Napster’s Undoing: Company-wide layoffs coming Dec. 16

Rhapsody’s purchase of Napster from Best Buy (s BBY) looks more and more like a glorified funeral. Sure, Rhapsody gains a few hundred thousand new subscribers — even though it’s unclear how many will actually stay around — and the company may even get a few interesting patents as a sugar coating.

But for Napster, the deal pretty much means game over. Here are some of the grim details I was able to gather by talking to sources and going through reports:

  • Napster’s two offices in Los Angeles and San Diego will close, leaving an estimated 120 people without work. A few may get rehired by Rhapsody, but I wouldn’t get my hopes up.
  • The official last day for Napster’s employees is Dec. 16, according to a reliable source close to the company. A Rhapsody spokesperson didn’t want to comment on the specific date, but said a few people may stay longer than others to help with the transition.
  • Reports put the number of current Napster subscribers at less than 400,000, which is down from around 700,000 to 800,000 when Best Buy bought Napster in 2008.
  • Rhapsody didn’t pay a single dollar in cash for the Napster assets, but gave Best Buy a minority share in its company. Rhapsody President Jon Irving confirmed yesterday that this was an “all-equity deal.”
  • The cat will cease to exist. The iconic Napster name and logo won’t be used by Rhapsody, at least not in the U.S.
  • What about Napster’s services abroad? “Business in Canada, the U.K. and Germany isn’t affected and will continue like before,” I was told by Napster VP Sales & Marketing Europe Thorsten Schliesche. However, it’s unclear for how long. A Rhapsody spokesperson explained that Napster’s foreign operations aren’t part of the deal announced this week, but Rhapsody is looking to buy these services through a separate transaction. At that point, all foreign subscribers will be rolled over to the Rhapsody service, but it may continue to be Napster-branded abroad.

Of course, this could all be seen as a necessary consolidation in an industry that’s bracing for new competitors like Spotify. However, browsing LinkedIn (s lnkd) profiles of current Napster employees last night, I not only got the sense that there are a lot of people who’ve been working at the company for close to a decade, only to suddenly find themselves without a job now.

I also have to wonder: Why wasn’t it possible to turn this hugely popular brand into an opportunity to make online music pay?