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12 the coup

NAPSTER CEO KONRAD HILBERS HAD ABANDONED TALKS WITH the record labels for a good reason. In Germany, Thomas Middelhoff had decided that the time had come for Bertelsmann to make its own move. Desperate for cash, Napster had begun laying off staff in the spring of 2002 and returned to the publisher asking for still more money. Seeing Napster’s weak bargaining position, Middelhoff suggested that Bertelsmann simply buy the company instead. He reasoned that Bertelsmann would have a better chance of striking a deal with the other labels than Napster would, since Napster appeared hamstrung by the Hummer Winblad directors. Before, Bertelsmann had exercised some control through its ties to former employee Hilbers, two previous loans totaling $85 million, and the warrants that entitled it to claim a majority stake. That one-step remove from ownership provided an extra layer of protection in

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