Listen.com Offers to Buy Scour’s Assets

Online music site Listen.com Inc. offered more than $5 million in cash and stock to buy the assets of file-swapping company Scour Inc., the controversial Beverly Hills multimedia company backed by former Hollywood super-agent Michael Ovitz that filed for bankruptcy protection last month.

San Francisco-based Listen.com revealed in court documents Wednesday that it submitted a proposal to the federal court overseeing the bankruptcy case.

In addition to $5 million, the privately held Listen.com offered 527,918 shares for Scour’s multimedia search engine and Scour Exchange, a Napster-like file-sharing service.

Neither company would place a value on the chunk of Listen.com stock being offered.

The request by Listen.com opens up the bidding process to other parties. Whatever deal is approved by federal bankruptcy Judge Kathleen March, it will essentially put Scour out of business.

But by buying only Scour’s technology, and not the entire corporation, Listen.com will avoid financial liability for the pending legal action against the file-swapping company.

News of the potential sale comes just one day after music giant Bertelsmann of Germany announced a partnership with embattled file-swapping service Napster to jointly market online music.

Listen.com, which is backed by all five of the major record labels, declined to say what it will do with the technology behind Scour Exchange, which allows consumers to copy and swap digitized versions of songs, movies, photographs and other multimedia files.

But Rob Reid, Listen.com’s chief executive, said the company wants to be involved in the development of the still-emerging technology.

“There’s an unbelievable consumer shift happening, and there’s got to be a business model that works here,” said Reid, who noted that the labels collectively own less than 5% of Listen.com. “Until the deal is finalized, it’s safe to say that legally we’re going to be very cautious in what we do.”

In court Wednesday, Scour officials said they plan to shut down Scour Exchange in the near future.

Scour, which is facing at least two lawsuits and recently laid off all but 12 of its 70 employees, is seeking to restructure its finances under Chapter 11 of the federal Bankruptcy Code.

The filing Oct. 12 puts the company’s daunting legal and financial troubles on hold and gives company officials time to develop a plan of reorganization that ultimately must be approved by its creditors and the court.

The company could have as much as $100 million in debt and estimated its assets at between$1 million and $10 million, according to filings in federal Bankruptcy Court in Los Angeles.

Its debt estimate largely stems from a lawsuit filed against the firm in July by the Motion Picture Assn. of America and the Recording Industry Assn. of America.

The suit seeks to block Scour from operating its Scour Exchange service. The plaintiffs seek statutory damages of $150,000 for each copyrighted work infringed, or an estimated $225 billion.

Scour sources peg the company’s current debt load to be between $3 million and $5 million.