Napster appears dead in the water after a US court blocked the sale of its assets to media giant Bertelsmann AG, forcing the latter company to end its attempt to buy those assets.
Bankruptcy court judge Peter Walsh blocked the $8 million sale of the assets to Bertelsmann, which has furnished close to $100 million in loans and other financing to Napster.
The decision was taken in response to objections from other record labels and music publishers.
"Napster is disappointed with the bankruptcy court's decision not to approve the sale of the company's assets to Bertelsmann," said Konrad Hilbers, CEO of Napster.
"As a result of the record companies' and music publishers' opposition, Napster's creditors will be denied substantial repayment and the company will likely be forced into Chapter 7 liquidation. As with most start-up technology businesses, Napster's technology is of little value without the talented team that created it, so it is an occasion of loss on many levels," Hilbers said.
Napster has been fighting to bring its music trading service back since the US courts shut it down, because of its trade in copyrighted material.
Mike McGuire, research director at GartnerG2, a division of Gartner said: "One of the early chapters in online music distribution is coming to a close."
However, Napster demonstrated a popular means of distribution that record labels have since tried to profit from, he said: "This is not a bullet in digital-music distribution," McGuire said. "There are tons of peer-to-peer networks out there that pop up overnight. The industry will have to come up with its own solution, or adopt something that exists and make it legitimate."