Best Buy Purchases Napster for $121 Million

Best Buy has agreed to purchase online music service pioneer Napster for $121 million, though it's unclear what the electronics retailing giant sees in the struggling company. The all-cash deal will provide Best Buy with a very small bump in the online music services market and access to Napster's 700,000 subscribers.

For Best Buy, $121 million is, as one commentator called it, a rounding error. And that's even more true when you consider that Napster has $67 million in cash, putting the final cost of the transaction somewhere around $55 million. But it's a good deal for Napster, which has hemorrhaged over 100,000 subscribers and seen its stock price fall to less than $1.50 per share. Best Buy is offering a per-share price of almost double that figure, and Napster's board has unanimously approved the sale.

Like so many high-tech train wrecks before it--Amiga, anyone?--Napster started off huge and then faded quickly into oblivion. The company rose to fame in the early 2000s as the poster child for illegal music sharing and was then sued into inexistence by the music industry. Digital media software company Roxio bought the Napster brand in 2003 and has been using that name ever since.

Best Buy says it plans to expand the Napster online distribution service to include other products like games and videos. But Napster CEO Greg Gorog says that Best Buy's sheer size and presence will help the company expand its core business, music, as well. "Everyone in the industry sees very plainly how this can create a more significant player in this exciting space," he says.