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#573904 - 09/15/08 01:38 PM
Best Buy to acquire Napster
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Bill Lumbergh
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Best Buy to acquire Napster for $54 million
SAN FRANCISCO (Marketwatch) -- Best Buy Co. said Monday that it has signed a deal to acquire digital music provider Napster Inc. for $54 million, giving the retailer a means of taking on Wal-Mart in the increasingly important online-distribution channel.
@ @ @ @ @ @ @
That's certainly an interesting denouement to the Napster saga.
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#573918 - 09/15/08 01:51 PM
Re: Best Buy to acquire Napster
[Re: Bill Lumbergh]
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quadguy1
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Seems pretty idiotic. That's a lot of scratch for...a name and a generally unsuccessful business...
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#573919 - 09/15/08 01:53 PM
Re: Best Buy to acquire Napster
[Re: quadguy1]
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jmassif
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Dunno, $54mil for a database of 700k + tech-savvy/almost tech-savvy consumers to market to and a ready-built infrastructure to deliver downloads of all sorts seems pretty reasonable to me.
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#573932 - 09/15/08 02:24 PM
Re: Best Buy to acquire Napster
[Re: jmassif]
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nycbiscuit
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$77 per name? Sounds kind of expensive to me.
I wouldn't think Napster was worth that much, especially given today's market.
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#573955 - 09/15/08 02:48 PM
Re: Best Buy to acquire Napster
[Re: nycbiscuit]
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jmassif
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Names, infrastructure, it's all pretty worthwhile. Especially since they've got a pretty half-baked system that works for no-one really as currently constructed.
I'm not a firm believer that this will work in the medium run, but it's better than what they've got, and they can't sit still with Amazon becoming a bigger part of the CE-selling universe.
_________________________
It's a well-known fact that reality has a liberal bias- Stephen Colbert
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#573991 - 09/15/08 03:47 PM
Re: Best Buy to acquire Napster
[Re: jmassif]
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QueenSheDevilCow
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It's a good deal for both parties.
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#574006 - 09/15/08 04:11 PM
Re: Best Buy to acquire Napster
[Re: QueenSheDevilCow]
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WillisDickfit
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It's a good deal for both parties.
It is a good deal for Napster, but someone at Best Buy should get fired over this joke of a deal. Is Napster worth anything at this point?
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#574009 - 09/15/08 04:19 PM
Re: Best Buy to acquire Napster
[Re: WillisDickfit]
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VSLC
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It's a good deal for both parties. It is a good deal for Napster, but someone at Best Buy should get fired over this joke of a deal. Is Napster worth anything at this point?
Exactly my sentiments. This idiot should be fired yesterday...
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#574020 - 09/15/08 04:36 PM
Re: Best Buy to acquire Napster
[Re: WillisDickfit]
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mpj
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Is Napster worth anything at this point?
do you use it yourself? i find it a VERY valuable tool for business...and where else can you go for $10 a month and stream anything you want to hear?
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#574021 - 09/15/08 04:41 PM
Re: Best Buy to acquire Napster
[Re: mpj]
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opwog
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Is Napster worth anything at this point? do you use it yourself? i find it a VERY valuable tool for business...and where else can you go for $10 a month and stream anything you want to hear?
I think that the larger point is to ask; does anybody actually know anybody who uses Napster? Personally, I don't know anybody who uses Napster since it went legit.
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#574025 - 09/15/08 04:45 PM
Re: Best Buy to acquire Napster
[Re: opwog]
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jmassif
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Not judging, but most of you are missing a rather large point. With this acquisition Best Buy now will have a download infrastructure that they lacked ownership of previously. Instead of having to fill up rows of valuable racks with tax software and productivity stuff-- hey you can go to bestbuy.com and download it, oh and hey you can listen to music and preview videos that you want to buy right on the website...
Just sayin', it's not solely about acquiring Napster and it's music-related capabilities, IMHO.
Edited by jmassif (09/15/08 04:45 PM)
Edit Reason: clarity
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It's a well-known fact that reality has a liberal bias- Stephen Colbert
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#574029 - 09/15/08 04:53 PM
Re: Best Buy to acquire Napster
[Re: jmassif]
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opwog
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Not judging, but most of you are missing a rather large point. With this acquisition Best Buy now will have a download infrastructure that they lacked ownership of previously. Instead of having to fill up rows of valuable racks with tax software and productivity stuff-- hey you can go to bestbuy.com and download it, oh and hey you can listen to music and preview videos that you want to buy right on the website...
Just sayin', it's not solely about acquiring Napster and it's music-related capabilities, IMHO.
Getting back to the price, that still sounds expencive. Admitedly, it is a shortcut, but logistically they could have done this for as little as half a million in about 8 months. Most Napster people will be let go, so is there really one or two people actually working at Napster who have such scary great talent that warrants paying $54mil?
