Telefónica gains access to Napster music through Rhapsody deal

Telefónica Digital and Rhapsody International said they have entered into a "wide-ranging strategic agreement" that will see the Spanish operator take a stake in the streaming music specialist and offer Rhapsody's Napster music services to its users across the globe.

The move reflects growing efforts by operators worldwide to seek more differentiated service offerings through content partnerships, with several operators in Europe already offering free access to Spotify or Deezer services as part of their 3G and LTE smartphone plans.

Telefónica now plans to close down its Sonora music service in Latin America and replace it with Napster, while in Europe its local operating units can choose to offer Napster music to subscribers as part of their mobile plans. The company said the service would provide users with unlimited access to over 20 million tracks.

"We have long believed that music is an important way of engaging with customers," said Stephen Shurrock, CEO of New Business Ventures at Telefónica Digital. "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."

Although Telefónica has picked Napster as its music streaming service of choice, the Guardian noted that individual operating units would still be able to choose rival music services. For example, Telefónica's Movistar already has a deal with Spotify, while O2 UK runs its own O2 Tracks service in partnership with start-up MusicQubed.

Telefónica chose Napster partly because it offers a dedicated Napster Music Service for Firefox OS devices, and intends to preload Napster on the Firefox OS devices it plans to launch in Brazil and other Latin American countries in the coming months, the Guardian added.

Telefónica's exact stake in Rhapsody International will depend on how many customers subscribe to the music service, according to the Financial Times. "Telefónica can earn equity in return for subscribers," Paul Springer, senior vice-president and global head of product for Rhapsody, told the FT. "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. It acquired the Napster brand two years ago from U.S. retailer Best Buy.

Rhapsody and Napster are two of the oldest brands in digital music. Napster has long moved away from its controversial past as a peer-to-peer music swapping platform and now works a music streaming platform customised for different regions.

French operator SFR also offers Napster streaming services as a bolt-on option on its LTE mobile plans, while E-Plus in Germany offers the service as part of a bundle.

For more:
- see this FT article (sub. req.)
- see this Telefónica release
- see this Guardian article

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