Napster prepares for life after death

The giants of the music industry said a long time ago that they wanted Napster's head on a plate, and yesterday they got it as the online music-swapping service, barely a shadow of its former self, filed for bankruptcy as a first step towards its final dismemberment.

The internet company that once scared the major record labels to death, because it enabled its users – 60 million of them at its peak – to swap digital music files unhindered and without charge, has been off the air since July last year, when a US federal court ordered its closure pending a music piracy lawsuit.

The bankruptcy filing, made in federal court in Delaware, is the first stage of an $8m (£5.67M) takeover by Bertelsmann. What the German media group is acquiring, however, is not the internet powerhouse of two years ago, but the online equivalent of a bag of bones.

Most of Napster's 70-odd employees quit last month, along with their chief executive, Konrad Hilbers, and founding guru Shawn Fanning. They had both tried and failed to squeeze more money out of Bertelsmann to provide Napster with a meaningful future business model.

As it is, Bertelsmann will acquire little more than the name and a pile of unpaid bills. As of 30 April, the date of the last filings with the Delaware bankruptcy court, Napster had about $7.9m in assets and about $101m in liabilities.

It remains to be seen what Napster's legacy will be. Its demise certainly has not diminished the internet craze for swapping free music. Indeed, the recording industry has mounted piracy suits against at least four other operators – Grokster, Morpheus MusicCity, Kazaa and Audio Galaxy.

What Napster's corporate masters hoped for, but never got a chance to try, was a viable for-profit commercial service. The big record companies still hope, as Bertelsmann does, that there is a future in subscription-based online swapping services. But that, like so much else in the digital future, remains to be seen.