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Best Buy will pick up Napster in an attempt to compete against more successful online music services

Best Buy kicked off this week by announcing that it purchased Napster for $121 million in cash in an attempt to compete against Apple iTunes and Amazon's online music store.  The deal should be closed by the fourth quarter.

“This transaction offers Best Buy a recognized platform for enhancing our capabilities in the digital media space and building new, recurring relationships with customers,” said Best Buy President and COO Brian Dunn.  “Over time we hope to strengthen our offerings to consumers, who we believe will increasingly seek devices and solutions that enable them to access their content wherever, whenever and however they want.”

Since Napster has about $67 million in cash and short-term investments, Best Buy will actually end up paying just $54 million, or $2.65 per share, which is a 50 percent increase in the stock's closing price last week.  The company purchased several smaller online music stores over the past few years, but its stock price continued to drop -- but the turnaround started in May, when the company launched its new store.

Both Best Buy and Napster have their own digital music download services, but both services have had a hard time competing with Apple which controls 70 percent of the music market.  Best Buy will be able to collect Napster's 700,000 subscribers, along with the Napster customer service platform and mobile service.  The deal does not include the company's peer-to-peer platform, which is a strong sign that it is no longer relevant.

Napster's online music store is one of the largest in the world, and generated $127.5 million in revenue over the last fiscal year.

Napster has 140 employees in its Los Angeles headquarters and Best Buy does not have immediate plans to make drastic changes among the employees.

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Napster is not bad
By gigahertz20 on 9/15/2008 3:32:46 PM , Rating: 2
A friend of mine did the Napster free trial a few weeks ago, downloaded a thousand or so of the DRM laced songs for free, then used the lossless program called FairUse4Wm to rip the DRM protection right off. FairUse4Wm doesn't even have to record the song through your soundcard like Tunebite and other similar programs.

When software like this exists, it's no wonder Napster is doing so poorly on music sales, and most people I know use iTunes anyways.

RE: Napster is not bad
By Diesel Donkey on 9/15/2008 3:58:12 PM , Rating: 2
Of course FairUse4Wm only works with older versions of Windows Media Player (WMP 11 Beta 2 and earlier). MS has locked down the latest WMP. I did have a free Napster account through my college before I graduated two years ago, and being able to strip the DRM from songs I had purchased was a nice feature. It was the only way I could play those songs on my somewhat old iRiver HP-120. Needless to say, I probably would have purchased more music from them had I been able to avoid the DRM hassle.

RE: Napster is not bad
By DASQ on 9/15/08, Rating: -1
RE: Napster is not bad
By Spivonious on 9/15/2008 4:09:03 PM , Rating: 3
Yes. What's wrong with it?

RE: Napster is not bad
By AnnihilatorX on 9/15/2008 4:18:48 PM , Rating: 3
I used to be an WMP user until WMP11, and frankly it's not bad. But I have jumped to foobar, being the only player that suit all my needs. Though as you can see, the technical gap is quite big there.

WMP needs to improve on 3rd party format support. It fails utterly supporting anything other than mp3 and wma. It can use directshow filters to play say flac, but you cannot use the library function because it simply can't read the tags. That's the main reason I moved on from WMP. Otherwise it's library is quite good.

It also lacks the frequent updates you see in other players from winamp, foobar to itunes. the newest ID3 tag v2.4 I don't think is supported.

RE: Napster is not bad
By AnnihilatorX on 9/15/2008 5:01:39 PM , Rating: 2
The reason I uses foobar is its ability to transcode any audio file to mp3 for my mp3 player, something most players fails to do.

RE: Napster is not bad
By StevoLincolnite on 9/16/2008 6:07:05 AM , Rating: 2
Personally I like Winamp, been using it for just over 10 years now, It's always been solid and has all the features I want, Plus more thanks to the Plugin System.

Ice cream > Napster
By JasonMick on 9/15/2008 3:19:14 PM , Rating: 1
Looks like the ice cream store owner who was one of the major shareholders and was demanding a shakeup got his way...

I'm guessing he's collecting his money as this hits the press, and laughing at Best Buy and its unprofitable new property.

List of companies (NOT) to acquire
1. AOL XX ...too late acquired
2. Napster XX...too late acquired
3. Yahoo

RE: Ice cream > Napster
By hellokeith on 9/15/2008 6:30:40 PM , Rating: 2
You forgot

4. ..
5. Profit?????

