Roxio, owner of the Napster brand, yesterday announced its acquisition of pressplay, the subscription-based music service launched by Universal Music Group and Sony.
Pressplay has cost Universal and Sony around $60 million so far, according to Fortune magazine. Roxio, a US company best known for CD-burning software, picked it up for $39.5 million. However, the number of subscribers has never been disclosed.
A perceived problem for pressplay was that it did not offer music from the other major labels of AOL Time Warner, Bertelsmann and EMI because they ran a competing service, MusicNet. Both MusicNet and pressplay agreed to cross-licence their music at the end of last year. But some observers considered this too late.
According to Phil Leigh, an analyst at Raymond James, pressplay and MusicNet together have only around 225,000 subscribers, each paying around $10 per month. By comparison, Apple's new iTunes service sold two million downloads in its first two weeks of operation, as music fans flocked to a legitimate service that does not require subscriptions (each track costs 99 cents), that has few restrictions on what is done with the downloads and that offered music from each of the five majors from day one. Pressplay's perceived problems seem to be reflected in its sale price.
Roxio's last high-profile purchase was also seen as something of a bargain. It acquired Napster’s assets in November last year for $5.3 million after the file-sharing service, once valued in the billions of dollars, was sued into bankruptcy.
Chris Gorog, Roxio’s Chairman and CEO explained yesterday:
“With our acquisition of Napster we obtained the most powerful brand in the on-line music space. Now, with our acquisition of pressplay, we have the most complete and scaleable legal technology infrastructure to use as a platform to re-launch Napster. After taking the necessary time to add features, enhance functionality and improve usability we will launch a new service with an extremely compelling consumer experience that builds on the qualities of the Napster brand.”
It seems that Napster will not launch as a file-sharing service. Instead, it is more likely that pressplay will be tweaked and re-branded as Napster. Universal and Sony will each retain a minority shareholding in pressplay and, according to Roxio, could each earn up to $6.25 million if the new Napster succeeds.
Roxio appears to be going head-to-head with Apple. But both services must tackle the much stronger competition from unauthorised peer-to-peer services like KaZaA where over a billion files are being made available at any time by around 4.5 million users.