Rhapsody Acquires Napster, but Can It Compete Against Spotify

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Rhapsody Acquires NapsterRhapsody has signed an agreement to purchase Napster from electronics retailer Best Buy for an undisclosed amount. According to the press release, “Rhapsody will acquire Napster subscribers and certain other assets, and Best Buy will receive a minority stake in Rhapsody”. While this might be enough to ward off music subscription newcomers like Rdio and Mog, will it stem the tide of Spotify’s US invasion.

Rhapsody is the United States’ largest on-demand music service with a base of 800,000 paying subscribers. RealNetworks, a provider of Internet media delivery software and services like RealAudio and RealVideo, began Rhapsody in December 2001, but Rhapsody has since become independent from RealNetworks in April 2010.

Napster began as a peer-to-peer file sharing internet service in 1999, but after a number of infamous legal battles, the company declared bankruptcy in 2002. Roxio bought the company’s brand and logo at a bankruptcy auction for $2.43 million, which they used to rebrand their Pressplay music service. In September 2008, Best Buy bought Napster from Roxio for $121 million.

According to Jon Irwin, the president of Rhapsody, “this deal will further extend Rhapsody’s lead over our competitors in the growing on-demand music market. 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.” This lead Irwin refers to is only in the United States.

Current Napster subscribers pay only $5/month compared to Rhapsody’s $10/month fee; however, Rhapsody offers a more robust subscription service than Napster. Napster subscribers will be able to transition to the more expensive service on an opt-in basis. While Napster’s user metrics have not been released, the gained users will increase Rhapsody’s lead in the US market and close the gap between Rhapsody and Spotify on the global stage.

Spotify is a London-based music subscription that finally reached stateside mid-July. The company already boasts 400,000 paying subscribers in the US and has a total of 2,000,000 paying subscribers worldwide. Also, Spotify offers a free add-supported version that has an additionally 8,000,000 and has recently become one of Facebook’s most popular apps, especially with the introduction of Timeline.

Irwin claims, “this is a ‘go big or go home’ business” and they are certainly making an effort to stay on top; however, this move is only an act to enlarge their base instead of dealing with their core deficiencies, new innovative features to try to surpass or even stay even with competitors. Without significant added features like music trending or self-prediction and an add-supported free version of their service, Rhapsody will remain at a distinct disadvantage against Spotify and will continue to lose its lead.

About Arthur Pignotti

Before joining CD-Info in 2010, Pignotti worked as a video editor, a multimedia designer, and a multimedia development manager at US Digital Media for 6 years. He has two BAs in journalism and history from Arizona State University and will be receiving an MA in history from Arizona State next year.
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