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#574035 - 09/15/08 05:03 PM
Re: Best Buy to acquire Napster
[Re: mpj]
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WillisDickfit
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Is Napster worth anything at this point? do you use it yourself? i find it a VERY valuable tool for business...and where else can you go for $10 a month and stream anything you want to hear?
This gets away from the point of the sale, but how much music DO you need to hear? Rhapsody, LaLa, YahooMusic - these all have a lot of music to hear (and see - music videos) available. LaLa and Yahoo for free.
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#574191 - 09/15/08 10:28 PM
Re: Best Buy to acquire Napster
[Re: nycbiscuit]
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rope_burn
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$77 per name? Sounds kind of expensive to me.
Not when you sell computuers.
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#574220 - 09/16/08 12:02 AM
Re: Best Buy to acquire Napster
[Re: WillisDickfit]
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mpj
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This gets away from the point of the sale, but how much music DO you need to hear? Rhapsody, LaLa, YahooMusic - these all have a lot of music to hear (and see - music videos) available. LaLa and Yahoo for free.
i must be missing something. when i go to yahoo, all i see are 30 second clips. on lala, you pay 10 cents a song to stream. neither are what i would call free.
and napster seems more easier to navigate.
but as far as the sale goes, i see it as a good thing for both parties. i got to think napsters data base alone, along with their cross promotion abilities, will make this worthwhile for them.
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#574259 - 09/16/08 01:29 AM
Re: Best Buy to acquire Napster
[Re: mpj]
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Wretched_Wrench
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What a fucking joke this is. Best Buy can kiss those millions adios.
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#574281 - 09/16/08 02:39 AM
Re: Best Buy to acquire Napster
[Re: Wretched_Wrench]
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jmassif
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Thanks for your valuable input. I found the part where you actually had something to offer beyond platitudes to be particularly compelling.
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It's a well-known fact that reality has a liberal bias- Stephen Colbert
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#574309 - 09/16/08 08:04 AM
Re: Best Buy to acquire Napster
[Re: jmassif]
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Darren
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This is an idiotic deal for Best Buy. For half that money they could implement their own system and not be tied down to whatever idiosyncracies exist within the Napster system. As for Napster's customer database, pfft. You don't think Best Buy has a sizeable databse of their own? Crikey.
I just have no idea what the fuck Best Buy thinks they have to gain, but I do congratulate Napster for finding someone willing to pay that much for a fucking facade.
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#574347 - 09/16/08 01:25 PM
Re: Best Buy to acquire Napster
[Re: rope_burn]
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nycbiscuit
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sure it is. hella expensive. the margin on computers is not what it once was.
now printer cartridges -- that's where they get you! 
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#574360 - 09/16/08 02:22 PM
Re: Best Buy to acquire Napster
[Re: nycbiscuit]
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MrMoo
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How much was the deal for? DMN is reporting $121 million in an all cash deal...
Link
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#574370 - 09/16/08 02:40 PM
Re: Best Buy to acquire Napster
[Re: MrMoo]
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zisk
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The purchase price is not that much above the amount of cash which Napster had, and I'm sure there are plenty of other assets not being reported (like possibly a tax loss carry forward), so when you consider that Best Buy is paying almost nothing for assets including a link from every current Windows Media Player (on the vast majority of computers which are and have recently been sold), the Napster name, and licenses from every major label (with advances already prepaid), my hunch is (contrary to the impression of folks panning the acquisition) that it was actually an extremely well thought through decision on the part of Best Buy.
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#574386 - 09/16/08 03:09 PM
Re: Best Buy to acquire Napster
[Re: zisk]
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BrandonKCMO
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There are people who bake bread and there are people who buy bread at the store. In this case, Best Buy bought bread. (A very large an unwieldy baguette to be sure)
It's how they make the sandwich that counts.
I give them one chance in three to make this work in the short-run with the odds of survival and profitability going up after three years.
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number one with a boat-anchor..
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#574390 - 09/16/08 03:19 PM
Re: Best Buy to acquire Napster
[Re: zisk]
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Guymandude
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I am just not sure if any of the positive attributes of this acquisition counter balance the amount of $$$ paid for it. At this point Napster as a brand to the consumer is ambiguous at best.-- it's very similar to what the Lime Wire Music Store is, and will be experiencing. For both, overall sales are horrendous, continued licensing fees moving forward will be exhorbitant and crossing the ad plateau to profitablity will prove difficult.
It's a great move for the Napster execs 401k's, I just don't see how this benefits Best Buy, other than a very expensive proactive press release.
I must admit I have not paid much attention to Best Buy, are they doing any business in this time of economic difficulty? My hunch is that, they are not doing well, like most retailers.
