Ironically enough, Napster co-founder Sean Parker is an investor and board member at Spotify. “Spotify is an attempt to finish what I started at Napster,” said Parker in an interview. Sean Parker and Shawn Fanning recently teamed up again on a new project called Airtime, which is a service that is similar to Chatroulette. It is a service where you can have random and real-time video chats.

Want to see what Napster looked like through the years? Check out the gallery in pages 1-9 of this post.

Shawn Fanning and Sean Parker is best known for working together on Napster. Sean Parker was referred to as a co-founder in Napster in the movie The Social Network, but he was an early employee in the music sharing company that Shawn Fanning founded. Now the two are working together on a new video chat project called Yo.

Parker was previously a founding president for Facebook, the co-founder of Plaxo, and the co-founder of the charity application called Causes. Fanning has also been working on a photo social networking company called Path. More details to follow once we find out more about the start-up.

[LA Times]

Napster’s brand and logo ended up being bought at an auction by Roxio Inc. and then ended up being called Napster 2.0. In September 2008, Napster was bought by Best Buy for $121 million.

Now Napster is available in the form of an iPhone, iPod Touch, or iPad application. For $10 a month, you can stream from a catalog of 10 million songs. Offline listening is available too. Downloading the actual application is free. [iTunes Link]

[Engadget]

Global Gaming Factory made an offer to buy out The Pirate Bay for $7 million about a month ago.  That deal is expected to close soon, but right out of left field another offer for The Pirate Bay has been made.

The offer came from John Fanning, the uncle of Napster founder Shawn Fanning.  John Fanning is the former CEO of Napster.  And Napster was bought out by Best Buy in September 2008 for $121 million.

The Pirate Bay turned down the offer shortly after GGF CEO Hans Pandeya and Fanning discussed the deal in London.  GGF also received a $15 million offer from an unnamed Russian company.  That would more than double GGF’s acquisition investment instantly.

“The basis for a legal site has been placed and contracts are expected to be concluded shortly with a leading player in the entertainment industry. The development of the company is very positive, and goes as planned,” stated Pandeya.

Through the acquisition, Best Buy will gain control of Napster’s 700,000 subscribers, the web platform behind the company, and the mobile platform.  Napster CEO Chris Gorog and other senior members of the company will stay on board with Napster for an agreed amount of time. 

“This transaction offers Best Buy a recognized platform for enhancing our capabilities in the digital media space and building new, recurring relationships with customers,” stated Brian Dunn, President and COO of Best Buy. “Over time we hope to strengthen our offerings to consumers, who we believe will increasingly seek devices and solutions that enable them to access their content wherever, whenever and however they want.”

Prior to the acquisition, three of Napster’s shareholders were in a proxy battle to have the board ousted.  These three individuals were Perry H. Rod, Thomas Sailors, and Kavan P. Singh.  But then Napster hired UBS to solicit an acquisition.

Napster generated revenue of about $127.5 million in 2008.  This was a 15% increase from 2007.  Shawn Fanning should be proud.  The company he started in college is still worth something today, even 8 years after the dot com bubble crash.

There are three shareholders that are looking to have the current Board of Napster ousted. Perry H. Rod, Thomas Sailors, and Kavan P. Singh are the three shareholders that are having a proxy battle with the current Board. Napster’s annual shareholder meeting is taking place on September 18. The Board is seeking to have Richard J. Boyko, Philip J. Holthouse and Robert Rodin re-elected.

The letter to shareholders is available after the jump.

IMPORTANT NOTICE FROM YOUR BOARD OF DIRECTORS

August 29, 2008

Dear Fellow Stockholder:

At Napster, Inc.’s September 18, 2008 Annual Meeting of Stockholders, you will be asked to make a critical decision regarding the future of Napster. You and your fellow stockholders will be electing three directors to serve for a three-year term on the Napster Board of Directors.

As you may know, three dissident stockholders with no significant ownership in your company and who, in fact, have recently been frequent sellers of shares proposed that they be elected in lieu of the three experienced members nominated for re-election by your Board. The proxy materials filed by the dissident group with the Securities and Exchange Commission make abundantly clear that all three are unqualified to serve on the board of a publicly-traded company.

