Bertlesman bought Napster

Bertelsmann to take control of music-swapping website Napster

SAN FRANCISCO, May 17 (AFP) - German media giant Bertelsmann agreed Friday to pay eight million dollars to take over the troubled music-swapping site Napster, and will bring back executives who quit just days earlier.

The money will go toward the payment of Napster's creditors, and allow Bertelsmann to acquire the assets of the California-based website, which has been dormant for months as a result of a court order.

A source familiar with the terms of the deal said Bertelsmann will, in addition to paying eight million dollars, forgive a loan to Napster of about 85 million dollars.

"We are very pleased to have reached an agreement with Napster's board of directors," said Joel Klein, chairman and CEO of Bertelsmann Inc., the US unit of Bertelsmann AG of Germany.

Bertlemann also said Napster CEO Konrad Hilbers and Napster founder Shawn Fanning have rejoined the company. The pair, along with other executives, quit the company earlier this week after the board reportedly rejected a 30-million-dollar buyout offer by Bertelsmann.

Fanning will hold the title of chief technology officer for Napster.

"We're happy to see Napster move forward with Konrad Hilbers at the helm," said Klein. "We're proud to have Shawn Fanning continue to work on its development."

The developments Friday quelled a ongoing boardroom battle at the company over who exactly runs the company. In its announcement, Bertelsmann said the Hilbers will now be chairman of the company's board.

"I have believed from the start that this deal was a valid and beneficial deal for Napster, the best direction for the company under the current circumstances," said Hilbers in the Bertelsmann statement.

"While this has been a very unusual week, I'm pleased that I and my colleagues can move forward and give our full attention to Napster's future."

According to sources within the company, dissident board members wanted to lessen Bertelsmann's hold on the company, but found no other partners willing to shore up the company's need for cash in the face of ongoing losses.

The once wildly popular Internet site -- shut down by court order since last year -- has been straining under a weight of debt, boardroom bickering, executive defections and pressures from the world's largest record companies.

Napster was a onetime Internet powerhouse that lured some 70 million users online with its ability to easily swap digital versions of almost every song published across an Internet connection.

But that technology very quickly brought the company into the crosshairs of the major record companies, including Sony and EMI, which sued Napster in federal court here for enabling users to engage in widespread piracy.

Hilbers has said Napster's future is being cut off by these record companies, which have balked at letting the site legally distribute their song catalogs.

The world's major record labels have created their own music distribution sites, which charge monthly subscription rates based on the number of songs downloaded.

Analysts have criticized these efforts, arguing that consumers won't categorize their music needs by the company publishing the particular song.

Those efforts have also raised eyebrows both with US antitrust regulators and those at the European Union. Both are investigating whether the company-owned sites violate monopoly busting laws.

 

Well, that's one way to kill it off, isnt it !