Yesterday, Napster laid off most of its 42 staff, including its founder, Shawn Fanning. Today, Napster.com displays a simple message: “Napster was here”. There is one link, to a crudely designed image of a tombstone bearing Napster’s cat logo and the message: “Ded Kitty” (sic).
Bertelsmann invested $85 million in Napster in the hope of turning it into a legal, profitable service. Napster has not functioned as a song-swapping service in over a year and the cost of lawsuits forced it into Chapter 11 bankruptcy proceedings, a means of keeping the company going while restricting the rights of its creditors. The company was offered for sale as a going concern in an auction.
Bertelsmann was the only serious bidder, offering an additional $8 million. Other record labels, including A&M, Geffen and Interscope, objected that the sale would be unfair.
Napster’s CEO, Konrad Hibers, came to the company from Bertelsmann. Judge Walsh wrote:
“It’s abundantly clear that Mr Hilbers had one foot in the Napster camp and one foot in the Bertelsmann camp and was so fundamentally conflicted that this transaction was tainted by his conduct.”
The result of the judge’s decision is that the company will be forced into Chapter 7 proceedings – which means that its assets, including equipment, intellectual property and its domain name, will be sold off under the supervision of a court-appointed trustee.
Yesterday, Bertelsmann confirmed that it is accepting the decision. The company also confirmed that it has put its on-line bookshop bol.com up for sale, but that it is keeping its stake in BarnesAndNoble.com.