.
"Best Buy intends to use Napster’s capabilities and digital subscriber base to reach new customers with an enhanced experience for exploring and selecting music and other digital entertainment products over an increasing array of devices," said Best Buy President and Chief Operating Officer Brian Dunn.
The original Napster was a pioneer in the digital music revolution in the 1990s. It was eventually shut down due to a lawsuit filed by the RIAA. The brand name was bought and resurrected as a legal digital subscription service.
"This is a very natural and appropriate time for Napster to lever up our position in the industry with a strategic bear hug from such a powerful partner," said Napster Chief Executive Chris Gorog.
Neither Napster or Best Buy pose much of a competitive threat to iTunes, but the hope is that they may attract more new subscribers together.
In late May, Napster began selling songs in the unrestricted MP3 format, a move the company hoped would bolster its position against Apple Inc.’s iTunes and Amazon.com Inc.’s online store. Napster also continued selling restricted tracks via its subscription service.
Best Buy has been expanding its wireless products and services, rolling out cellphone departments to all of its U.S. stores. In May, the consumer electronics retailer paid $2.1 billion to form a joint venture with U.K.-based Carphone Warehouse Group PLC.
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