Monday appears to be something of a Chapter 11 festival in the Internet
world.
First, the file-swapping service that sparked the furor over illegal
downloads of copy-protected music is headed into reorganization.
Napster Inc. filed for Chapter 11 Monday in U.S. Bankruptcy Court in
Delaware, with a plan to have most of its assets acquired by music label
Bertelsmann AG.
The three-year-old company intends to sell its assets to Bertelsmann for $8
million in cash, and that money will be used to pay off creditors. Bertelsmann
will also be taking on certain liabilities, according to reports.
In its heyday, Napster was a clearinghouse for some 60 million users to share
digital music files.
But battles with the recording industry piled up large legal fees, and usage
dwindled as the company tried to reform the service to offer only authorized
music titles.
Also filing for reorganization in the Delaware court was broadband satellite
Internet provider StarBand Communications Inc.
The McLean, Va.-based company -- which started as a subsidiary of Israeli
satellite provider Gilat Satellite Networks Ltd. and later gained investment
stakes from Microsoft Corp. and EchoStar Communications Corp. -- is looking to
restructure its debt and attract new investments.
StarBand debuted its service in November 2000, offering customers connections
at 500 kilobits per second upstream and 60 kbps down. But the service was
hampered by reports of slow connections and service issues, and it has managed
to attract only 40,000 customers.
Late last year, EchoStar assumed a controlling stake and sank $50 million
into the company, but in April, it stopped wholesaling the service. That
prompted StarBand to file suit against the direct-broadcast satellite provider,
seeking to force EchoStar to release its customer base and cease acting as its
billing agent. The suit also claimed that EchoStar owed StarBand millions of
dollars in subscriber revenue.