Their SEC filings describe work experiences–musician, nursing home executive, ice cream franchisee, middle management banking executive and other positions–that are irrelevant to a company like Napster competing in the highly sophisticated digital music industry. In addition, not one of the three nominees provided evidence they have ever served on the board of a public company. Finally, the dissident group’s proxy materials put forth no substantive plan for how its nominees will enhance value for our stockholders if elected to the Board, suggesting only a vague review of our business. Accordingly, we strongly believe that the dissident group’s initiation of this proxy contest is unnecessarily costly, disruptive to the company, and not in the best interests of our stockholders.

Your Board of Directors unanimously recommends that you vote your shares FOR the Board’s director nominees — Messrs. Richard J. Boyko, Philip J. Holthouse and Robert Rodin — by signing, dating and returning the enclosed WHITE proxy card today. We urge you to immediately discard and not return any blue proxy card you may receive from the dissident group.

CONTRARY TO THE DISSIDENT GROUP’S ASSERTION, YOUR BOARD IS FIRMLY COMMITTED TO ENHANCING VALUE FOR ALL NAPSTER STOCKHOLDERS

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.

UNLIKE THE DISSIDENT GROUP, YOUR BOARD’S NOMINEES ARE EXPERIENCED, HIGHLY QUALIFIED AND REQUIRE NO ON-THE-JOB TRAINING

Each of the Board’s director nominees has demonstrated exceptional qualifications in representing our stockholders and, collectively, in bringing a valuable and broad-based set of business experience that will continue to serve the long-term interests of our stockholders.

– Richard J. Boyko has a deep background in advertising and marketing, having served in senior executive creative positions at Ogilvy & Mather, one of the nation’s most distinguished advertising agencies, for more than twelve years, including as co-president and chief creative officer from 1997 to 2003. Mr. Boyko is currently the Director of the VCU Brandcenter the School of Mass Communications graduate program in advertising. Mr. Boyko has been a member of our Board since April 2001 and has been a member of the board of directors of Martha Stewart Living Omnimedia since June 2004.

– Philip J. Holthouse has an extensive financial and accounting background, currently serving as a partner with Holthouse Carlin & Van Trigt LLP, a certified public accounting firm that has been honored as one of Public Accounting Report’s Top 100 accounting firms in the nation. Mr. Holthouse also holds a master’s degree in business taxation and a bachelor’s degree in business administration from the University of Southern California, a law degree from Loyola Law School in Los Angeles and is a certified public accountant. Mr. Holthouse has been a member of our Board since January 2004.

– Robert Rodin has exceptional operational and management experience, serving more than 25 years in senior management positions for various companies. He is the founder and currently the chief executive officer of the RDN Group, a management consulting firm. Prior to that, from April 1994 to October 1999, Mr. Rodin served as the president and chief executive officer of Marshall Industries, a New York Stock Exchange listed company that had more than $1.7 billion in annual sales at the time of its acquisition by Avnet. Mr. Rodin is the author of the book, “Free, Perfect and Now,” which chronicles his transformation of Marshall Industries into a pioneer of emerging web technologies and e-commerce platforms. Mr. Rodin has been a member of our Board since January 2005, a member of the board of directors of SM&A since January 2005, a member of the board of directors of Inter-tel, Incorporated from March 2006 until August 2007 and a member of the board of directors of Marshall Industries from October 1992 until October 1999.

As detailed above, our Board’s director nominees combined have more than 34 years of relevant experience serving on public company boards, while the dissident group’s director nominees have 0 years of experience serving on public company boards. Further, the dissident group has offered no proof of any management, operational or other experience in the digital music industry. While we appreciate that the dissidents are music enthusiasts and subscribe to Napster’s service, such interests hardly qualify any of them to serve on your Board. It is not in the best interest of Napster’s stockholders to elect three unproven candidates who will require on-the-job training to serve as directors of a public company. This is especially the case where, as here, the nominees are unable to offer any evidence that they can contribute to enhancing stockholder value if they are elected to our Board.

THE DISSIDENT GROUP HAS SELECTIVELY MISREPRESENTED FACTS AND DISTORTED STATEMENTS

The dissident group has made assertions that we believe are misleading in an attempt to gain support for its director nominees. These misleading assertions only reinforce your Board’s determination that the dissident group’s director nominees are the wrong choices for your Board.

