Seattle-based digital media software company RealNetworks has taken control of Napster, doubling its previous stake of around 42% to approximately 84%.
RealNetworks has acquired the debt and equity interests in Napster’s owner Rhapsody International, which operates as Rhapsody Applebee, and which is managed by Columbus Nova Technology Partners (CNTP).
Bill Patrizio will continue to be Napster’s CEO, and Rob Glaser will continue as Napster’s Chairman.
In exchange for all of the CNTP-managed equity, debt, and other interests in Napster, RealNetworks has committed to pay $1 million cash up front and an additional $14m over time subject to certain conditions, with additional consideration depending on subsequent events, for a total of up to $40m.
According to an 8-K form filed with the SEC yesterday (January 22), the full $40m will only be paid out in the event that the 42% equity stake is sold within the next five years and the proceeds received by RealNetworks for that sale exceed $60m.
The purchase took place after RealNetworks sought and received special approval from the US Treasury Department’s Office of Foreign Assets Control to purchase the sanctioned stake in Napster.
“Under Bill Patrizio’s leadership, Napster has delivered five consecutive quarters of positive operating income and generated over $14 million in operating income in the first three quarters of 2018.”
Rob Glaser, Chairman and CEO of RealNetworks and Chairman of Napster said: “We are very pleased to have deepened our partnership with Napster.
“Under Bill Patrizio’s leadership, Napster has delivered five consecutive quarters of positive operating income and generated over $14 million in operating income in the first three quarters of 2018.
“This success was achieved by pivoting to a B2B strategy focused on selling the Napster platform as a service. We think Napster’s future is very bright.”
“The unique deal structure is one that we believe will drive significant value for RealNetworks’ shareholders.”
Cary Baker, RealNetworks
Cary Baker, RealNetworks’ CFO, added: “The unique deal structure is one that we believe will drive significant value for RealNetworks’ shareholders.
“The terms and deal structure reflect the unusual circumstances that CNTP has been operating under since a major limited partner of its managed funds – including Applebee – was sanctioned by the US Government in April 2018.
“In spite of these circumstances, Napster continued to execute on its business plan and had a strong 2018 operationally. These circumstances are now a closed chapter for Napster.”