Sue Zeidler
LOS ANGELES: Song-swap service Napster on Friday said it has received another
cash infusion from German media giant Bertelsmann AG, which sources familiar
with the situation put at about $26 million.
"Bertelsmann did commit to a fixed amount of further funding, a portion
of which was tied to our recent licensing deal," a Napster spokeswoman said
on Friday, declining to provide specifics.
Earlier this week, Bertelsmann said it will use Napster's new secure
song-swap technology for its BeMusic operations as part of a licensing agreement
between the two companies.
Sources said part of the latest funding was payment for Bertelsmann's
licensing of the technology and the remainder went towards ongoing operational
and development needs.
Sources said this latest funding from Bertelsmann came in addition to money
provided by the giant German company to help Napster pay off a $26 million
settlement announced in September with music creators and copyright owners
regarding damages for past, unauthorized uses of music.
Bertelsmann also confirmed on Friday it had provided additional unspecified
funding. The company broke ranks with the rest of the music industry last year
by investing about $60 million in Napster, which was sued for copyright
infringement by other labels because its service enabled users to swap songs for
free.
Napster, which was once wildly popular but has stood idle since July due to
legal pressures, announced this week it would cut about 16 of its 104 jobs.
Sources said the latest cash infusion was also tied to the company's
cost-cutting measures.
"They were to receive $26 million funding, pending a reduced burn rate
which is why they provably had those cutbacks," said one source familiar
with the situation.
Some industry sources speculated that Napster received another round of
funding from Bertelsmann this summer as well. Prior to the Bertelsmann alliance,
Napster got about $13 million in funding from Hummer Winblad Venture Partners.
Many music industry experts believe Napster's days are numbered due to
billions of dollars in potential damages it may owe the recording industry. But
Bertelsmann Chief Executive Officer Thomas Middelhoff has often said he believes
Napster will be a powerful brand and player in the online music arena, once it
is transformed into a service with paid subscriptions and secure online
connections.
Napster's chief executive officer Konrad Hilbers will deliver the opening
keynote speech at Webnoize 2001, a digital entertainment conference beginning on
Monday in Los Angeles.