REDWOOD CITY, Calif. (AP) — Freshly fired workers enjoyed one last pizza party at Napster Inc. after they were all laid off and the enterprise shut down following a judge's decision to block the sale of the song-swapping network to its chief investor, Bertelsmann AG.
The bad news came Tuesday from Wilmington, Del., bankruptcy court Judge Peter J. Walsh, who found Napster's CEO Konrad Hilbers had conflicting loyalties with his former employer Bertelsmann.
Many employees at Napster had hoped the deal would go through and that the small Redwood City-based company that turned the music industry on its ear would survive.
"I'm pretty surprised," said programmer Keith Melmon. "It's a real shame because I put a lot of effort into the new user interface that would have really turned some heads. Now nobody gets to see it."
Melmon toted off a cardboard box with a telephone, a Frisbee and a few other small personal items that were checked at the door by a private security guard hired to make sure no ex-employees made off with whatever Napster still deems valuable.
Bertelsmann had sought to purchase the remains of Napster for $8 million after having already sunk $85 million into the company to keep it afloat. Bertelsmann is now a creditor, but Napster has been off line for more than a year and no one else is lined up to buy the brand or much else the company has to offer.
The Napster Web site, altered Tuesday, summed it up with a page that displayed a cartoon tombstone with the Napster cat logo below the words: "Ded (sic) Kitty."
Suits by several major record labels effectively destroyed Napster. Those record companies also filed motions in the bankruptcy case, vigorously objecting to the sale of the company to Bertelsmann.
A&M Records, Geffen Records, Interscope Records and other labels objected to the proposed Bertelsmann buyout, citing a reticence on the German media giant's part to turn over documents related to the loans and relationships between Napster and Bertelsmann.
Hilbers, a Bertelsmann veteran, said the judge's decision likely will force Napster to change its reorganization effort into a Chapter 7 liquidation.
"Napster is disappointed with the bankruptcy court's decision not to approve the sale of the company's assets to Bertelsmann. 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," Hilbers said in a statement.