Rhapsody announced today that it will be buying Napster from Best Buy to boost its subscriber base and expand its IP portfolio. The move appears to be a direct reaction to the intensifying competition from music service rivals like Spotify, which has been hogging much of the spotlight lately. The terms of the deal have not been revealed, but it is expected to close around November 30 with Best Buy receiving a minority stake in Rhapsody.
"This deal will further extend Rhapsody's lead over our competitors in the growing on-demand music market," said Rhapsody president Jon Irwin in a statement. "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."
When Napster was acquired by Best Buy in 2008 for $121 million, it had about 700,000 subscribers but then faced a large decline. The current Napster subscriber base hasn't been revealed, but it will add to Rhapsody's subscriber base of 800,000.
Although both companies were among the earliest music service providers, they have struggled in recent years to gain more users and especially so with newcomers like Spotify that offer a significant amount of music for free. Spotify is also now tightly integrated with Facebook, giving it even greater access to a large pool of potential subscribers. Its been reported recently that since its integration with Facebook, the service adds about 250,000 new subscribers each day and has already hit over 4 million users.