Online music service Napster Inc. and Tower Records are planning to launch a digital music service in Japan in a joint venture that will be mostly owned by Tower Records Japan. Outside the U.S., Napster offers its service in the U.K. Canada and soon in Germany. Napster and Tower report that the venture will operate out of Tower's Tokyo headquarters under the guidance of a dedicated board of directors chaired by Tower Records Japan CEO Hiroyuki Fushitani.
"Our partnership with Tower Records Japan represents a significant development in the globalization of the digital music industry and one which will take Napster to a new level," said Chris Gorog, Napster chairman and CEO. "Teaming with Japan's number one music brand and retailer will help ensure Napster Japan reaches a mass audience with a service carefully tailored to local tastes and rich in Japanese repertoire."
"The decision to partner with Napster was very simple," Fushitani said. "We believe subscription will be the digital music business model of the future and Napster Japan will expedite our entry into the digital music industry under the name of the most powerful and universally-recognized brand in the business."
Tower Records Japan will contribute up to $7 million in cash and assume additional funding obligations in exchange for an approximately 70% equity stake in Napster Japan. Tower Records Japan will also provide the majority of the management team, local music content and marketing for the new service through its network of 108 retail stores, web sites, music magazines and other promotional vehicles. Napster will provide up to $3 million in cash, plus its brand, technology platform, music library and ongoing technology, operational and marketing support in exchange for a 30% equity stake and guaranteed royalty income.
The arrangement with Tower is the first time Napster has partnered with another company.
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