Bankruptcy looms for doomed Napster

Napster, the internet file-sharing system that briefly threatened the entire music industry, is close to bankruptcy. Its creator, Shawn Fanning, and chief executive, Konrad Hilbers, have both quit, and its 70 employees have been told the company has a week to find a buyer.

The impending closure ends one of the most important chapters in the internet's history, during which a program written by Mr Fanning while he was at college became a global phenomenon, used by 80 million people. Almost single-handedly, Napster made famous the MP3 format, which "shrinks" songs until they are small enough to transmit easily over the Net. But now, the company looks beached. "Most everybody is taking off," one employee said. "It seems pretty clear it's not worth sticking around for a week."

Napster has been torn apart by the twin problems of a lawsuit brought by the Recording Industry Association of America (RIAA) over its file-sharing system and internal strife. But it was the RIAA which in effect killed Napster when a court injunction closed its central index. Last year record sales in America fell by 5 per cent, which the RIAA partly blamed on file sharing.