But on a serious note, I wonder what this does to Rhapsody? "Best Buy Digital Music Store" powered by Rhapsody (RealNetworks). I would guess this means Best Buy will be severing ties with RealNetworks.

RE: Ice cream > Napster
By someguy123 on 9/15/2008 6:48:39 PM , Rating: 2
I would have died laughing. This was a great way for best buy to toss 121mil down the drain. if they seriously think they can compete with the huge cultural phenomenon that is the ipod and itunes they are truly delusional.

i mean seriously, the main reason ipod is so popular is because it's a trendy item. it's considered "cool" to have an ipod or i guess now an iphone. i mean i love ipod, but really the technology is not the reason it's so insanely popular. they're going to try to beat something so culturally relevant with something that hasn't been relevant for the past decade???

By uhgotnegum on 9/15/2008 5:41:23 PM , Rating: 2
BestBuyRep: Looks like you're searching around for a song...
Guy: Yeah, I think this one looks good...

BestBuyRep: Ooo, yeah, that's a good one. Have you considered purchasing a DRM protection plan with that? For a nominal cost, you can extend the length of your DRM for an additional 2yrs. beyond the initial lifetime of the song.
Guy: Hmm. I don't know; the song is only $.99. I think I'll risk it.

BestBuyRep: Ok, I recommend it if you change your mind, but on another note, have you perused our selection of media players, which will help you get the most out of your music selection?
Guy: No, I have an iPod already

BestBuyRep: Well, when you get a chance, I'd check it out. There are new generation iPods out there, but since I work at Best Buy, I recommend the Zune. Now, I wouldn't want you to buy this song and then not be able to really catch the highs and lows, so let's go see about some Monster Cables....and since you're shopping for music at Best Buy, it's clear that you'll need GeekSquad to come by and show you how the blue-tipped cord goes into the blue connector....

and so it goes.....

By chmilz on 9/15/2008 10:37:36 PM , Rating: 2
You get service at your local Best Buy?

LOL iPods blow
By mrdeez on 9/15/2008 8:27:55 PM , Rating: 2
The reason ipods are so popular is because of the "i". Its all about me me me...and apple has manipulated peoples false sense of "i" and made millions off of it. I bet they have other ideas as well like this:

1-gaypod-for the gay community and they would do this if they could get away with it. figure it out.
3-put any ethnic group here.....

It is sad that we as a society are so self absorbed that we go for this. I would never own an ipod...I detest any company that blows its horn as open source and then does the exact opposite...Archos5 ftw

RE: LOL iPods blow
By icanhascpu on 9/15/08, Rating: -1
RE: LOL iPods blow
By nafhan on 9/16/2008 8:26:19 AM , Rating: 2
Your post reminded me of a hilarious Mad TV skit where they have Steve Jobs showing off new products called the iRack (it's unstable!) and the iRan (it'll make you forget about the iRack).

By Ctsephion on 9/15/2008 3:17:29 PM , Rating: 2
Does this remind anyone else of a kid that has potential, but keeps getting bounced from foster home to foster home?

Om nom nom nom
By therealnickdanger on 9/15/2008 3:18:25 PM , Rating: 2
Best Buy HQ is only a few blocks from my house. I can hear the sound of it devouring things as I drive about. I enjoy shopping (and working occassionally) at Best Buy. Every day they nom just a little more of my soul. I'm glad I've got stock! :P

Imagine that.
By 67STANG on 9/15/2008 4:23:45 PM , Rating: 2
I didn't even know Napster still existed. I had assumed they faded away once they went "legit" and all of us thieves moved to torrents...

I guess you learn something new every day.

By PhantomRogue on 9/16/2008 7:51:03 AM , Rating: 2
Now when I check out at BestBuy, im not only gonna get the "do you have a rewards card with us, would you like to sign up for one.." AND the "With your purchase, you get 6 free issues of Entertainment Weekly." But now i'll get "With your purchase, you get 3 free songs from Napster, we can sign you up for a subscription with 1 click!" Yaaaaay.

By icanhascpu on 9/15/2008 5:16:45 PM , Rating: 1
Napster is the redheadedstepchild of the online music sales industry.

"People Don't Respect Confidentiality in This Industry" -- Sony Computer Entertainment of America President and CEO Jack Tretton

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