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Best Buy and Napster: Smart, quirky or “Dumb 2.0”?

Not counting the ongoing Wall Street drama, one of the most buzzed about business stories of the week has been Best Buy’s surprise acquisition of Napster. The verdict is out on whether Best Buy and Napster will find harmony. Here’s a sampling of what business and technology bloggers are saying about the deal:

The Toronto Globe and Mail’s Matthew Ingram calls the deal “Dumb 2.0.” The combination is doomed, he writes. “Why? Because Napster’s problem isn’t a lack of money, it’s a lack of a successful business model.” People don’t like paying for music they don’t get to keep forever, Ingram writes. Need proof? See Virgin Music, Yahoo Music and AOL Music, all of which tried similar models.

Investment blogger George Gutowski at the Financial Skeptic blog says the acquisition is like buying an SUV. The sticker price was low, but digital platforms like Napster are expensive to run and require lots of spending on research and development to keep up with evolving technology. “The [Best Buy] management team is not used to managing R&D. The deal makes sense but is not a complete slam dunk. How much cash will be needed to stay in the game and be good at it?”

On ZDNet’s Between the Lines blog, editor Larry Dignan parses a statement in Best Buy’s press release about building customer relationships over a mobile digital platform. “That’s shorthand for saying that Best Buy can’t continue to sell CDs forever,” he writes. Dignan calls the deal “quirky” but says it makes sense for Best Buy if it’s trying to diversify beyond being a brick-and-mortar big box.

Kevin Maney, technology writer for Portfolio magazine, calls the deal “a bit of a head-scratcher — like, what would a big box retailer want with what has become a minor-league music service?” It’s a sign the mobile music wars are coming. Nokia recently launched a music service in the U.K., and rumors are floating about Sony Ericsson doing the same. “All of this adds up to yet more corporate guns aimed at Apple’s dominance of the digital music business.”

The Motley Fool’s Rick Munarriz says Napster’s 700,000-plus subscribers bring big value to Best Buy. “These are hardcore music fans, likely to be receptive to Best Buy pitching new digital players, accessories, and music their way.” Napster investors get a premium for their shares, and putting the service in Best Buy’s hands will give it more credibility with consumers, he says.

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