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Thursday, September 27, 2001

THE $100 MILLION QUESTION

Bertelsmann Forks Over The Dough, But Napster’s Worth It, Right?
Napster may very well have the richest sugardaddy ever. Bertelsmann’s crusade to keep the online music service alive has cost the media giant over $100 million, according to CNET.com, with more expenses expected.

The file-swapping company’s recent settlement with music publishers (hitsdailydouble.com, 9/24) will cost Napster $36 million up front —$26 million to settle the lawsuit, and a $10 million advance on future licensing fees—and Bertelsmann is fronting the cash.

Last year, Bertelsmann gave Napster a near-$60 million loan, and then this year added a second loan in the "$7 million to $12 million range." We at HITS haven’t seen a tab climb that quickly since Murphy's birthday.

Napster's spending spree is far from over, however, with impending damages or settlement fees to record labels that exceed the music publishers’ $26 million. The company is also hoping to create an attractive subscription service that could rival larger companies such as America Online, which means that Bertelsmann CEO Thomas Middelhoff will have to dig deeper into his lederhosen to keep things running smoothly.

 
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