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EDITIONS
Tuesday, 3 September, 2002, 21:36 GMT 22:36 UK
Napster faces liquidation
Napster has been offline since July
Napster has been offline since last year
A court in the United States has blocked the sale of Napster to the German media giant Bertelsmann, almost certainly sounding the death knell for the beleaguered online music service.

Bertelsmann had agreed to pay $9m to Napster creditors to buy the pioneering internet company, which until last year provided its users with software to swap copyrighted songs for free.


The company will likely be forced into liquidation

Konrad Hilbers, Napster
Law suits by all the big record labels put a stop to the service, and Napster had since tried to reinvent itself as a legitimate subscription online music provider.

The end of Napster, however, does not spell an end to file swapping and copyright violations, with the use of new file-sharing software like Kazaa and Morpheus increasing rapidly.

Bertelsmann had wanted to relaunch Napster later this year, but Tuesday's judgement put paid to such hopes.

Bowing out

Created by then 19-year-old student Shawn Fanning, nicknamed Napster, the service at its height could boast more than 70 million users.

Shawn Fanning started the service as a 19-year-old
Fanning's dream is drawing to a close

It allowed its users to swap recorded material with each other for free rather than having to buy it straight from the recording companies.

But major record groups such as AOL Time Warner, EMI, Sony, Universal - as well as Bertelsmann itself - argued the company was cheating them and the artists out of royalties. In 1999 they took the matter to court, demanding damages.

Just over a year ago, Napster closed down the file-swapping service.

Liquidation

Now, faced with no financing, no revenues, and no other buyers that might try to make its new business model work, Napster is expected to close down what remains of its operations and sack its remaining staff.

The company is already enjoying so-called Chapter 11 bankruptcy protection, which gave it a reprieve from creditors while it tried to sort out its business model and finances.

This is now no longer a viable option.

Napster chief executive Konrad Hilbers, a Bertelsmann veteran, said the company would now be forced into "Chapter 7 liquidation" - winding up the firm.

Bertelsmann will not appeal, saying it accepted the court's decision: "The purchase process will not proceed."

Swapping continues

The days of copyright violations are not over, though.

A raft of file-sharing alternatives has emerged, among them favourites like Kazaa, Audiogalaxy and Morpheus.

Kazaa, by far the most popular software, now has about 8.2 million US users, according to internet tracking firm Comscore Media Metrix, not far off Napster's peak of 13.6 million.

Its growth rate is huge, adding 1,491% to its user base within just one year.

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The BBC's Theo Leggett
"Napster may now be silenced for good and its creditors left empty-handed."


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02 Sep 02 | Business
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