Napster: worth more dead than alive
p2pnet news view | Music:- If you’re a financial type, the quotes below might make perfect sense to you.
If not ………
“At today’s valuation, Napster has the dubious distinction of being worth more dead than alive,” said a proxy signed by Web site developer Perry Rod, 29, Thomas Sailors, 49, an investor and former banker; and Kavan P. Singh, 29, owner of 10 Cold Stone Creamery ice-cream stores.”
The three own 648,180 shares, or 1.3 percent, says Bloomberg News, going on »»»
While Los Angeles-based Napster hasn’t posted a profit in four years, its $69.8 million in cash and investments as of March 31 eclipsed the shares’ $52.1 million value before today.
The company’s biggest investor, New York-based hedge fund Eminence Capital LLC, boosted its stake to 9 percent in the second quarter, according to regulatory filings.
Non-stop mainstream media hype
If any two events have done anything to promote file sharing online, they are:
A) Big Music’s effort to crush P2P at birth by killing Napster; and,
B), Vivendi Universal, EMI, Warner Music and Sony BMG’s subsequent efforts to use their Recording Industry Association of America (RIAA) to quite literally sue their own customers into becoming compliant consumers.
Taking B) first, Big 4 efforts notwithstanding, file sharing is now firmly established as a primary online communications and distribution vehicle and all the labels have achieved is to alienate literally millions of the very people they depend on to survive.
And then A) —- Before Napster’s corpse had even settled in its grave, it was disinterred and presented as a corporate zombie. But despite non-stop mainstream media hype, and despite the fact it was initially shoehorned into the American university system as a funnel for corporate ‘product,’ it’s never managed to even nearly become a player.
Instead, it’s been steadily haemorrhaging money like there’s no tomorrow and the two big questions since Day One have been, and still are »»»
- How come it’s still around?
- And, Where’s the money coming from?
Bloomberg News answers both questions.
Eminence Capital LLC
Napster shares have plunged 95 percent in six years, but it’s now “takeover bait” for hedge funds, “zeroing in on a cash hoard exceeding the company’s market value,” says Bloomberg.
A “cash hoard” that’s “exceeding the company’s market value?
That’s what the story says.
And it goes on »»»
While Los Angeles-based Napster hasn’t posted a profit in four years, its $69.8 million in cash and investments as of March 31 eclipsed the shares’ $52.1 million value before today. The company’s biggest investor, New York-based hedge fund Eminence Capital LLC, boosted its stake to 9 percent in the second quarter, according to regulatory filings.
Napster may be an attractive target for a buyer like JDS Capital Management Inc., the New York hedge fund that owns digital-music retailer eMusic.com, said Ken Smith, a portfolio manager at Munder Capital Management. The Birmingham, Michigan- based firm, which oversees $30.9 billion, increased its shares by 36 percent as of March 31, according to filings.
“The valuation’s absolutely dirt cheap,” Smith said. “The scenario that provides the highest value for shareholders is a sale to a strategic buyer,” he said. Referring to JDS, Smith added, “That’s the type of strategic buyer you need.”
JDS bought 1 million shares of Napster in the first quarter, according to filings.
Napster boss Christopher Gorog has, “built up cash by slashing sales and marketing expenses 90 percent to $18 million in the year ending in March, say the story, going on, “The reduction came as revenue rose 15 percent to $127.5 million.
According to Bloomberg, it controls about half of the online-music subscription market in the US, which amounted to $240 million last year, says research firm Jupitermedia Corp.
“Subscribers get jukebox-style access to 6 million songs for $12.95 a month,” says the story, continuing »»»
Napster’s biggest direct competitor is Rhapsody, a joint venture of Seattle-based RealNetworks Inc., the maker of the RealPlayer for online media, and Viacom Inc.’s MTV Networks. Rhapsody may also be a potential buyer, Piper Jaffray’s Olson said.
“We don’t comment on M&A activity until there’s something to announce,” RealNetworks spokesman Bill Hankes said. The company’s 2007 music revenue was $149.1 million, mostly from subscription services, he said.
The investors say lack of confidence in the company’s governance is holding down Napster’s value. Their filing points to CBS Corp.’s acquisition of the social-networking site Last.fm, which offers song downloads and free advertising- supported music, for $280 million in May 2007.
“We’ll study it,” Gorog said of the proxy. “There are not any vacancies on the board.” Three directors are up for re- election at the company’s annual meeting Sept. 18.
“Napster is a very important strategic asset the market’s valuing at zero,” said Sailors, who added that his Dallas-based Cloverdale Investments LLC now owns 625,000 shares.
“You can buy Napster for less than its liquidation value. It’s just a matter of time before people realize that.”
.
.Stumble It!
Bloomberg News – Napster Takeover Looms as Funds See Cash Exceed Stock, July 21, 200
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