Bertelsmann's £6m seals Napster assets deal

The German media giant Bertelsmann is this week set to cement its acquisition of Napster, once considered one of the internet's brightest stars, after attempts to flush out other bidders failed.

Bertelsmann, which last month ousted its chief executive Thomas Middelhoff, is expected to acquire the assets of the dormant music file-swapping service tomorrow, for as little as $9m (£6m). The payment comes on top of more than $85m that the German group has lent Napster.

The deal comes as HMV prepares to launch a UK service enabling customers to digitally download up to 60 tracks a month for a subscription of £4.99 a month. It will be the first UK music retailer to offer such a service.

Napster ­ set up in May 1999 by the technology whizz-kid Shawn Fanning ­ filed for bankruptcy protection in June after Bertelsmann, which owns the BMG music label, agreed to the last-minute bailout. Despite fears that the departure of Mr Middelhoff, the website's biggest fan, would threaten the group's relationship with Napster, it seems Bertelsmann still intends to revamp the online music service.

Only 11th-hour legal objections from the US bankruptcy court would stop the sale going ahead after a committee of unsecured creditors failed to attract other buyers for Napster's assets, pitched at $25m.

Napster's service has been offline since July 2001. Meanwhile, the music labels have been building their own online services, Pressplay and MusicNet. Like its newest rivals, Napster is aiming to develop a subscription service that licences songs from the major record companies.

Separately HMV, the UK music retailer, hopes to become the first UK music retailer to offer a subscription service allowing customers to download digital music from the internet.

From September, visitors to HMV's website will be able to sign up to a £4.99 a month service. They will have the option of "buying" up to 60 tracks a month and downloading them on to their computers' hard drives. The files disintegrate after a month if a member stops subscribing, meaning users will not be able to build up a vast library of songs.

Alternatively they will be able to "burn" five tracks a month on to CDs. They will also be able to play music on their PCs via the internet, in a process known as "streaming".

HMV has signed up three major music labels to its plan, being run in conjunction with On Demand Distribution, an online music distributor. They are EMI (which owns a major stake in HMV), Warner Music and BMG.