Napster files for bankruptcy protection
In an expected move, Napster filed for Chapter 11 bankruptcy protection on Monday (6/3) as it moves toward finalizing its recent agreement to sell the company to Bertelsmann Group.
In an expected move, Napster filed for Chapter 11 bankruptcy protection on Monday (6/3) as it moves toward finalizing its recent agreement to sell the company to Bertelsmann Group.
The filing follows last month’s announcement that Bertelsmann had agreed to pay $8 million-worth of the beleaguered file-sharing company’s sizeable debt in exchange for acquisition of the company.
Chapter 11 bankruptcy proceedings will allow Napster to reorganize itself and emerge as a still-intact entity owned by Bertelsmann. Prior to the Bertelsmann deal, it seemed likely that the company would have to file for Chapter 7 bankruptcy, through which the company would have been dissolved.
Napster CEO Konrad Hilbers and company founder Shawn Fanning announced on May 14 that they were resigning. Hilber stated at the time that he was leaving because Napster’s board of directors had rejected a previous Bertelsmann offer.
Three days later, Napster and Bertelsmann announced that they had struck a new deal, and that Hilbers and Fanning would subsequently remain on board.
Napster’s file-sharing network was disabled last summer following a lengthy battle in federal court during which the company tried to evade a court-ordered shutdown sought by the Recording Industry Association of America (RIAA).
Following its shutdown, Napster had hoped to re-launch as a subscription-based, royalty-paying service, but its legal woes and related financial problems derailed those plans.