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Napster's savior returns

Sun, 05/19/2002 - 8:00pm
Susan Rush

Just days after CEO Konrad Hilbers said he was washing his hands of Napster, the one-time ruler of peer-to-peer online music file swapping has closed a merger deal with Bertelsmann.

The $8 million deal, which will wipe out most of Napster's debt, brings Hilbers and other key Napster executives back to the company. Hilbers' resignation last week came at a time when Napster's demise seemed to be a foregone conclusion — the Bertelsmann deal was off the table. Napster reportedly will file for Chapter 11 bankruptcy protection as part of the deal, according to a Wall Street Journal report.

And, even though the Bertelsmann deal finally has been locked up, it remains to be seen whether the backing will be enough to save the ailing company. At its peak, Napster had 60 million users, but the company watched that base dwindle as the legal battles over its file swapping practices ensued. The service has been dormant since July, after a judge ordered the company to stop the free trade of music.

For nearly a year now, Napster has been working to revise its business structure. Hilbers has contended all along that the success of a paid subscription service is dependent upon licensing content from major labels. It also remains to be seen if users once loyal to Napster will embrace a subscription-based service or shun the service and continue to download music from other file-sharing systems —such as FastTrack, Audiogalaxy, iMesh and Gnutella — that have yet to come under as much legal fire as Napster.

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