The legendary Napster is now part of Rhapsody. On Monday, Rhapsody International announced it was purchasing its rival, currently owned by Best Buy. Details of the deal were not released.
Best Buy will retain a minority stake in Rhapsody. Both Rhapsody and Napster were early into the game of subscriber-based online music services, both influenced the field, but both are seeing their positions challenged by newcomers.
Spotify, Facebook Moving In
In 2008, Best Buy bought Napster for $121 million, a point at which the online service's subscriber base was rapidly dropping. Rhapsody, co-owned by Real Networks and MTV Networks, is facing a new landscape that now includes Apple's iTunes, Amazon's music service, and smaller startups such as Spotify, Rdio, and others.
Spotify, a U.K.-based service that was launched in the U.S. in July, has become one of Rhapsody's most aggressive competitors. Users can listen to ad-supported music for free, or opt for a subscription-based, ad-free service. Spotify also recently announced a tight integration with Facebook.
In that move, Spotify is requiring every new member to also be a member of Facebook. While such a dependence on the social-networking giant has raised eyebrows, Spotify has reported that it is adding 250,000 new members each day since the deal was announced. That service now says it has 2 million paying customers over eight countries. Rhapsody, by contrast, has about 800,000 subscribers.
Rhapsody is also involved with the new Facebook Music services, although not with the kind of integration that Spotify has. Other music partners with Facebook, which could become the dominant platform for social-music listening, include Earbits, iHeartRadio, Rdio, Mog and Slacker. Facebook, with 750 million members worldwide, could dwarf any other platform for new music.
Napster Brand Continues?
In a statement, Rhapsody President Jon Irwin said the deal would bring "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."
Irwin added that the online music business is a "'go big or go home'" environment. It is not known if the Napster brand will continue in any form.
When Best Buy purchased Napster, the service had about 700,000 subscribers, a customer service platform, mobile apps, and an online store containing DRM-less MP3s. It also said it had the largest music selection of any online service. A new version of the service was launched in 2009.
Napster began life in 1999 as a peer-to-peer site that offered MP3 files to share, a revolutionary move that helped jump-start the online music scene -- and resulted in a variety of copyright infringement suits from record companies that led to its temporary shutdown. It reopened after it was purchased by Bertlesmann AG in 2002.
Rhapsody, launched in 2001, was spun off into a separate company by Real Networks in 2010. It retained 51 percent, and sold the remainder to MTV Networks.