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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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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.

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