Napster Weighs Options, Including Sale
Napster made moves to prepare for a possible sale of the company Monday, including retaining an investment banker to discuss its options. Sale of the service was first rumored to be considered in January of this year, although it was quickly denied by the company.
However, in August Napster CEO Chris Gorog acknowledged that he was weighing options for the company, including considering a sale. Napster has been losing subscribers after adding a free portion to its Web site, which users have begun to choose over the company's subscription plans.
"Our goal is to enhance shareholder value which could potentially lead to a new strategic partnership or the sale of the company but in any event our primary focus will remain on growing Napster," Gorog said in a statement.
The company said that there was no assurances that any deal would come as a result of the move, adding that it was done due to third-party interest in the company. The identities of those corporations were not disclosed.
For Napster, a sale of the company would add yet another chapter to its storied history. It started in the late 1990s as an illicit peer-to-peer network, and was forced to shut down in mid-2001 after a high-profile court battle. Napster relaunched in 2003, but this time as a legal download service owned by Roxio.
The company has enjoyed some initial successes, but it would be short lived. Not soon after Napster's launch, Apple debuted iTunes, which quickly became the most popular online music store by piggybacking on the success of the iPod. Real has also seen success with Rhapsody, which now has a subscriber base three times the size of Napster's.
Napster attempted to chip into iTunes dominance, by highlighting the all-you-can-eat subscription service and its advantages over Apple. However, consumer's didn't respond, and Gorog's comments that iPod users were "stupid" may have also kept people away.
Monday's sale news shows that the entire PlaysForSure-based online music store market seems to be collapsing. Also on Monday, the largest licenser of the technology, RealNetworks, announced it would be switching over to its own in-house digital rights management.
A new Napster suitor may also decide to abandon Microsoft's DRM, especially in light of the Redmond company's apparent lackluster commitment to the technology.