Napster could be wound up

MUSIC: Napster, the music swapping website that became an international phenomenon and the centre of a massive music industry lawsuit, may be liquidated after failing to agree terms of a buyout by media group Bertelsmann.

Chief technology officer Mr Shawn Fanning, who founded the site at age 19, stepped down from the Californian company on Tuesday, along with chief executive Mr Konrad Hilbers and four of Napster's vice-presidents.

The website, which offered a centralised directory where members could find others to trade MP3 music files, once boasted tens of millions of subscribers to its free service. Members could download music using Napster's peer-to-peer network, which allowed members to link to each other directly over the internet to download songs.

Napster became a household word when the music industry concentrated its battle against the free distribution of its copyrighted material in lawsuits against Napster.

The court battles received international publicity when well-known musicians testified both for and against the company.

Symbolic of both the threat and possibilities of the internet as a distribution medium, Napster was forced eventually to close its swapping service. However, German media group Bertelsmann stepped in to give financial support, and began negotiations to acquire the company. But, after spending some $85 million (€93.6 million) on Napster, Bertelsmann's negotiations apparently fell through this week after infighting among Napster's board members.

The early, wildfire success of Napster - especially among the lucrative and elusive youth market - will continue to have ramifications, say industry and legal experts. Napster's legacy will be to force change in the way the entertainment industry operates and perhaps even in the way copyright material is handled.

"The important thing about Napster is that they were trying to take on the copyright establishment - the major record companies - which themselves were rather dilatory in looking at these new distribution possibilities," said Prof Robert Clark, a copyright and intellectual property expert at UCD' s Law School.

Napster challenged the whole music industry model by "completely bypassing the traditional supply chain," said Mr Colm Reilly, chief executive of the Irish Internet Association.

Napster may yet live on. Even if the company is liquidated, Bertelsmann has been a major investor and could thus acquire the assets of Napster.