Rhapsody acquires Napster from Best Buy

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On-demand music service Rhapsody has reached an agreement to acquire digital music platform Napster from Best Buy. Rhapsody will land Napster's subscribers and certain other assets, and Best Buy will receive a minority stake in Rhapsody. Financial details were not disclosed.

Best Buy acquired Napster in Sept. 2008 for $121 million. Launched in 1999 as a free file-sharing service that became synonymous with the advent of the digital music era and the demise of the traditional recording industry business model, Napster quickly fell prey to legal challenges, and in late 2001 transitioned to a premium subscription approach to pay off past copyright violations and future licensing royalties.

Napster has nevertheless struggled to compete with streaming services like Spotify and Pandora--Gartner analyst Michael McGuire estimates that the service touts 200,000 to 300,000 subscribers, down from about 700,000 when Best Buy acquired the platform three years ago.

Rhapsody said it will combine its subscriber base with Napster's, adding the acquisition will also enhance its product line. Rhapsody now offers users more than 12 million songs, accessible via the desktop, home audio systems and mobile apps optimized for Apple's (NASDAQ:AAPL) iOS, Google's (NASDAQ:GOOG) Android and Research in Motion's (NASDAQ:RIMM) BlackBerry platforms. In August, Rhapsody teamed with MetroPCS (NYSE:PCS) to introduce Music for All, an unlimited, ad-free service optimized for Android handsets and bundled into the prepaid operator's $60 monthly rate plan.

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