October 16, 2013 2:00 pm

Telefónica agrees Napster tie-up

Promotional Napster stickers are seen at the Napster studio©AP

Telefónica will acquire a significant stake in Napster as part of an agreement to take the music streaming website into the Spanish telecoms group’s Latin American markets.

Telefónica will acquire the stake in Rhapsody, the music media group that owns Napster, although the exact ownership will depend on how many customers sign up to the music service.

Paul Springer, senior vice-president and global head of product for Rhapsody, described it as a “significant” stake but would not say exactly how much was likely to be acquired by Telefónica in exchange for access to its customers.

“Telefónica can earn equity in return for subscribers,” he said. “It will be meaningful enough aligned with the company but not enough to push out existing shareholders.”

Rhapsody is owned by RealNetworks, the internet streaming provider, and Columbus Nova, the private equity group.

Latin America is the largest region for Telefónica with about 200m customers. The Spanish group already offers a music streaming service called Sonora, whose “hundreds of thousands” of existing customers will be ported on to the Napster platform.

Sonora is one of the largest subscription music services in Latin America with customers in Brazil, Argentina, Colombia, Chile, Peru and Mexico.

Telefónica will also offer bundled Napster music services to subscribers in its European markets, depending on whether its local operating businesses want to take up the service, and preload Napster on Firefox-based smartphones sold in Latin America.

Rhapsody, which acquired the Napster brand two years ago from BestBuy, the US retailer, said the deal was the largest of its kind in digital music in terms of global reach and customer base. This is the first time Napster has been available in the Latin American market since its acquisition by Rhapsody.

The Napster service is no longer the peer-to-peer music swapping platform that caused controversy a decade ago, but instead works as a conventional music streaming platform customised for different regions. Mr Springer described it as a “nostalgia” brand, but one that still carried a high level of recognition around the world as rebellious and revolutionary.

Stephen Shurrock, chief executive of new business ventures at Telefónica Digital, said: “As demand for streaming music services takes off, our Rhapsody partnership will allow us to deliver a compelling music proposition to our customers, leveraging Napster’s heritage, brand and strong position in this market.”

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