Blog Post

Napster’s Undoing: Company-wide layoffs coming Dec. 16

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

Rhapsody’s purchase of Napster from Best Buy (s BBY) looks more and more like a glorified funeral. Sure, Rhapsody gains a few hundred thousand new subscribers — even though it’s unclear how many will actually stay around — and the company may even get a few interesting patents as a sugar coating.

But for Napster, the deal pretty much means game over. Here are some of the grim details I was able to gather by talking to sources and going through reports:

  • Napster’s two offices in Los Angeles and San Diego will close, leaving an estimated 120 people without work. A few may get rehired by Rhapsody, but I wouldn’t get my hopes up.
  • The official last day for Napster’s employees is Dec. 16, according to a reliable source close to the company. A Rhapsody spokesperson didn’t want to comment on the specific date, but said a few people may stay longer than others to help with the transition.
  • Reports put the number of current Napster subscribers at less than 400,000, which is down from around 700,000 to 800,000 when Best Buy bought Napster in 2008.
  • Rhapsody didn’t pay a single dollar in cash for the Napster assets, but gave Best Buy a minority share in its company. Rhapsody President Jon Irving confirmed yesterday that this was an “all-equity deal.”
  • The cat will cease to exist. The iconic Napster name and logo won’t be used by Rhapsody, at least not in the U.S.
  • What about Napster’s services abroad? “Business in Canada, the U.K. and Germany isn’t affected and will continue like before,” I was told by Napster VP Sales & Marketing Europe Thorsten Schliesche. However, it’s unclear for how long. A Rhapsody spokesperson explained that Napster’s foreign operations aren’t part of the deal announced this week, but Rhapsody is looking to buy these services through a separate transaction. At that point, all foreign subscribers will be rolled over to the Rhapsody service, but it may continue to be Napster-branded abroad.

Of course, this could all be seen as a necessary consolidation in an industry that’s bracing for new competitors like Spotify. However, browsing LinkedIn (s lnkd) profiles of current Napster employees last night, I not only got the sense that there are a lot of people who’ve been working at the company for close to a decade, only to suddenly find themselves without a job now.

I also have to wonder: Why wasn’t it possible to turn this hugely popular brand into an opportunity to make online music pay?