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Apple out to acquire Napster owner?

Roxio takeover makes sense

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Apple is in talks to buy Napster, Mac rumours site LoopRumors has claimed, citing "reliable sources".

Well, not Napster per se but Roxio, the CD burning software specialist, which itself acquired Napster's assets for $5 million after the peer-to-peer pioneer declared itself bankrupt last summer.

Roxio also owns PressPlay, the online music service launched by major music labels Sony and Universal in 2001.

It's not hard to see what might interest Apple in Roxio. Roxio's Mac portfolio is limited, but does include Toast, long the leading CD tool until Apple shipped iTunes and built disc burning into the Mac OS. But for many pro users, Toast remains the best solution for disc creation.

But of greater interest to Apple is Roxio's Windows offerings, which include Toast, video editing and digital photo software. Apple bought MP3 jukebox software from Casady & Greene, reworked the user interface and renamed it iTunes. You can see it doing the same with Roxio's Photosuite (iPhoto for Windows) and Videowave (iMovie for Windows).

Now that Apple is charging for its iLife bundle - iTunes, iPhoto, iMovie and iDVD - its entirely possible that the company believes it can make more money selling the software than by giving it away to encourage consumers to buy a Mac. It certainly has to port iTunes to Windows to broaden the availability of its Music Store - indeed, it has been looking for a new member of staff to handle the port - so why not the rest of iLife?

iLife for Windows might prove a cunning tactical move: make money out of Windows users who may never switch, while establishing the Apple brand beyond its established user base.

But back to the online Music Store and related matters. Roxio wants to rename PressPlay using the Napster brand. While it might piss off P2P purists, the Napster name has a very high level of public mindshare that PressPlay itself simply does not possess. Roxio has said it doesn't expect PressPlay to generate a profit until the service is "widely adopted". It's betting that the strength of the Napster brand will make that happen.

Apple may well agree, and acquiring Roxio might be as much about neutralising a threat to Music Store as grabbing the Napster name for itself. We can't see Apple wanting to use the Napster brand, given not only the strength of its own branding, but just how much pain using it would bring to the company's new-found chums in the music industry. And Apple want to keep them sweet: witness its recent move to knock iTunes-based music sharing via the Internet on the head.

One other point: acquiring PressPlay/Napster would bring Apple a ready-made user base for its Windows Music Store launch.

In addition to its source, LoopRumors points to recent "erratic stock activity" and "very high volume trading" as an indication that something's going on. Certainly there was strong trading in AAPL shares during early May, but that's more likely to have been the fallout from the launch of the Music Store. Roxio stock (ROXI) saw above average trading during mid-May - circa the PressPlay acquisition. Early trading this past Friday drove ROXI stock up to $7 from around $6.2. It closed at $6.54. ®

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Related Link

LoopRumors: Apple to buy Roxio?

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