Bertelsmann buys Napster for $8 million

ITworld.com |  Networking

After a long and torrid courtship, Bertelsmann AG said Friday that it has agreed to purchase Napster Inc. for US$8 million, and is reinstating Konrad Hilbers at the helm of the troubled song-swapping service.

The move comes just days after Hilbers and Napster founder Shawn Fanning quit the company out of frustration that they could not secure financing to keep the operation running.

Hilbers will now regain the title of chief executive officer and will also chair the company's board of directors. Fanning will rejoin the company as chief technology officer, Bertelsmann said.

The $8 million Bertelsmann is paying for the embattled startup will go toward paying Napster's creditors, the company said.

Once the high-flying darling of music swapping services, Napster had its wings seriously clipped when it was hit by a lawsuit from the major record labels, represented by the Recording Industry Association of America Inc. (RIAA). The renegade was then ordered to remain offline until it could ensure that no copyright protected works would be traded on its service.

Since then, Napster has struggled to pay mounting legal bills, while also trying to re-emerge as a legitimate subscription-based file-swapping service. Bertelsmann seemed the most likely cash cow, as the media conglomerate dropped out of the RIAA's suit in late 2000 to form an alliance with Napster, and has already shelled out upwards of $100 million in loans to keep the company afloat.

Last month, Bertelsmann executives told the press that it planned to buy Napster outright, but the bid fell through when the deal was shot down by some members of Napster's board.

Now that Bertelsmann has Napster, however, it may find that it has less than it originally bargained for. Over the last year, a host of potential competitors have come onto the scene, including major-label backed ventures such as MusicNet and Pressplay. And, of course, while Napster once boasted some 85 million users swapping songs on its service, the service is now silent.

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