Electronics retailer Best Buy to acquire Napster

16 September 2008

Technology and consumer electronics retailer Best Buy Co Inc is planning to acquire digital music service provider Napster Inc for $121 million in cash. The move is being seen as an endeavour to compete with Apple's dominant iTunes service that sells digital music for its iPod players.

Apple effectively controls around 70 per cent of the US digital market, while Best Buy, amongst the largest consumer electronics retailers in the US, is also one of the largest retailers of compact discs, though it does provide digital subscription services.

Napster, the online music file sharing service that was accused of copyright violations, also provides digital subscription services. By combining forces with Best Buy, Napster and the retailer are playing to secure a fair chunk of the Apple-controlled market, by collaborating instead of competing with each other.

Best Buy has announced that it will pay $2.65 per Napster share, almost double of its closing price on Friday. Napster shares were up by a whopping 87 percent in early trading at $2.54.

This is not the first move by the retailer, who had teamed up with REalNetworks Inc and SanDisk Corporation in 2006 to create a digital music subscription service and a compatible media player. Best Buy now plans to use Napster to extend its customer reach across an array of devices, including Napster's 700,000-odd subscribers, web-based customer service and mobile capabilities.

Best Buy's moves outside of traditional consumer electronics are driven by its ambition to double its annual sales to $80 billion over the coming five years.