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RHAPSODY BUYS NAPSTER…


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Rhapsody’s President Jon Irwin said of the acquisition that “scale is extremely important in this business.” He is, of course. entirely correct. Rights fees leave little in the way of margins. For sake of full disclosure, I’ve been a very long-term fan of Rhapsody, right since their earliest days. It was partly our experiences of Rhapsody that led me and my former colleague David Card to be so bullish about music subscriptions when we were helping build the Jupiter Research digital music forecasts. But the time has come for Rhapsody not just to change but to drive change.

The digital music market is a different world from that Rhapsody was built for. Unless Rhapsody wants to be limited to spending the next year or two simply trying to stay one subscriber ahead of Spotify, it needs to overhaul its product roadmap…

Cnet:
Rhapsody, one of the older subscription music services, has made it official. The company has acquired Napster subscribers and other assets from Best Buy, while the electronics retailer will obtain a minority stake in Rhapsody, the companies said today.

In a deal first reported by CNET, the acquisition is expected to close on Nov. 30, 2011, the companies said in a press release. Best Buy appears to be unloading a music service that struggled prior to being acquired by the merchant and only seemed to disappear after.

The total financial terms of the deal were not fully disclosed. Nonetheless, it doesn’t appear that Best Buy’s investment in Napster paid off…

AllThingsD:
The companies, which are claiming to have the two largest music subscriber bases in the U.S., did not disclose how many they will have together. Rhapsody said it will also use the assets to add to its product line. Separately, Rhapsody has reported that it has surpassed 800,000 subscribers.

In a statement, Jon Irwin, Rhapsody’s president, said, “There’s substantial value in bringing Napster’s subscribers and robust IP portfolio to Rhapsody as we execute on our strategy to expand our business via direct acquisition of members and distribution deals.”

The two companies likely have felt additional pressure as new subscription and ad-supported music services enter the U.S. market, such as Rdio and Spotify…

Mark Mulligan:
When 2+2=2.5

In the near-term the Napster acquisition will put more clear water between Rhapsody’s subscriber count and Spotify’s. It should also grant Rhapsody membership of the the ‘1 Million Club’, with its 800,000 subscribers swelled by a few hundred thousand from Napster. The last time Napster reported their numbers in December 2008 they had 700,000 subscribers. After three years in the Best Buy wilderness and shifts towards bundled download products I estimate there to be no more than 400,000 fully fledged subscribers left, probably more like 300,000…

Rhapsody needs unlimited MP3, now!

I’ve long advocated that if the record labels really want to ensure the extant premium subscription services don’t become extinct that they must empower them with dramatically more powerful licenses: namely unlimited MP3. Of course it will be a good year or two more of global music revenue decline before the labels hurt enough to really countenance unlimited MP3, but Rhapsody needs it now…