Napster Gets New Life

Bertelsmann buyout keeps company alive, Fanning back in

May 17, 2002 12:00 AM ET

Three days after announcing their resignations, Napster Chief Executive Konrad Hilbers and founder Shawn Fanning have both rejoined the company, following an $8 million dollar bailout by Bertelsmann Entertainment Group. BEG owns several labels, including Arista Records and J Records, where Santana, Alicia Keys and dozens of other artists make their homes. The deal, announced today, staves off an imminent bankruptcy filing, which prompted the departure of the two executives.

"Bertelsmann understood our vision when they first invested in us," said Fanning. "They still believe in that vision. I'm ready to work with the many talented people at Napster to complete the new service and get it off the ground."

Hilbers echoed Fanning's sentiment, referring to the reversal of fortune, saying: "I have believed from the start that this deal was a valid and beneficial deal for Napster, the best direction for the company under the current circumstances. While this has been a very unusual week, I'm pleased that I and my colleagues can move forward and give our full attention to Napster's future."

The deal provides $8 million towards the payment of Napster's creditors and funds the company's efforts to relaunch the site as a pay subscription service that blocks the trading of unauthorized, copyrighted material. The service has been offline since last July after two years of legal wrangling with the Recording Industry Association of America.

"Creating new ways of doing business is never easy," Bertelsmann Chairman and Chief Executive Joe Klein said, "but Napster will be at the forefront of finding business models that respect copyright, reward artists and deliver entertainment value to consumers."

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