#1: The dissident group implies that your Board recently implemented a classified board structure requiring a nearly impossible 80% vote of the outstanding shares in order to change the bylaws allowing for the annual election of all directors to further its own and management’s deep entrenchment and control over the company.

FACT: This is not true. First, the classified board structure has been a part of Napster’s certificate of incorporation (and bylaws) since Napster became a public company in May 2001. This provision was not recently implemented by your Board. Second, in this year’s proxy materials, your Board has recommended a proposal to our stockholders to amend Napster’s certificate of incorporation to eliminate the classified board provision. The dissident group’s misleading assertions directly conflict with these recent actions by your Board.

#2: The dissident group alleges that your Board recently implemented a change in control severance package, commonly referred to as a golden parachute for the Chairman/CEO.

FACT: This is simply not true. While we recently amended the employment agreement for our Chairman/CEO in advance of the pending expiration of the initial term of his agreement, no changes were made to the so-called golden parachute provision, which has been a part of his employment agreement since it was originally entered into in August 2003, and is customary in our view for public company chief executive officers.

#3: The dissident group implies that your Board recently adopted a “poison pill” stockholder rights plan.

FACT: This accusation also is just not true. In fact, Napster’s stockholder rights plan has been in place since May 2001. In addition, your Board believes that the stockholder rights plan serves to enhance stockholder value in the event of an unsolicited takeover attempt by giving your Board bargaining power and time to consider other alternatives and negotiate a superior offer.

YOUR VOTE IS IMPORTANT — SUPPORT YOUR BOARD NOMINEES

SIGN, DATE AND RETURN THE WHITE PROXY CARD TODAY

DISCARD ANY BLUE CARD YOU RECEIVE

The dissident group’s nominees have no relevant experience in the digital music industry, have no public company board experience and the dissident group has not put forth any substantive plan for how their nominees will enhance value for our stockholders if elected to the Board. The dissident’s proxy materials also include selective and distorted statements, which further draw into question the suitability of the dissident group’s nominees to serve as your directors. For those reasons, your Board of Directors unanimously recommends that you vote your shares FOR the Board’s director nominees — Messrs. Richard J. Boyko, Philip J. Holthouse and Robert Rodin — by signing, dating and returning the enclosed WHITE proxy card today. We urge you to immediately discard and not return any blue proxy card you may receive from the dissident group.

We thank you for your support.

Sincerely,

THE NAPSTER, INC. BOARD OF DIRECTORS

Vernon E. Altman

Richard J. Boyko

Wm. Christopher Gorog

Philip J. Holthouse

Joseph C. Kaczorowski

Ross Levinsohn

Brian C. Mulligan

Robert Rodin

IMPORTANT

1. Your Board of Directors unanimously recommends that you vote your shares FOR the Board’s director nominees. Your Board has not endorsed any of the dissident group’s director nominees or proposals.

2. Regardless of how many shares you own, your vote is very important. Please sign, date and return the enclosed WHITE proxy card. Please sign, date and return each WHITE proxy card you receive in order to ensure that all of your shares, including shares held in separate accounts, are voted at the meeting. Only your latest dated proxy counts.

3. We urge you NOT to sign any blue proxy card sent to you by the dissident group.

4. If you have sent a blue proxy card to the dissident group, you have every right to submit a new proxy card to change your vote. You may revoke that proxy and vote as recommended by Napster’s Board of Directors by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided.

If you have any questions about voting or need additional assistance, please contact Laurel Hill Advisory Group, LLC the firm assisting us in the solicitation of proxies, toll free at 1-888-742-1305.

Important Information. On July 29, 2008, Napster, Inc. filed a definitive proxy statement with the Securities and Exchange Commission (the “SEC”) in connection with Napster’s 2008 Annual Meeting of Stockholders. Napster’s stockholders are strongly advised to read the definitive proxy statement carefully before making any voting or investment decision because the definitive proxy statement contains important information. Napster’s proxy statement and any other materials filed by Napster with the SEC can be obtained free of charge at the SEC’s website at www.sec.gov or from Napster at http://investor.napster.com. Napster’s definitive proxy statement and other materials will also be available by writing to Napster, Inc., 9044 Melrose Avenue, Los Angeles, CA 90069 or by contacting our proxy solicitor, Laurel Hill Advisory Group, LLC by toll-free telephone at 1-888-742-1305.

