Best Buy must really want in on digital music sales as it has agreed to pony up $121 million to buy Napster. That value represents $54 million net of approximately $67 million in cash and short-term investments in Napster as of June 30. In the end, it will net Best Buy 700,000 subscribers. Here’s Best Buy’s spin on why they’ve done this:
Translation: If we want to get into this space and not get our butts handed to us by WalMart and iTunes we need to buy a name that people recognize and also give us marketshare so that we have some street cred.
I suppose that Best Buy can use Napster to sell hardware in the same manner that the Apple/iTunes monster does, or it can be used to drive additional revenue in the manner that the WalMart music store does. But one thing that they might not have considered is that Best Buy Canada/Future Shop tried this with the Bonfire music store and that failed miserably. Granted, the store was Puretracks with a custom skin on it, but still it highlights that it didn’t go so well for them before. What’s changed now?
Oh yeah, these are the same people who once decided it would be a good idea to sell “branded” mp3 players that had 128MB of storage with a few music tracks on it for $169. Hmmm… uber-ghetto MP3 player with DRM’d tracks for more than the cost of an iPod? I wonder why that failed miserably?
I don’t expect this to work out any better.
Apple Threatens To Shut Down iTunes Music Store Over Royalty Rates
Posted in Commentary with tags Apple, iTunes, Music on October 1, 2008 by itnerdThe iTunes Music Store has allowed Apple to sell a ton of iPods and iPhones and it also has become a revenue stream for them as well. But a ruling expected tomorrow by the Copyright Royalty Board could raise royalties for online music sales by 9 to 15 cents per track. That would make Apple pull the plug on the iTunes Music Store:
“If the [iTunes music store] was forced to absorb any increase in the … royalty rate, the result would be to significantly increase the likelihood of the store operating at a financial loss – which is no alternative at all,” [Apple V.P. Eddie] Cue wrote. “Apple has repeatedly made it clear that it is in this business to make money, and most likely would not continue to operate [the iTunes music store] if it were no longer possible to do so profitably.”
I would like to think that this is some sort of empty threat designed to influence tomorrow’s decision, but I’m not so sure. As I mentioned earlier, the iTunes store sells a ton of iPods and iPhones for Apple. I don’t think that Apple would sell songs at a loss just to move other Apple products. So perhaps there’s something to their threats.
Check in tomorrow to see what happens next.
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