In a deal that surprised the market, a British music tech startup has acquired one of the pioneers of the music streaming industry Napster.
Rhapsody International, which operates as Napster and is owned by Nasdaq-listed RealNetworks, will be taken over by MelodyVR, which is engaged in filming and streaming of gigs that fans watch with virtual reality headsets.
The aim of the acquisition of Napster by the AIM-listed MelodyVR is to create a music platform with the combination of Napster with its immersive live performances.
Founded in the 1990s, Napster was initially looked upon as an illegal downloading platform. Currently there are some 3 million users of Napster and a library of 90 million licensed musical tracks.
During the novel coronavirus pandemic the trend of fans turning to online entertainment and with the restrictions and closures bringing the live music industry to a halt, helped the two-year-old British company to record strong growth. The British startup has hosted gigs by acts including Emeli Sandé, The Chainsmokers and Cypress Hill.
In order to enable artists to perform gigs, the company set up safe studios in London and Los Angeles. The company charges money from its users to watch via its app. It has had 100 artists perform virtual reality gigs to date.
“MelodyVR’s acquisition of Napster will result in the development of the first ever music entertainment platform which combines immersive visual content and music streaming. Our purchase of Napster, one of the music industry’s original disrupters, is born out of a wish to present a truly next-generation music service,” said Anthony Matchett, chief executive of MelodyVR.
A combination of cash and shares was used to fund the Napster deal by the British company which raised $15 million from investors on Tuesday.
RealNetworks is to receive $26.3m: a $15m cash payment and the remainder as 200m MelodyVR shares, giving it a stake of about 11.5% in the business. The rest of the $70m deal involves MelodyVR taking on $44m in future payment obligations to music companies and other partners that are on Napster’s books.
10.8 billion streams to its consumer and business partners were delivered last year by Napster which helped it to generate revenues of $113 million and $1.8 million in pre-tax profits.
This latest takeover of the company is the latest twist in the 21-year history of Napster. When it first started to operate in 1999, it helped its users to bypassing the traditional record business and allowed music users to share music files. That marked the beginning of the decline of the CD.
Napster filed for bankruptcy in 2002 following a string of lawsuits from the music industry and artists from Dr Dre to Metallica. It was re-launched as a legal business after being acquired by Roxio. It was later acquired by US electronics retailer Best Buy for £121 million.
(Adapted from TheGuardian.com)