Judge quashes Napster’s bid for a comeback
BySep 3, 2002 10:00 PM
A federal judge dealt what appeared to be the final blow to Napster on Tuesday (9/3), blocking German conglomerate Bertelsmann AG’s planned buyout of the once-popular file-swapping service.
A federal judge dealt what appeared to be the final blow to Napster on Tuesday (9/3), blocking German conglomerate Bertelsmann AG’s planned buyout of the once-popular file-swapping service.
Following the surprise decision, most of Napster’s remaining employees were reportedly laid off, including company founder Shawn Fanning and CEO Konrad Hilbers. The few remaining employees are expected to guide the company through its liquidation.
“As a result of the record companies’ and music publishers’ opposition, Napster’s creditors will be denied substantial repayment and the company will likely be forced into Chapter 7 liquidation,” Hilbers said in a statement. “As with most start-up technology businesses, Napster’s technology is of little value without the talented team that created it, so it is an occasion of loss on many levels.”
On Tuesday, a message on the Napster website read “Napster was here,” and featured a link that led to a cartoon graphic titled “Ded (sic) kitty, “ which displayed the company’s logo--a cat wearing headphones--on a tombstone.
A U.S. Bankruptcy Court in Wilmington, Del., found that Bertelsmann could not prove that it had reached a good-faith agreement with Napster. Bertelsmann valued its bid for Napster at $92 million, but offered up only $9 million in new funding. The balance of the bid consisted of secured loans the company made to Napster over the last two years.
“We accept the court’s decision that the sale of Napster’s assets to Bertelsmann has been denied and that the purchase will not proceed,” Bertelsmann said in a statement.
Napster, which once was the most popular file-swapping service, has been shuttered since July of 2001. A judge ordered the site closed in response to a lawsuit filed by the Recording Industry Association of America, a lobbying group that represents major labels.
Since its closure, peer-to-peer services such as Kazaa, Morpheus, Limewire and Audiogalaxy have grown in popularity.