Best Buy No Apple, Exits Mobile Music Biz with Napster Sale
Best Buy’s (NYSE:BBY) digital music unit, Napster, will soon be acquired by Rhapsody International, an Internet music service provider. In the proposed deal, Rhapsody will acquire the subscribers and other assets of Napster and in return Best Buy will get a minority share in the business. A few years back in 2008, Best Buy bought Napster for $121 million, and this acquisition enabled Best Buy to enter the online music sector. We believe Best Buy initially hoped to challenge Apple’s iTunes service, but this fell short as Best Buy lacks the device and software support of the Apple (NASDAQ:AAPL) ecosystem. Nevertheless, we believe this is a good move for Best Buy and will allow the company to focus on its core competencies.
Our price estimate for Best Buy’s stock stands near $35, implying a premium to the market price.
See our full analysis for Best Buy
- With Q2 Earnings Around The Corner, Will Best Buy Stock Live Up To Its Name?
- Down 7% This Year, Will Best Buy Stock Recover Following Q1 Results?
- Flat Since The Beginning of 2023, What’s Next For Best Buy’s Stock Post Q4 Results?
- Down 15% This Year, Where Is Best Buy Stock Headed Post Q3?
- What To Expect From Best Buy’s Stock Post Q2?
- What’s Happening With Best Buy’s Stock?
Best Buy’s Struggle with Napster
Best Buy has struggled to grow Naspter’s subscriber base since its acquisition. According to the Star Tribune, Best Buy bought Napster when digital music downloads were on the rise and sales of music CDs were on the decline – but Napster has been essentially been marginalized while Apple’s iTunes has dominated. [1] Now a flurry of other music services are entering the fray like Pandora, Spotify and others.
According to industry analysts, Napster has fewer than 400,000 subscribers, significantly fewer than the 706,000 subscribers that it had before its acquisition by Best Buy. On the other hand, Rhapsody claims to have 800,000 paying subscribers. [2] Rhapsody, a joint venture of RealNetworks and Viacom’s MTV Networks, was spun off as an independent company in 2010.
Napster was not a bad idea for Best Buy in its attempts to hedge the decline of its CD business; however, we believe that it is a good move to sell this asset after its attempts to grow this business failed to blossom in recent years.
Understand How a Company’s Products Impact its Stock Price at Trefis
Notes:- See: Best Buy to Sell Online Music Provider Napster, Twin Cities Business [↩]
- See: Rhapsody Tries to Stop the Spotify Juggernaut, Business Insider [↩]