MP3.com wavers on brink

MP3.com will shut its European arm and has put its US operation up for sale
Written by Will Sturgeon, Contributor

Another former favourite of online-music fans looks set for the scrapheap -- MP3.com appears to be on the brink of closure.

News broke late last night that the company is to close its European arm in a month's time, and is looking for a buyer for the US business. It is a search that may well prove to be in vain.

The company was bought by media giant Vivendi Universal for $372m (£228m) in May 2001 but has been on rocky ground ever since, with users failing to warm to the idea of paid-for music services while free alternatives such as Kazaa are still available.

Recent lay-offs at the company appeared to offer a warning of worse to come.

The chequered history of MP3.com began in earnest with its $344m flotation in July 1999. Even then, the company was being targeted by angry music companies who were claiming copyright infringement, because the site enabled the online distribution of digital music. While this didn't deter investors from snapping up the $28 shares, it did give an idea of the troubled waters the company was heading for.

In August 2000, MP3.com agreed out of court to pay Sony $20m in damages for copyright infringement. While that may have rocked the boat, the next month saw the company ordered to pay $250m to Universal Music for the same offence -- a fine which left it close to ruin.

After hammering the final nail in the coffin, it was Universal and parent Vivendi that picked up the assets and intellectual property of MP3.com in mid-2001 -- paying just $5 per share for the fallen company.

But since then the media giant has failed to make MP3.com profitable, and it appears the former dot-com darling may now be axed in Vivendi's ongoing cost-cutting.

Universal Music has also been the subject of acquisition speculation in recent months, with Apple tipped as a potential suitor.

MP3.com failed to return calls for comment. Universal Music declined to comment on the story.

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