German media conglomerate Bertelsmann AG has made an offer to completely take over Napster, the company's chief executive Thomas Middelhoff said in an interview with the Germany newspaper Die Welt published on Friday.
"Our solution is to take over Napster completely. We plan to buy out the former owners, most of all venture capitalist Hummer Winblad Venture Partners and some private investors like John Fanning, who is the uncle of the founder Shawn Fanning. We have made them an offer, because we believe that our strategy is the right one for the future of the company," Middelhoff is quoted as saying in the newspaper.
A Bertelsmann spokeswoman confirmed the comments made in Die Welt, but declined to comment any further. Representatives from Napster could not immediately be reached for comment.
Napster, with the help of the Gütersloh, Germany-based Bertelsmann, has been in the process of attempting to transform itself from a free peer-to-peer file-swapping service that has been mired in court battles over charges of copyright infringements, to a legal digital music subscription service.
Napster was briefly able to offer a beta version of its service in January, but was shut down by order of the U.S. Ninth Circuit Court of Appeals. Two weeks ago, Napster put its plans for the members' service on indefinite hold though the company indicated it is still in negotiations on licensing music from the five major recording companies.
Bertelsmann was part of the original lawsuit brought by the Recording Industry Association of America Inc. (RIAA), a trade group representing the major record companies, including Universal Music Group Inc., EMI Group PLC, Time Warner Inc. and Sony Music Entertainment Inc., but dropped out of the suit when it formed an alliance with Napster in October 2000.
As part of its agreement, Bertelsmann extended loans to Napster to assist the Redwood City, California-based company through its legal troubles in exchange for the option to bid for the entire company at a later date. According to various analyst and media estimates, Bertelsmann has already spent between US$85 million and $100 million on loans to Napster and would be willing to spend an additional $30 million to fully acquire Napster.
Napster is trying to compete with digital music distribution companies backed by the major labels and already operational: MusicNet, formed by AOL Time Warner Inc., EMI, RealNetworks Inc. and Bertelsmann, and Pressplay, formed by Vivendi Universal SA and Sony Music Entertainment.
At one point, Napster had 84 million users of its music-swapping software. "Bertelsmann recognized the tremendous potential arising from this, early on," the company explains on its Web site.