The original music pirate has been boarded. The electronics retailer Best Buy has snapped up Napster.
DVDs best bet for Best Buy
The original music pirate has been boarded. The electronics retailer Best Buy has snapped up Napster, the file-sharing service that many blame for touching off the record industry's chronic problems, for US$121 million (Dh441m). It looks like a hedge against falling music sales. But it is too little too late. Napster cannot compete with the likes of iTunes and Amazon. Best Buy would be better off protecting its more valuable DVD business by snapping up Netflix.
Best Buy, which sells CDs as well as stereo equipment, has been on the losing end of the free download trend. Music sales industry-wide fell 15 per cent last year and have dropped another 11 per cent so far this year. So it makes sense that the retailer would try to hedge against further losses. But it will not be much help. Napster has 700,000 users, but lost $16.5m last year. Best Buy should be more concerned about protecting a more lucrative revenue stream: DVD sales. One solution would be to buy Netflix.
Netflix would cost a pretty penny more than Napster. Its current market value is $1.76bn. But DVD sales represent far more of Best Buy's revenues than music sales do, according to Pali Research. And Best Buy has over $1.5bn of cash. So Netflix could be within its means.