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Tuesday, 30 July, 2002, 08:37 GMT 09:37 UK
Napster doubts after saviour quits
Napster
Thomas Middelhoff planned to relaunch Napster
File-sharing system Napster could face the axe after the head of its parent company - who was one of its biggest supporters - resigned, experts have warned.

Thomas Middelhoff oversaw German media giant Bertelsmann's acquisition of the internet music service, and was thought to have saved it from closure at the time.

Former Bertelsmann chief executive Thomas Middelhoff
Mr Middelhoff resigned because of "differences of opinion" with the board
But Mr Middelhoff resigned as Bertelsmann's chief executive at the weekend in a row over the company's direction, and some observers have predicted that his removal could be "the final nail" in Napster's coffin.

"It's hard to see a scenario where Middelhoff goes but Napster stays," Peter Fader, professor of marketing at the Wharton School at the University of Pennsylvania, said.

At its height, Napster was an immensely popular site among technology-savvy music fans who swapped digital files containing songs.

But it also became the focus of anger and legal action from record companies and some musicians who accused it of letting fans cheat them out of royalty payments.

After it was crippled by court rulings, Napster was bought by Bertelsmann, who wanted to resurrect it as a legitimate service that would charge users a subscription fee in return for downloading songs.

Napster founder Shawn Fanning
Napster was created by college drop-out Shawn Fanning in 1999
But the acquisition was questioned by some within Bertelsmann, who were unsure about Mr Middelhoff's policy of snapping up internet ventures.

A reported $80m (51m) of Bertelsmann money had been pumped into keeping Napster afloat by the time Mr Middelhoff resigned.

"Middelhoff upset the status quo at BMG [a Bertelsmann company] when he purchased Napster," said Tess Taylor, president of the National Association of Record Industry Professionals.

"Napster has been sidelined not only by all the lawsuits, but by competitors. Even if they were able to revive it, Napster would have a lot of catching up to do."

Risks

Bertelsmann said Mr Middelhoff's departure was because of "differences of opinion between the chief executive officer and the supervisory board about the future strategy of Bertelsmann".

Bernhard Tubeilah, media analyst at Merrill Lynch, said ambitious expansion plans including internet investments and flotation on the stock market would "probably shift down a gear but they won't be pulling off the road".

The chief executive of the Recording Industry Association of America, Hilary Rosen, said Mr Middelhoff was "an aggressive guy who took risks and tried to establish a clear vision".

"He wasn't a great listener, though," she added.

See also:

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