RealTime IT News

Pressplay To Become Napster

Less than two years after going live as a legal alternative to the rogue file-sharing program Napster, the Pressplay digital music service has been acquired by Roxio and will be relaunched as Napster.

Roxio, known mostly for CD and DVD recording software, announced Monday it would shell out about $40 million in cash and stock to acquire Pressplay's distribution infrastructure and music licensing, which was previously a 50-50 joint venture between Universal Music and Sony Music Entertainment.

The acquisition signals another phase of the predicted contraction in the fee-based digital music space.

It follows a decision by RealNetworks to pay $36 million in cash for Listen.com. Industry watchers are now speculating that Microsoft will be next in line, possibly in a deal to purchase Chicago-based FullAudio.

The decision by Universal and Sony to bail out on the digital subscription model (the two would hold a minority share in Roxio) comes as a surprise. Apple's initial success since launching a 99-cent per song service earlier this month has added some buzz to the business but reports say the two music labels were bleeding cash from the struggling Pressplay service.

For Roxio, the acquisition proves the company is serious about is stated plans to add legitimacy to the controversial Napster brand. Roxio paid $5.3 million last November to pick at Napster's bones in bankruptcy court and now that it has secured catalog rights from all five major music labels, the company says it has a "foundation" for the reincarnation of Napster.

"With our acquisition of Napster we obtained the most powerful brand in the online 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," Roxio chief executive Chris Gorog said in a statement.

Pressplay, which also enjoys promotional backing from Microsoft and Yahoo, offers radio stations and unlimited tethered downloads for $9.95 a month in addition to song downloads that allow for CD burning. Roxio is expected to maintain that price point, which appears to be one the entire industry is comfortable with.

Roxio said it would add some features and enhance the functionality of the combined service before relaunching but no details were provided. The company said Pressplay's senior management team and its New York and Los Angeles offices would remain in place.

Financial terms of the acquisition call for Roxio to spend just over $12 million in cash and approximately 4 million shares of its common stock to buy out the majority ownership of the two labels.

Roxio said it would spend another $20 million to fund the relaunch of Napster and warned that, despite the value of the Napster brand, the new business "will result in negative cash flows until the service is widely adopted."