Consumer electronics retail giant Best Buy purchased Napster, the digital music distribution company, for $121 million in cash today. (Though the deal will actually only cost $54 million net when you take out Napster’s cash and investments.) The obvious reaction is: Why?
The $54 million price tag for a service that is perhaps still best remembered as the one-time largest hot zone for music piracy seems a bit high. The problem is that while Napster may have 700,000 users and a fairly impressive MP3 catalog featuring some 6 million tracks, consumers already have at least two options for online music purchases that are much better: Apple’s iTunes and AmazonMP3.
When you throw MySpace Music, scheduled to launch any day now, into the mix, you have Napster as just another has-been. Best Buy is likely just looking at iTunes’ dominating numbers, and AmazonMP3’s growing numbers and realizing that if it wants to compete in the music sales business of the future it’s going to need a robust digital store. Of course, Best Buy has had a digital store in partnership with Rhapsody for a while, and it just hasn’t worked.
Interestingly, Best Buy also mentions Napster’s “excellent capabilities in the mobility space,” in the press release for the acquisition. Napster does offer mobile services, but they’re rather limited, and confusing. Napster To Go lets users transfer unlimited music from a PC to a phone, while Napster Mobile is a different service that lets users download music directly to their phones.
Currently, AT&T is the only carrier that supports both services — and it only offers them on a small selection of phones. The other, much smaller carriers, U.S. Cellular, SunCom Wireless and CellularOne only offer one or the other of these Napster mobile services.
These hardly sound “excellent.”
Speaking of mobility, Best Buy recently reached an agreement with Apple to start selling the iPhone in its stores. It also sells iPods, which are the dominant music device in the United States with nearly three quarters of the market. Will anyone who buys an iPhone or iPod want to use Napster? Probably not. Will Best Buy employees? Probably not.