Napster snapped up by Best Buy

IN A MOVE MEANT to shake Apple to its core, Best Buy has snapped up digital music service Napster in a surprise challenge to Itunes.

The electronics giant will shell out $121 million for the privilege of pulling Napster - the ex bad boy of digital downloading - to its bosom, working out at $2.65 a share, almost double Napster’s $1.36 closing share price on Friday.

Napster, of course, is but a shadow of its former self, after being closed down by a damaging music industry lawsuit several years ago. But the company didn’t stay down for long and quickly re-invented itself into a legal service currently boasting 700,000 subscribers. This may not be much on its own, but it’s a possible force to be reckoned with when paired up with Best Buy’s own digital subscription services.

Shares in Napster, which counts140 employees, had plunged 60 per cent since last year after a complicated proxy battle with three dissident investors. But shares shot up again – by a whopping 87 per cent - at the news that Best Buy had indeed bought it, to reach early trading of $2.54. Best Buy’s own shares also saw a small boost, rising by 0.47 per cent, or 21 cents, to $44.70.

Best Buy wants to use Napster’s customer base and use its reach to cater to a whole host of music devices, including mobile phones. But taking a bite out of Apple’s 70 per cent share of the digital music market won’t exactly be a piece of pie.

The deal includes approximately $67 million in cash and short-term investments held by Napster, which means Best Buy is only actually really shelling out $54 million. Also, Napster will have to pay a $3 million forfeit fee, if it breaks off the deal.

Napster CEO, Chris Gorog, along with a few selected senior managers will stay on as part of the Napster leadership, according to the press release.

Not exactly music to Apple’s ears. µ