AOL has dropped its Music Now service and will move its 350,000 subscribers over to Napster, which is a losing startup struggling hard to boost its business. The deal of acquisition of AOL Music’s subscription service was settled at $15 million in cash. But, I don’t understand one thing that though the deal is not too bad at $15 million, what wonders will these more unprofitable customers do for Napster?
Will the deal turn out to be good or bad? The answer will be very soon before us after Napster will announce its next quarter’s financial results soon. Now, Napster competes with Apple Inc.’s iTunes digital music store, which makes for more than 80 percent of U.S. music download sales. Well, AOL customers will be renewed to Napster unless they choose to cancel their subscriptions.
While NewYork Times reported that “Napster paid just $43 per AOL subscriber, compared to their own valuation of $328 per subscriber“, TechCrunch held them incorrect by pointing out that ‘they failed to take into account that the majority of Napster’s market capitalization is from the $90 million or so they have in cash‘ and added that the Napster’s per subscriber valuation is around just $90.
