Software Company Buys Online Music Venture, Plans on Bringing Back Napster Name

AP Technology Writer

SAN JOSE, Calif. (AP) – Software maker Roxio said Monday it has acquired the online music service pressplay for about $40 million, setting up the return of the Napster name.

Roxio, best known for its CD-burning software, owns the Napster brand and expects to use pressplay as the foundation for a new online music service under the name that set Internet music file-swapping in motion.

Pressplay is jointly owned by Universal Music Group and Sony Music Entertainment.

“This is Napster’s second coming,” said Phil Leigh, analyst with Raymond James & Associates. “The record labels crucified him, and now he’s going to come back and be their savior.”

The new service will “retain the overall feel and vibe of Napster,” said Chris Gorog, Roxio’s chairman and chief executive. He would not elaborate on details, including whether the new Napster would include the famous file-swapping technology that upset the record industry and doomed the company in a sea of copyright infringement litigation.

The deal lays the groundwork for a competitive Windows-based offering against Apple Computer Inc.’s online music store. The online pay-per-download service for Macintosh users, which boasts virtually no restrictions on how and where the songs can be played, sold more than 2 million tracks within 16 days of its April 28 launch.

“That success reinforces our belief of the future profitability of selling music online,” said Larry Kenswil, president of UMG eLabs, Universal’s new media division.

Born in 1999 in a college dorm room, Napster once boasted some 60 million users and symbolized both the excitement of the digital revolution and the worst nightmares of the established recording industry. But the company went bankrupt and dissolved last year amid a series of legal battles with the record labels, and in November, Roxio bought the company’s name.

“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 relaunch Napster,” Gorog said.

Pressplay was Universal and Sony’s attempt to offer a legitimate online music alternative, but its subscription-based model and copy restrictions apparently hampered its success. Analysts estimate the money-losing venture had at most 100,000 users.

Pressplay wouldn’t give specific customer figures, but it “didn’t have enough subscribers to satisfy us,” Kenswil said. “For sure, we see the brand name of Napster as increasing that tremendously.”

Under the deal, Universal and Sony will become minority owners of the new Napster company.

Santa Clara-based Roxio purchased pressplay for $12.5 million in cash and approximately 3.9 million shares of Roxio common stock, the companies said.

Based on Roxio’s closing stock price on Friday, the purchase price would be approximately $39.5 million, the companies said. Roxio shares closed Monday at $8.09, up $1.19, on the Nasdaq Stock Market.