Bertelsmann offers to take over Napster

Bertelsmann, the German media giant, has offered to buy out the rest of Napster, once considered one of the internet's brightest stars, for just $20m (£14m).

Thomas Middelhoff, Bertelsmann's chief executive, confirmed the move yesterday but said squabbling over the cash among the site's owners was delaying the acquisition. John Fanning, an early investor and uncle of the site's teenage founder, Shawn Fanning, is in a furious dispute with Napster's venture-capital backers over how this money should be split.

Bertelsmann, which owns the BMG record label, shocked the music industry in late 2000 when it signed an alliance with Napster, a site that allowed the illegal downloading of copyrighted music. It has loaned about $80m to Napster in return for a warrant that can be exchanged for 52 per cent of the site, once a series of lawsuits from major labels were settled.

"Our solution now is to completely take over Napster," Mr Middelhoff said in a German media interview. "We want to buy out the original shareholders .... We have made them an offer, because we believe that our strategy is the right one for the future of the company."

Napster, the world's most popular song-sharing service until it was shut down last summer by court order, plans to relaunch as a legal subscription service once it reaches a settlement with the music companies that sued it.

Bertelsmann believes full ownership of Napster would help convince the major labels to agree to license their music to the re-launched site. It is thought BMG, Universal and Warner are willing to cut a deal with Napster, while EMI and Sony are holding out.