Napster bought for $5m

Napster has finally sealed a deal that may see it re-emerge from bankruptcy, with the announcement on Friday that US software maker Roxio will pay $5m for the company's assets, including its technology, patent portfolio and trademark.

The future of Napster seemed in doubt in September, when a judge blocked the sale of the company's assets to media giant Bertelsmann for $9m (about £5.7m).

Roxio's $5m cash deal, which is subject to approval by the bankruptcy court, could see a Napster-branded file-downloading service re-appear, but it is unlikely to be operated along the same lines as the controversial original service.

Napster became a lightning rod for the music industry's fight against internet piracy after it found huge popularity in the late 1990s. Lawsuits by record labels caused Napster to shut down in July 2001, and it declared bankruptcy in June 2002, not long after agreeing to sell its assets to Bertelsmann. After the Bertelsmann sale was blocked, most of the company's 42 remaining employees were laid off, according to industry sources.

Napster is likely to join the ranks of the more legitimate services, if Roxio's deal succeeds. Roxio, which makes the CD-burning software used in Windows XP and Mac OS X, enjoys a good relationship with the music industry, and emphasised that it plans for this to continue.

Chris Gorog, CEO and president of Roxio, said in a statement "We look forward to continuing to work with our partners in the entertainment industry and will be announcing further plans in the coming months."

Roxio said that it sees Napster as complementary to its CD-burning technology. Its new service could, for example, allow users to buy song tracks and burn them to CD, as do several other paid downloading services. The company said it will give more details of its plans after the deal is approved, which is expected on 27 November. Although Roxio has "signed a definitive agreement", rivals still have a chance to top its bid before approval by the bankruptcy court.

If approved, the deal will leave the company free of Napster's liabilities, including pending litigation. Napster has liabilities of about $101m, the company said earlier this year.

Matt Broersma writes for ZDNet.co.uk