Best Buy Coughs Up $54 Million for Napster

Lynn 09-19-2008

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.
Chart of NAPS

Under the deal, Best Buy will pay Napster for $2.65 a share in cash, a premium of 95% over the value of the stock at the end of last week. The retailer also is paying about $67 million for cash and short-term investments on Napster's balance sheet as of June 30. Read MarketWatch First Take commentary.

The deal will give Best Buy an online digital music retail outlet as well as a subscription streaming service that has about 700,000 subscribers. That could help Best Buy to compete against retail giant Wal-Mart which has its own online digital music offering.

"This transaction offers Best Buy a recognized platform for enhancing our capabilities in the digital media space and building new, recurring relationships with customers," Brian Dunn, Best Buy's president and chief operating officer, said in a statement.

"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."

In morning trading, shares of Napster jumped $1.19 to $2.55. Best Buy shares dipped 34 cents to $44.15.

The deal has already been approved by Napster's board of directors. Best Buy said it expects to close the deal in the fourth quarter.

Raven

I may have to wait for Hsool o GIR to fill me in on this one. Why wont they just Napster died. Majority of the public has.

GIR

I dunno why Napster has died, it just wont die. many companys want iTunes, the amount of money they get is crazy and people want a chunk of the pie.

but as for Bust Buy getting there hands on them, its good for them as online music is a make a break deal. and with the name of Napster and the power of Best buy, they could do something. the amount of money you can make is crazy if your a name. if your a shmuz then your dead.

Raven

the only reason itunes is so popular and have most of the market is that they have an ipod and now the iphone. The ipod is breatty much the best mp3 player ever. The iphone of course teh worse phone ever lol. If the ipod wasn't stuck to really only using itunes it wouldn't be as popular, it just that there's only 2 alternatives to it and those artuntives cost.

Hsoolien

It's the slickness of the interface between iTunes and the iPod that have made the service so popular, as well as the support of the music industry. There is no one single factor that make any of the factors of iTunes/iPod so successful, it's the combination.