Roxio Sold To Sonic, Name Changed To Napster

[Suhit Gupta]

<div class='os_post_top_link'><a href='http://www.roxio.com/en/company/news/archive/prelease080904.jhtml' target='_blank'>http://www.roxio.com/en/company/news/archive/prelease080904.jhtml</a><br /><br /></div><i>"Sonic Solutions and Roxio today announced a definitive agreement for Sonic to acquire the consumer software division of Roxio for a total purchase price of $80 million. Under the terms of the transaction, Roxio will receive $70 million in cash and shares of Sonic common stock valued at $10 million ... Roxio plans to focus its business on the digital music market and will change its corporate name to Napster and trade under the ticker “NAPS” on NASDAQ, assuming the successful completion of this transaction."</i><br /><br />This is a shocking move on the part of Roxio, i.e. to sells its popular consumer division which includes CD and DVD burning software (Easy CD Creator for the PC and Toast for the Mac — both best-sellers on their respective platforms) since the online music business is not exactly a secure/mature place to be right now. Very odd, IMHO.

[Felix Torres]

The CNET article on the subject has some added detail buried in it.

http://news.com.com/Roxio+sells+software+division%2C+focuses+on+Napster/2100-1027_3-5302949.html?tag=nefd.top

Seems the buck-a-song business has a profit margin of 10% and the music subscription business has a 40% profit margin.
So the Roxio execs are betting the firm, literally, that they can grow their Napster business faster and more profitably than the software side could, which is not a bad bet given that their software resides in a mature market with limited growth potential.
They seem to think that now that they have an in at a variety of universities, they can quickly expand their business. And its a fixed-overhead business for the most part, since starting up the service is the most expensive part and they've already done that...

Funny thing, though, Samsung *paid* for the Napster co-branding!
Can't see that continuing.
If anything, subscription services are likely to end up *paying* a bounty to hardware vendors that deliver customers, much as AOL and MSN do...

So now we know that Wal-mart is very likely taking a 10 cent loss on every song they sell and why Apple can't afford to have Real poach on their ranch.
Still 10% margins aren't bad; lots of vendors would kill for 10%.
But 40%?
Sounds like there's room for competition in the subscription business alright.

Somebody happy with 20% is going to make a killing...

[dean_shan]

Weird, the Napster brand is not as big today. I havn't meet anyone who would buy something based on the Napster brand.

[Felix Torres]

Weird, the Napster brand is not as big today. I havn't meet anyone who would buy something based on the Napster brand.

Did they ever *buy* anything? :twisted:

Odd that Samsung would pay for the privilege of sending customers to Napster...

[piperpilot]

I only use Napster because the DRM on iTunes doesn't allow me to load music onto my iPAQ.