Rhapsody buys Napster from Best Buy

Rich Fiscus
4 Oct 2011 14:50

Rhapsody is buying Napster from Best Buy. Details of the deal weren't disclosed, except that Best Buy will be getting a minority stake in Rhapsody.
Based on statements from Rhapsody executives, it appears this may mark the end of the Napster brand..

Rhapsody President Jon Irwin said:

This deal will further extend Rhapsody's lead over our competitors in the growing on-demand music market. There's substantial value in bringing Napster's subscribers and robust IP portfolio to Rhapsody as we execute on our strategy to expand our business via direct acquisition of members and distribution deals.

He added:

This is a 'go big or go home' business, so our focus is on sustainably growing the company. We're excited to welcome Napster music fans to the best on-demand music experience anywhere. Our new members will have more places to connect to the music they love and to discover new favorites, guided by Rhapsody's rockstar editorial team and the tastes of other Rhapsody members via our innovative social features.

The brand is really all that's left of the original Napster service, which brought file sharing to the masses in 1999 as broadband Internet was taking off.

Despite an investment of $80 million from a major record label, Bertelsmann Music Group, and plans to launch a legal subscription service, a lawsuit from the other major labels eventually brought Napster to its knees.

After a BMG attempt to buy Napster was rejected by a federal judge, the company folded in 2002, declaring Chapter 7 bankruptcy.

They were eventually purchased by Roxio for just over $5 million as part of a plan to rebrand another failed music service originally launched by some of the same labels who brought down Napster.

In 2003, Roxio launched Napster 2.0, an iTunes-like service which offered DRM crippled downloads, and also a separate streaming service. After failing to live up to Roxio's high expectations of being an iTunes competitor, the company was purchased by Best Buy in 2008.

Their new owner, Rhapsody, was originally part of RealNetworks, but later spun off into a separate company owned by Real and Viacom's MTV Networks.

Despite being the biggest player in the US streaming market, competition from both download services like iTunes and Amazon MP3 and Internet radio services like Pandora has kept them from becoming more than a niche service.

Today Rhapsody faces more competition than ever. Earlier this year Spotify entered the US market after building a successful streaming business in Europe.

Additionally, cloud offerings from Amazon, Google, and now Apple are showing signs of being the next big thing. Even with Napster, Rhapsody's opportunities seem to be disappearing quickly.