📸

resigned. Shawn, Aydar, and the others cleared out their desks. “It’s officially over,” Aydar said. “We’re picking up our last paychecks.” Yet even now, the reports of Napster’s demise were exaggerated. A committee of unsecured creditors, including David Boies’s firm, had tried in August to drum up rival bidders against Bertelsmann. They had failed in part because of Bertelsmann’s claimed $85 million head start. With that advantage gone, the creditors tried some more. This time, a dozen firms were interested. Walsh was impressed enough that he allowed Napster to avoid liquidation for four more weeks. Shawn Fanning tried to raise enough money to make his own bid, but fell short.

John Fanning told others that he had arranged for $10 million to fund another takeover effort. But rather than bid in the court-approved procedure and try to walk off with the technology and brand alone, Fanning thought he could take away something more valuable—the right to sue other people on Napster’s behalf. He gathered together his old allies from the spring coup attempt, asking the Series A and common shareholders to reelect him a director of Napster. Since no one else was still on the Napster board, he planned to ask the judge for control, cut his own deal with the creditors, and sue Bertelsmann, Hummer Winblad, or both. (The gambit was an obvious long shot, since Napster’s hands weren’t clean.) Over the last weekend in September, just before the bankruptcy judge was to appoint a trustee to handle a sale to the top bidder, he came within a few votes and sent an angry e-mail to those who hadn’t given their consent. “Needless to say, after raising 200k in DIP [debtor-in-possession] financing, 1 million in Bridge Financing, and 10 million in permanent financing in order to turn Napster Inc. around and not getting the opportunity to do just that, I am disappointed in the failure and inability of this group of shareholders to act, in what would otherwise seem clearly to be there [sic] own best interests. John.”

Judge Walsh appointed an impartial trustee to dispose of Napster’s assets, and the trustee began negotiating with the top bidder for Napster’s brand, technology, and website. In November 2002, that bidder was revealed as Roxio Inc., which was offering $5 million in cash, $200,000 in temporary financing, and warrants for 100,000 Roxio shares. A Silicon Valley spinoff of data storage firm Adaptec Inc., Roxio made the leading

📸