Roxio have announced that they are to sell off their CD business and re-brand to the name of their digital music division: Napster. This is a big deal for Roxio and underlines their commitment to the digital music space. It perhaps also suggests the increasingly competitive nature of the CD/DVD burning software business: although burning is an increasingly widespread consumer activity, computers are ever more delivered to the consumer with pre-installed free software. Though in many instances the software will be based upon code licensed from the likes of Roxio, it is by definition a lower margin business than selling the complete boxed product direct.
That said, Roxio’s core business is still a solid one and the cash that it’s sale will generate will give Napster a very welcome financial safety net as it consolidates current growth and builds for the future. Whilst a la carte stores like Apple’s iTunes Store will have the impetus in the near term, subscription services will gain traction in the longer term, as explained by my colleague David Card in his authoritative Market Forecast Report which is well worth a read. Thus Napster’s business model, while valid in the near term is essentially a long term one and Roxio has been sowing the seeds for long-term growth as illustrated by the relationships with Universities that echo the strategies of banks trying to establish life long relationships with young students.