Best Buy Joins Real for New Music Store

Apparently taking heed of analysts' advice that the best chance a digital music download service has of survival comes from being associated with a specific player, Best Buy announced this morning it's changing course. In what appears to be an early termination of its existing deal with Napster, the retailer is launching its new Digital Music Store, as the online storefront for Sansa's re-branded Rhapsody MP3 player.

Starting today, Best Buy is partnered with player manufacturer Sansa and its teammate, RealNetworks, to place its brand front-and-center on the Sansa Rhapsody player.

The deal will make Best Buy the preferred purchasing option for songs downloaded under Real's Rhapsody music service. With the current Rhapsody plan, subscribers can either download tracks for 99 cents per song, or can purchase a subscription for $14.99 USD per month that gives them unlimited access to Rhapsody's entire library. Either way, downloaded songs may only be played within the Rhapsody player or through a computer.

But that's generally as far as these songs can go, thanks to DRM protection under Microsoft's PlaysForSure system. Every few months, the subscriber must renew his licenses to continue playing songs from the player. With an upgraded service option, the subscriber gains the ability to purchase some songs from the library for burning to CD, at a variable rate per song.

The Best Buy deal apparently will not enable Rhapsody customers to purchase DRM-free music on physical media through the Best Buy retail storefront. However, nothing about today's news implies that Best Buy's retail knowledge couldn't be called upon for such purposes in the future. The retailer will be selling pre-paid gift cards at its stores, good toward downloads from the Digital Music Store.

The Sansa Rhapsody player is the recently re-branded version of the model e200R. With a 1.8-inch TFT screen, the price for a new 2 GB flash memory model has been set at $139 USD. Meanwhile, the 4 GB model continues to sell for $179.99, and the 8 GB model price stays at $249.99 USD.

Best Buy will carry the Sansa in its retail stores, complete with a two-month charter subscription to Digital Music Store, plus pre-loaded music that may include an exclusive track by Sean "Diddy" Combs. In a review published this morning by The Wall Street Journal, Walter Mossberg didn't think too highly of Rhapsody's choice of pre-loaded music.

The new partnership represents Best Buy's third major push in the digital downloads arena, the first two of which were widely heralded at first, but never really gained traction thereafter. In June 2001, the retailer partnered with a group called RioPort.com, which had licenses to music from every major publisher. The idea was to push RioPort's music through Best Buy's servers, although the idea might have gone over more efficiently if it had been vice versa.

Three years later, in a deal that at least had a leg to stand on, Best Buy partnered with Roxio, which at that time had just purchased the Napster brand and announced it would become a legal download service. To make the deal work, Roxio sold off all its interest in consumer software to Sonic Solutions, and folded its existing business interests into the new Napster.

While still one of the most recognized brands in music, Napster's popularity is nowhere near what it was in its unregulated days of guilt-free copyright infringement. There doesn't appear to be a "Napster player" in the works, which may end up being that service's Achilles heel in years to come.

Presently, the company enjoys record revenue -- close to $30 million per quarter -- but expenses grow proportionately, so it can't avoid posting losses of near $10 million per quarter. Last month, Napster retained the services of UBS Investment Bank to investigate the possibility of opening itself up to acquisition.

Best Buy probably expects both Sansa and RealNetworks to be around for at least the next few years. But for this new deal to eventually succeed for Best Buy, customers may expect the retailer to stick this one out at least a few years longer.