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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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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?

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