Best Buy Pays $121M For Napster

Once the king of illegal file-sharing protocols, Napster operated in the law's gray area for a few years before 'going legal' not long ago. The firm's owners have now cashed in on their reputation -- good or bad -- after being bought out by Best Buy for $121 million.

Napster became known as the leading file sharing site for music in 2000. While the software could be used for any files, the comparative lack of broadband connections at the time meant it was mainly used for single songs rather than albums or movies. It met with widespread legal opposition at the time, the most prolific coming from Metallica.

While Napster was bought out by Roxio and re-launched as a subscription service for legal downloads, its infamy has proven highly influential. Napster originally used a central server to co-ordinate the file-sharing of its users, which meant copyright holders could prove in court that the company directly 'handled' the illegal material. The cases led to the growth in popularity of true peer-to-peer systems, most notably torrents (which split files into dozens of smaller pieces) in which websites simply act as a sort of phone directory; the files themselves pass directly from user to user. (Source: salon.com)

The subscription-based Napster has struggled to compete with rivals, most notably Apple, in recent years; it lost more than $50 million over the last two years and has just 700,000 subscribers. Despite that drop, it could still boast a healthy $67 million in cash reserves, meaning the real purchase price is effectively $54 million.

It's not clear why Best Buy splashed the cash for a floundering company whose main asset is a brand name several years past its peak. Analysts are speculating Best Buy might have little interest in the subscription service and instead could be looking to use Napster's staff expertise and infrastructure to work on adding digital services to products such as cellphones. (Source: nytimes.com)