Napster to go legit as part of Roxio

The file-trading service could finally have a new, music-industry-friendly owner in the shape of CD-burning software maker Roxio

Napster has finally sealed a deal that may see it re-emerge from bankruptcy, with the announcement on Friday that US software maker Roxio would buy the substance of the company's assets, including its technology, patent portfolio and trademark.

The future of Napster seemed in doubt in September, when a judge blocked the sale of the company's assets to media giant Bertelsmann for $9m (about £5.7m). Roxio's $5m cash deal, which is subject to approval by the bankruptcy court, could see a Napster-branded file-downloading service re-appear, but it is unlikely to be operated along the same lines as the controversial original service.

Napster became a lightning rod for the music industry's fight against Internet piracy after it found huge popularity in the late 1990s. Lawsuits by record labels caused Napster to shut down in July 2001, and it declared bankruptcy in June 2002, not long after agreeing to sell its assets to Bertelsmann. After the Bertelsmann sale was blocked, most of the company's 42 remaining employees were laid off, according to industry sources.

In the mean time, free file-trading services have continued to flourish, with Morpheus and Kazaa duplicating Napster's success. Leader Kazaa is still attracting more than 2.5 million downloads of its software in a week, according to Download.com, a software aggregation site operated by CNET Networks, publisher of ZDNet UK.

The music industry has also organised its own paid downloading services, though these have as yet failed to gain wide support. Record labels have slowly begun to allow consumers more freedom with these authorised services, however, giving users the right to copy and burn music to CDs in some cases.

On Thursday Pressplay announced that it had signed the Warner Bros music label to its service. MusicNet, an online venture of BMG, Warner and EMI, said on Friday it had licensed music from the remaining two major record labels that it hadn't already signed, Sony and Universal.

Napster is likely to join the ranks of the more legitimate services, if Roxio's deal succeeds. Roxio, which makes the CD-burning software used in Windows XP and Mac OS X, enjoys a good relationship with the music industry, and emphasised that it plans for this to continue.

"We look forward to continuing to work with our partners in the entertainment industry and will be announcing further plans in the coming months," said Roxio president and chief executive Chris Gorog in a statement.

Roxio said that it sees Napster as complementary to its CD-burning technology. Its new service could, for example, allow users to buy song tracks and burn them to CD, as do several other paid downloading services. The company said it will give more details of its plans after the deal is approved, which is expected on 27 November. Although Roxio has "signed a definitive agreement", rivals still have a chance to top its bid before approval by the bankruptcy court.

Roxio's offer consists of $5m in cash and 100,000 warrants. If approved, the deal would leave the company free of Napster's liabilities, including pending litigation. Napster has liabilities of about $101m, the company said earlier this year.

As Napster's fortunes have faded, its staff have moved on to other ventures. Napster co-founder Sean Parker recently formed a start-up called Plaxo, which collects address book contact information by email and automatically updates the data in Microsoft Outlook.


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