Napster actually has over 700,000 paying customers, yet their market value is zero (market cap of about $69 million minus their saleable assets).  The reason why Napster is trading low is because of a “lack of confidence in governance” stated the shareholders.

Last.FM was a private company with a close-knit community of users when they were acquired.  Napster is a public company that was a has-been music sharing site in the early 2000′s back when it was making Metallica and Dr. Dre mad and Shawn Fanning was one of the most well known people in the tech industry.  CBS acquired Last.FM because they were ramping up their Radio services and even signed a partnership with AOL.  Last.fm currently has over 21 million active users in 200 countries. 

Should Napster be worth close to $280 million?  I’m not an active shareholder, but I’d have to say no because their user-base just isn’t that big. 

[Source: paidContent]

Announcement
Napster Inc. (NASDAQ:NAPS) has announced today that they will start selling MP3s.  Prior to the announcement Napster was selling “all-you-can-eat” streaming music, but selling MP3s may enable the company to attract iPod users and others that prefer DRM-free music. 

Napster will be selling the MP3s for $0.99 each.  Amazon.com and iTunes are currently the dominant players for DRM-free online music sales and they sell MP3s for roughly the same price.

Napster has 6 million MP3 tracks in their library while Amazon.com has 5 million.  As of March 31, Napster has 760,000 subscribers.  Napster will continue to sell streaming subscription services despite a shift in their strategy for selling music download files.

Last month, Apple beat Wal-Mart in becoming the biggest music retailer through iTunes.  Apple sold over 4 billion songs since 2003.

Different Perspectives
While the information above was simply put together from a press release, below are some of the perspectives from the blogosphere:

* TechCrunch wrote: “I’m having trouble getting excited about it.” 
* CNET wrote “This is a huge day for digital music.”

Pulse 2.0 Perspective
I believe that both CNET and TechCrunch have great points.  While this is a huge day for digital music because now there are alternatives, Napster simply doesn’t have a large user-base.  Nor do they have a powerful brand to instantly win over new customers. 

The consumers that Napster wants to win most likely already own iPods.  And to use an iPod, you need iTunes, a Napster competitor.  It’ll be an uphill battle and the only way for Napster to win through it’s MP3 offerings is to prove that customers need them.  Only then will they be able to convince skeptics like TechCrunch that we as consumers should switch to Napster.

Information Source:
[1] Reuters: Napster rolls out MP3 store in challenge to iTunes by Yinka Adegoke

Music streaming company, imeem has announced recently that they have acquired SNOCAP, a Digital Rights Management company started by Shawn “Napster” Fanning.  SNOCAP owns their own digital registry platform that allows independent artists to control their music distribution.  SNOCAP has over 7 million songs in their digital registry.

Financial details were undisclosed.

imeem spent the past year ramping up advertisements and partnerships.  In 2007, imeem made deals with Universal, EMI, Warner Brothers, and Sony.  While SNOCAP has been MySpace’s partner for spreading independent music.  Through the acquisition the COO of SNOCAP, Ali Aydar will be joining imeem as VP of Operations.

Information Source:
[1] MarketingVOX: Music Streaming Service imeem Buys Indie DRM Firm SNOCAP

Ruckus’ membership grew 60% during the Spring 2007 semester and signed contracts with 40 new schools. Currently the company has 120 memberships. Ruckus service is exclusive to those who have a .edu e-mail address.

“Today’s funding announcement caps what is arguably the most significant, successful and exciting period to date for Ruckus,“ stated Mike Bebel, the CEO of Ruckus Network, Inc. “Ruckus has become the digital entertainment service of choice for college students and administrators alike, creating considerable interest among advertisers and marketers who recognize the vast potential Ruckus fulfills. With this investment round, we are poised for even greater growth.“

Ruckus established partnerships with OneNet and Merit, who are the Internet Service Providers for educational institutions Michigan, Michigan State University, Wayne State University, Western Michigan University, etc.

The new funding will be used to develop further advertisement partnerships. Ruckus also provides full length movies for streaming.

[1] www.ruckus.com
[2] www.colcap.com