NAPSTER TURNS TO CHAPTER 11

Napster filed for bankruptcy protection today as part of the planned sale of its assets to German media giant Bertelsmann.

The company listed less than $10 million in assets and more than $100 million in debts in its filing under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court in Delaware. And that doesn't even account for Shawn Fanning's baseball caps.

Bertelsmann stepped in on May 17 with $8 million to buy Napster's assets. As part of that agreement, Napster was to voluntarily seek bankruptcy protection and emerge as a wholly owned unit of Europe's second-largest media group. The agreement requires court approval.

Napster became one of the Internet's hottest properties by allowing people to swap music online. Though wildly popular, it has been offline since last July as it fights a music piracy lawsuit by major record labels.

While Napster has said it will relaunch as a royalty-paying services, company officials have conceded technical glitches in setting up a system, as well as contract difficulties with record labels protective of their music licenses.

Konrad Hilbers, who joined Napster from Bertelsmann as Chief Executive in July 2001, resigned on May 14 after the company failed to find funding to relaunch its service. He returned three days later after Bertelsmann offered the buyout. Fanning, who founded Napster as a college student in 1999, will be the company's Chief Technology Officer.