Roxio is to get out of the software industry and concentrate solely on digital music – even to the extent of ditching its name and becoming Napster. Online music services are so popular, and the Napster brand still so well known, that it makes sense to to them get out of the software business completely by selling their software business to Sonic Solutions for US$80 million (€65 million).
Napster is making Roxio just under US$8 million a quarter, and will bring in between US$30 million (€24.5 million) and US$40 million (€32.5 million) in the financial year. More than half of Roxio’s income comes from Napster subscriptions, and Napster-branded MP3 players brought in US$1.1 million (€900,000). Napster subscriptions are a good revenue stream for the company – margins on downloaded songs are only 10%, but are as high as 40% on subs.
Roxio can see that there is limited life in the CD burning software market, especially now that operating systems like Windows XP have disk burning facilities built into them, and are getting more sophisticated all the time. Whilst there will be a market for specialist software for recording CDs for some time, many consumers’ needs are already satisfied by the disk burning capabilities already integrated into iTunes or their OS, leading to reduced demand for their products.
Napster CEO Chris Gorog said during a conference call announcing the sale: “With the news today, we are on a path to become a very well-funded pure play in one of the hottest sectors in the consumer technology market.”
Roxio will be testing Microsoft’s Janus DRM technology this year, allowing subscribers to move their content to portable players for the first time.
Sonic are quite pleased with their new acquisition – Roxio has a well-established consumer brand with high-profile distribution channels. Try buying a CD writer that doesn’t come with a Roxio product.
