Another Week, Another Music Deal: Best Buy Snaps Up Napster

I was on holiday in Italy last week, trying out the sat nav on my mobile phone (and avoiding a €140 bill to rent a navigation device from the car hire company, but that’s a tale for another blog posting). While I was away, I missed the news that US electronics retailer Best Buy had entered the online music business by acquiring Napster for $121 million.

The story wasn’t widely reported, perhaps showing that music deals are becoming so common that journalists are running out of things to say about them. In my view, the story is notable because of Best Buy’s formidable standing in bricks-and-mortar retailing in the US and its growing presence in Europe.

In May this year, Best Buy invested more than $2 billion in Carphone Warehouse. Part of the deal involves using Carphone Warehouse’s expertise to expand Best Buy Mobile outlets in the US. The Napster deal indicates Best Buy is looking to offer its own services in these stores as well as mobile hardware and connections.

Although an investment of $121 million is small compared with the sums Nokia has poured into Ovi, the acquisition underlines the central role that music will play in mobile services. Napster’s brand may have fallen on hard times recently, but it’s still a well-known name in music. Best Buy will be keen to exploit Napster’s relationships with European operators such as O2, Swisscom, TIM and TMN, as well as the likes of AT&T in the US, and NTT DoCoMo and KDDI in Japan.

I think we’ll see Best Buy step up its activities across the mobile services market. As it does so, it’ll have to be careful how it manages its ventures with Carphone Warehouse. Europe’s biggest independent phone retailer is also an important partner in the mobile music strategies of Apple and Nokia, gaining exclusive access to the iPhone and Nokia’s first Comes With Music phone. A Napster offering may conflict with these products.

It seems everyone’s desperate to take a piece of the mobile music market, but it’s still not clear who’ll succeed. The final quarter of this year will see consumers overwhelmed with mobile music services from established players like Omnifone and Apple and newcomers such as Nokia, Sony Ericsson and Google. Best Buy will have to move quickly if it’s to avoid becoming an also-ran.