Why Best Buy has acquired Napster

Napster CEO Chris Gorog seems to be among the most accomplished escapists in the game, with the shock announcement today that US retail giant, BestBuy, has agreed to buy the loss-making music service for $121 million ($2.65 per share).

The transaction has been approved by Napster’s board and is expected to close during the fourth quarter. The proposed acquisition includes Napster’s approx. 700 thousand digital entertainment subscribers, its Web-based customer service platform, and innovative mobile capabilities.

Napster CEO Chris Gorog and key members of the company’s senior management team will be employed to manage the company post-acquisition, and no redundancies among the 140 exisiting employees have (yet) been discussed.

So – what’s a giant high street US retailer to gain out of this deal? Well, we think it reflects the increasing commodification of digital music. Also consider the major labels appear ready now to offer their music in DRM-free MP3 format internationally (expect much more news on this in the weeks ahead). And Napster already offers music DRM-free.

Certainly these hunches are borne out by Best Buy management, in the form of Brian Dunn, President and COO of Best Buy, who said, "This transaction offers Best Buy a recognized platform for enhancing our capabilities in the digital media space and building new, recurring relationships with customers. 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.”

Dave Morrish, Executive Vice President – Connected Digital Solutions of Best Buy adds, "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."

And Gorog? He said this: "We are looking forward to combining our digital media capabilities with Best Buy’s resources and global network to extend our digital content platforms."