Rhapsody To Buy Napster

Rhapsody plans to buy Napster from Best Buy. The retailer had purchased the music download website just 3 years ago for $121 million. The purchase was a chance for the retailer to get into the digital download business to offset falling CD sales.

However, with a market full of strong competition, mainly from iTunes, the plan failed. Gartner analyst Michael McGuire estimated that Napster has 200,000 to 300,000 subscribers, down from 700,000 when Best Buy acquired the company in 2008.

Currently, Rhapsody has about 800,000 subscribers. In a statement, Rhapsody International Chief Executive Jon Irwin acknowledged that a key goal of the acquisition was to build scale by combining the two companies’ user bases.

“This is a ‘go big or go home’ business, so our focus is on sustainably growing the company,” he said.

Napster was originally founded as a pioneering peer-to-peer file sharing Internet service that emphasized sharing audio files that were typically digitally encoded music as MP3 format files. The original Napster owner ran into legal difficulties over copyright infringement, ceased operations and was eventually acquired by Roxio and later by Best Buy.

Rhapsody is an online music store subscription service, launched in December 2001, and available in the United States only. On April 6, 2010, Rhapsody officially declared its independence from RealNetworks. Downloaded files come with restrictions on their use, enforced by Helix, Rhapsody’s version of digital rights management enforced on AAC+ or WMA files. The service also sells individual MP3s without digital rights management restrictions.