Napster Update 2009
Lena Jerominek
After various record labels, artists, and the RIAA sued Napster’s peer-to-peer music service for infringing copyright laws, the company was forced to close down its service in July 2001. One year later, in May 2002, the Redwood City-based enterprise announced that it would be purchased by media conglomerate Bertelsmann in a $94 million deal, but a court decided not to approve the sale to the German company. In September 2002, Private Media Group, a Spanish adult entertainment service, announced it would purchase assets of the file-swapping platform and presented plans to convert Napster into a service focusing on the exchange of “adult-oriented content” through peer-to-peer networks (news.cnet.com). But the takeover failed, and a couple of months later burning software company Roxio agreed to invest $5 million to buy Napster’s brand name and file-sharing technology in order to create a subscription model that would charge users a certain fee for downloading files.
In September 2008 experts on the market were surprised when Best Buy, one of the United States’ largest retailers of consumer electronics, offered $121 million to acquire Napster, which agreed on the merger that should be completed by the end of 2008 (businesswire.com). Best Buy reportedly took this step to “to build out its digital delivery platform and build ‘recurring relationships’ with its customers” (Paidcontent.org) and to compete with market leader iTunes that still dominates the market for music downloads. On a monthly subscription fee basis, Napster provides users access to a catalog of about eight million music files that can be listened to via online streaming.
But music streamed to a computer will only be stored temporarily, so in order to store it permanently it must be purchased for an additional fee. Napster therefore offers so-called “MP3 credits” users will earn each month according to their specific type of subscription. These credits can then be used to download a certain amount of tracks onto a local or external device. As of late 2008, after certain restructuring measures, Napster switched from DRM protected WMA to unprotected MP3 files, since many users complained about the restrictive nature of DRM protected music that usually refuses to play on hardware other than the computer it was originally downloaded onto.
According to market research company Ipsos, Napster had a market share of eight percent in 2008 and was ranked third among online music retailers behind iTunes (fifty-seven percent) and Amazon (nine percent). But compared to 2006, the number of Napster’s subscribers decreased by three percent – probably a positive sign for the music industry and “physically” sold music?!