Back in September 2008, Best Buy (NYSE: BBY ) agreed to shell out $121 million
for Napster. The giant retailer had high-hopes for the deal after all, the
online music service had about 700,000 subscribers as well as a well-developed
mobile platform. Add in the heft of Best Buy, and youd get a boost in growth,
right? Didnt happen. And this week, Best Buy gave up on things, agreeing to sell
Napster whose service shrunk to between 300,000 and 400,000 users to Rhapsody.
The price tag was not disclosed. The online music world has changed radically
during the past couple years. Some of the main drivers include the dominance of
Apple 's (NASDAQ: AAPL ) iTunes, as well as the hyper growth in online music
operators such as Pandora (NYSE: P ), RDIO, Mog, Slacker, iHeartRadio and
Spotify. Unfortunately, Best Buy wasn't nimble enough to deal with the major
shifts. And the companys brick-and-mortar business could have used the help.
Same-store sales have been anemic, and Amazon (NASDAQ: AMZN ) continues to take
away market share, with Amazons newly unveiled Kindle Fire tablet posing yet
another threat. True, it never is easy for a traditional company like Best Buy
to move into new waters. Yet some of its rivals have shown they can get
traction. Just look at Wal-Mart (NYSE: WMT ). The company's video streaming
service, Vudu, has an extensive content library and is seeing strong customer
adoption. According to a report from IHS, its market share has gone from 1% to
5.3% over the past year. Wal-Mart purchased Vudu in February 2010. So
shareholders of Best Buy have plenty to be concerned about. There is no clear
vision of a digital strategy. And in today's world, it can be extremely tough
to play catch-up, especially when the competition only gets stronger and
stronger. Tom Taulli is the author of "All About Short Selling" and "All
About Commodities." You can also find him at Twitter account @ttaulli. He does
not own a position in any of the stocks named here.
No comments:
Post a Comment