Napster to be absorbed into Best Buy in $121 million deal

A filing with the US Securities and Exchange Commission yesterday confirms that retailer Best Buy has entered into a deal to completely purchase online music service Napster, for $121 million including $54 million up front.

According to the SEC filing (HTML copy available here), Napster will have 20 days to reach a firm decision on the deal, although a definitive merger plan has already been agreed upon. Conceivably, opposing bids could be considered during that time, assuming any are forthcoming.

Best Buy's statement this morning makes it clear that the retailer would be acquiring Napster's subscriber base of 700,000, its Web-based customer service, and its mobile technology. No other technology is listed as being part of the deal -- a clear indication that the P2P platform that once defined Napster is no longer of value.

Today's deal could spell the end of a weird, wild ride for both parties. Two years ago, Best Buy entered into a partnership with RealNetworks, which made Rhapsody available on MP3 players sold and serviced through Best Buy, including Sansa models. That deal came about after Best Buy split from its former partner Roxio, which in 2004 had been the first to purchase the Napster brand, and try to convert it from a P2P free-for-all into a legal download service. Yesterday's SEC filing made no mention of RealNetworks, so the fate of that deal today is uncertain.

Last May, Napster reported that its long downward spiral may have at last come to an end, with its new mobile service having contributed to a spike in revenues and an unexpected surge in subscribers. Two years ago, Napster's subscriber base had reached a low of 512,000.