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Napster to be Acquired by Rhapsody

Written By Shelly Alicia on Tuesday, October 4, 2011 | 5:30 AM

NapsterOne of the oldest internet subscription music services on the web, Rhapsody, has finally, and officially, acquired Napster subscribers as well as a host of other assets from Best Buy. However, Best Buy will retain a minority stake in Rhapsody according to a joint statement from both companies.

The acquisition is expected to close on November 30 according to the companies. Best Buy is unloading a music service that really struggled before being acquired by Rhapsody and seemingly disappeared afterwards. Financial terms of the deal have not officially been released though it does not appear that Best Buy's investment in Napster has paid off.

The electronics retailer acquired a revamped version of Napster back in 2008 which allowed the company to officially enter into the online music sector. Napster started off as the pioneer file-sharing service back in the day. The service allowed users to share songs with each other via the internet. However, lawsuits filed by multiple recording companies nearly destroyed the company, eventually leading to the selling of the trademark and brand.

Three years ago Best Buy launched an all-cash tender offer for outstanding Napster shares priced at $2.65 per share; the full acquisition was valued at $121 million. That number represented a $54 million net of approximately $67 million in cash and short-term investments. Napster recognized that it had 700,000 members when Best Buy acquired the service though it is unclear as to how many the company has now.

Despite Napster's failure, Rhapsody appears to be years ahead of its time. Over the past ten years Rhapsody worked on getting consumers interested in subscription music services. Now the entire music industry is attempting to make that business model work.

Rhapsody was owned, in part, by RealNetworks and Viacom, though those companies spun off the service back in April 2010. Since then, managers for Rhapsody have been trying to prevent upstart "all-you-can-eat" services from taking all the credit. Spotify, MOG and some other digital music services are just some of the many services that charge a monthly fee for premium services, just like Rhapsody.

Source: CNET - Rhapsody to acquire Napster (scoop)

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