Best Buy downloads onto music scene with Napster deal
MINNEAPOLIS —To position itself as a top destination for music sales, Best Buy has agreed to buy Napster for an aggregate purchase price of approximately $121 million, giving the CE giant control of the digital music retailer’s approximately 700,000 digital entertainment subscribers, as well as its Web-based customer service platform and innovative mobile capabilities. The companies said they expect the transaction to close during the fourth calendar 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.”
Best Buy came in third in an NPD consumer survey on music purchases for the first half of 2008, finishing behind iTunes and Walmart. iTunes’ place at the top proves that digital downloads are growing, while CD sales are lagging.
In order for the Best Buy/Napster partnership to succeed, however, Best Buy has to hope that the Napster name can attract the following it had when it first introduced the idea of file sharing. While Napster does have a high number of users, it’s no longer the powerhouse it was before being forced to shut down over legal issues. Today the site is legal, but with sites like iTunes and Rhapsody, the competition for paid digital downloads is strong.
Yet, Napster can provide Best Buy with the tools it needs to grow in the music space and can help the CE giant go from being a music retailer to being a community for music shoppers. Best Buy, which reported a 13% decrease in second-quarter net earnings over the same period last year, could certainly use the boost Napster can potentially provide.
“We believe Napster brings us excellent capabilities in the mobility space, as well as international operations and an established team of technology experts,” said Dave Morrish, evp of connected digital solutions at Best Buy. “We can foresee Napster acting as a platform for accelerating our growth in the emerging industry of digital entertainment, beyond music subscriptions. We’re very excited to add these capabilities to leverage our existing relationships with the labels, the studios, and the hardware providers. We believe Napster will be an outstanding addition to our already robust portfolio of partners and offerings in the digital music space.”