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Ironically, Lars Ulrich appeared on “Who Wants to Be A Millionaire” on Sunday Night and busted out at $32,000.

A day later, in case you live in a #^@$ing cave, Napster got burned at the stake by the San Francisco US Circuit Court, which upheld the earlier ruling that Napster IS in fact liable for the actions of their users. Sploosh! The billion dollar lawsuit will proceed.

This is the most comprehensive article I’ve found in the last couple of days.

Is it already a cliché to assert that Napster is really just the lightning rod for Big Music’s fear of the Internet?



Tuesday February 13 6:31 PM ET Napster Prepares for the After-Life

By Sue Zeidler

LOS ANGELES (Reuters) – It could be curtains for Napster unless it can forge a duet with the recording companies who have been trying to get it thrown off the air.

The wildly popular song-swapping service, which has been told by an appeals court to stop its millions of users from trading copyrighted music, must either find the cash to pay mounting bills to keep a legal fight going or reach settlements with major record labels if it wants to survive.

“The challenge for them is how to go legit and still keep their business,” said Bill Burnham, managing director of Softbank Venture Capital.

Monday, the 9th U.S. Circuit Court of Appeals supported a District Court ruling that would effectively shut Napster down but asked the lower court to modify its original ruling. An injunction could be issued in days or weeks.

As millions of songs were being downloaded ahead of the injunction, Napster vowed to keep up the fight in the courts and in Congress.

Napster’s Chief Executive Officer Hank Barry said the company has the financial resources to keep going and planned to continue discussions with record companies.

The longer Napster is shut down, however, the greater risk it faces of losing fan and brand loyalty, said Aram Sinnreich, analyst with Jupiter Media Metrix.

“This ruling will accelerate settlement talks with other major labels simply because Napster doesn’t want to go for too long time with the service down,” Sinnreich said. He said Napster was likely to sweeten terms to recording companies.


Many Napster users, which total more than 50 million, are already looking at alternative file-swapping sites to get their songs from once Napster is shut down.

Research firm Webnoize Tuesday said an estimated nearly 91 million songs were downloaded using Napster Monday following the ruling, compared with 130 million Sunday in anticipation of the appeal court’s decision.

Analysts, such as Phil Leigh, of Raymond James and Associates believe that Napster — which to date has only received about $17 million in venture capital funding and faces potentially billions in liability costs — may run out of money.

Leigh compared Napster’s predicament to that of, another file-sharing community that was sued for copyright infringement and which filed for bankruptcy last October.

Scour’s assets, including its name and membership lists were ultimately sold in December for about $9 million in cash and stock to CenterSpan Communications (NasdaqNM:CSCC – news), which plans to relaunch the Web site as a subscription service.

“If Napster’s active membership drops to a fraction of its current total, it may seek to sell its assets, which might include the name and the membership list,” Leigh said.

Under a deal announced in October, German media giant Bertelsmann AG (BTGGga.D) agreed to loan Napster an estimated $50 million to keep the site operating and help transform the service into a viable, fee-charging subscription service.

Leigh said Bertelsmann might be a logical buyer of Napster’s assets, which could then relaunch the service with BMG content.

“Bertelsmann is also attempting to purchase EMI Group Plc’s EMI Music Plc (EMI.L) and if it can get access to the EMI catalog, the reborn Napster under BMG ownership might have enough content to make an interesting subscription service,” he said.

Some Believe Settlements Now Likely

The recording industry knows that in order for any music subscription to work well, it needs offerings from all the labels. Now that the record industry has won the appeals court ruling, settlement talks may speed up between the labels and the service that rocked the music world.

“No other major record companies have struck a deal with Napster since Bertelsmann and that could be because the business model wasn’t adequate from their perspective and also because they wanted a strong legal opinion,” said Cary Sherman, general counsel for the Recording Industry Association of America (RIAA), which represented the labels against Napster.

“Now that they have gotten a ruling they may be more receptive to negotiations that lead to a viable business model for this kind of service,” Sherman said.

Sinnreich said the heat is on Napster to relaunch a subscription service.

“Napster can offer the labels higher royalty rates, bigger equity stakes. They’ll bend even further backwards,” he said. ”I wouldn’t be surprised if the next company on board was either EMI or (AOL Time Warner’s (NYSE:AOL – news)) Warner Music.”

He cited EMI because it is in merger talks with Napster’s partner, Bertelsmann, and Warner because its new parent, AOL, is planning to launch its own subscription service.

“I think a Warner deal with Napster is very possible. It would make sense for Napster/Bertelsmann to have a reciprocal deal with Warner, which could then use Bertelsmann content on the AOL service,” he said.

Both EMI and Warner Music declined to comment on settlement discussions with Napster.

“EMI is open-minded and is prepared to do business with people who come up with viable business models that help us achieve the widest distribution of our music to consumers,” said Amanda Conroy, a spokeswoman for EMI.

But many music industry executives remained skeptical about settlements with Napster and said that efforts to launch other subscription services would likely garner more attention.

“There are many impediments to Napster relaunching a service. They’ll have to pay for past infringements, which would be part of a settlement, and raises the question of whether or not the business would be sustainable,” one record executive said.