The overall capital spent on acquiring Napster may have been better spent on a corporate re-structuring/downsizing and the subsequent charge off,-- who knows, maybe that is in the cards as a way to pay for, amortize and justify this acquisition. But as of this moment, at the end of the day, Best Buy paid big $$$ for a troubled and unprofitable brand with alot of negative baggage. And I don't think that much hyped POS kiosks can salvage this one.
Maybe I am missing something. I would bet the house on an internal re-org soon.
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#574393 - 09/16/08 03:25 PM
Re: Best Buy to acquire Napster
[Re: Guymandude]
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BrandonKCMO
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Best Buy is currently shrinking it's music retail floorspace and jacking-up the cost of Co-op advertising and retail programs.
...So I would guess that they do not see their sales as being all that impressive.
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#574394 - 09/16/08 03:27 PM
Re: Best Buy to acquire Napster
[Re: Guymandude]
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mpj
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i don't know the numbers, but i would think best buy is kickin ass. at least in my area, they are doing much better than circuit city, all the record stores combined, staples, etc etc. they are still growing and building new stores.
and zisk makes some very good points as well.
the reality is nobody really knows how this will pan out for either side. i am a napster subscriber and i love it. it is a very useful tool for the me in the music biz.
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#574398 - 09/16/08 03:39 PM
Re: Best Buy to acquire Napster
[Re: zisk]
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RopeDope
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Just to clarify:
The purchase price is not that much above the amount of cash which Napster had, and I'm sure there are plenty of other assets not being reported ...and licenses from every major label (with advances already prepaid), my hunch is (contrary to the impression of folks panning the acquisition) that it was actually an extremely well thought through decision on the part of Best Buy.
Not all true.
Napster does not have "licenses from every major label" with "advances already pre-paid." They have significant outstanding royalty obligations - some of which the amounts are still unknown.
I would think that a good deal of the cash reserves they have is earmarked as a reserve vs. what they know are going to be some significant retro-active royalty obligations. And those obligations are going to come due very soon - like, the beginning of next year.
They've been running a digital music subscription service since when, 2001? No royalties (beyond some token advances) have been paid to publishers for ANY of those song uses. More subscribers and uses in this period means greater past-due royalty obligations.
In addition, many of the royalties owed to record companies are being paid as they go, and those are subject to increase, as well.
I'll side with those that think Best Buy just made a dumb move by buying Napster for just under a 100% premium over the trading price.
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#574422 - 09/16/08 04:23 PM
Re: Best Buy to acquire Napster
[Re: RopeDope]
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zisk
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>Napster does not have "licenses from every major label" with "advances already pre-paid." They have significant outstanding royalty obligations - some of which the amounts are still unknown.
There are differences between advances and royalty obligations, but I guess that is not clear to everyone. ;-). Which major label does Napster not have a deal with, nor paid an advance?
I did not say whether it will or won't work out for Best Buy.
What I am saying is that it was "an extremely well thought through decision on the part of Best Buy." This comes more from having watched the style of the Best Buy acquisition folks in action than from any impression of Napster, which of course has been a huge failure.
Can Best Buy successfully capture more of the hardware sales which are driven by Napster? My hunch is yes...
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#574449 - 09/16/08 05:02 PM
Re: Best Buy to acquire Napster
[Re: mpj]
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nycbiscuit
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they are doing much better than circuit city
that doesn't take much effort.
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#574456 - 09/16/08 05:10 PM
Re: Best Buy to acquire Napster
[Re: zisk]
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RopeDope
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There are differences between advances and royalty obligations, but I guess that is not clear to everyone. ;-).
Apparently not.
Advances are (in this case, at least) simply pre-payments of royalties that will become due. So the difference between "advances" and "royalty obligations" is really just timing of the payment, and perhaps an adjustment of the amount (as the recoupable advance might not meet or might exceed actual royalties due).
I think Napster has deals with all major labels. I do not believe however, that they are in a "fully paid up" (i.e. advances paid still exceed royalties owed) position to all labels, for all royalties (including "all-in" publishing). Nor to publishers, directly (something you seem to be unaware of or unwilling to consider).
My point was, that to suggest that Napster is sitting on a bunch of cash reserves and all paid up on its obligations is not accurate. They have significant outstanding obligations, and more coming. Several of the articles I've seen analyzing the deal have completely missed those important obligations, as well.
I'm not sure how Napster will help Best Buy to capture more hardware sales. What hardware sales are driven by Napster?
They had a subscription service/hardware/retail tie-in between Best Buy, Rhapsody and Sandisk before and it didn't yield any significant results, that I am aware of.
Edited by RopeDope (09/16/08 05:11 PM)
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#574458 - 09/16/08 05:15 PM
Re: Best Buy to acquire Napster
[Re: RopeDope]
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WillisDickfit
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I just took a look into my crystal ball and saw that Best Buy isn't going to be happy with this purchase down the road...and they don't have a receipt, so there is no option for a refund or store credit.
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