Napster has hung out a sale sign. Again. Two problems: It doesn’t seem very serious about it, and no one buyers seem interested, either.
Two years ago, the music subscription service announced that it had hired UBS to shake the trees, but nothing ever came of it. Conventional wisdom in the music business: CEO Chris Gorog was never serious about selling. Now NAPS shares are trading at about 50%, and Gorog has hired UBS again. But this time he hasn’t even bothered to send out a statement. Instead, the news is buried in Napster’s formal proxy response to a crew of motley, agitating shareholders:
The press release recently filed by the dissident group appears to imply that your Board is not willing to consider a sale of the company. This is not true . Your Board has been, and will continue to be, committed to enhancing value for all Napster stockholders. Each of your Board’s nominees, like the rest of your Board, is open to all opportunities for building value for our stockholders by objectively evaluating all options for maximizing your investment in Napster, including by exploring possible strategic alternatives. To that end, Napster has retained UBS Investment Bank to assist the company with that process, and UBS has been actively advising the company with regard to possible strategic alternatives.
Napster’s market cap of $65 million is now about equal to its cash on hand, so at first glance you’d assume somebody would be willing to snap it up. And a few years ago, that probably would have been true — had Gorog, whose 6% stake makes him the company’s largest personal shareholder, been willing to sell.
But look at the digital music landscape now: While there were once a handful of companies offering music subscription services like Napsters’, it’s now down to just Rhapsody, the JV between RealNetworks and Viacom’s MTV. In theory, there’s also eMusic, which is also selling subscriptions, but using a variant (instead of all-you-can-eat rental, it’s a monthly fee for 30 or 40 tracks you download and own).
But from what we understand, neither company seems much interested in what Gorog has to offer. And it’s unclear what a financial investor would get out of the deal: It’s not as if this is a functioning business that you can strip down and retool. Music subscriptions are a neat idea that no one seems to have embraced. So who’s going to embrace a music subscription company — even at a bargain price?