Digital music giant Rhapsody told sources today at CNET.com that it will make an announcement about acquiring Napster from Best Buy.
Some of you may recall that Best Buy was responsible for breathing new life into the music streaming service, Napster, after it took over ownership of it back in 2008. At that time, Napster was a small operation of only 40 employees and was losing cash flow. In the prior quarter of that year, Napster had reported losing $16.5 million from a previous revenue of $127.5 million. Best Buy reportedly purchased the service for $121 million, and acquired the program with over 700,000 subscribers already intact. Keep in mind that this was back during the time that peer-sharing and digitally-subscribed music services were gaining popularity (think about other services like Kazaa and Lime Wire).
So just how many subscribers does Napster currently carry since Best Buy took over? It isn't really known at this time, but according to an article published back in 2010, Napster was reporting around 708,000 subscribers, up 8,000 from 2008. So it isn't clear exactly how many users subscribed (or have un-subscribed) from the service in the last year. Rhapsody did not report any specific terms of agreement with Best Buy, and has not released any information regarding any specific numbers or projected revenues. Perhaps all of these questions will be answered when Rhapsody gives an official statement about the buyout, which could be happening as soon as today.
With the acquisition beyond the rumor phase now and entering reality, it begs the question "is this a smart move for Rhapsody?" In short, probably yes. As of 2011, Rhapsody was reporting over 750,000 subscribers, and an infusion of the 700,000 plus that Napster is offering would propel Rhapsody forward as a front-runner with over 1,450,000 subscribers. That is no small number, and at an average monthly fee of $5.00 that is a rather nice amount of cash flow for the already dominant service. Rhapsody reported that it had a library of over 11,000,000 songs in 2011. However, it is important to remember the uprising of such services like Pandora Radio, which are offering users a larger variety of music that is custom tailored to their tastes. Although, digital subscription services are trying to gain some ground. A popular service, Kazaa, is now offering I-Phone and I-Pad applications that users can run from their mobile devices.
Rhapsody is keeping much of the deal under-wraps for now and it is apparent that we will not know much more until an official announcement is made. Stay tuned for more information regarding the buyout.
What are your opinions about the buyout? Comment below!
