Bertelsmann May Walk Away From Napster Deal

An attorney for Bertelsmann told a bankruptcy judge Thursday that the German publishing giant might walk away from its plan to buy the technology of Napster Inc. if a dispute over the deal isn’t resolved by next week.

Under former Chief Executive Thomas Middelhoff, Bertelsmann agreed to pay $9 million to Napster creditors if a deal were consummated by Tuesday.

Record labels and songwriters filed their opposition to the transaction this month, saying that Bertelsmann exercised improper control over Napster when the bargain was struck.

Bankruptcy Judge Peter Walsh was to hear the objections Thursday afternoon, but rescheduled the hearing for today.

During the scheduling debate, he asked a Bertelsmann lawyer if the company would agree to honor the offer past the Tuesday deadline if he couldn’t rule before then. The attorney said Bertelsmann would not, according to Dow Jones.

That marked the clearest indication to date that the dormant file-swapping service might not survive its Chapter 11 bankruptcy reorganization. If the judge can’t rule on the objections in time, Napster might be liquidated.

Bertelsmann has declined to comment on its intentions, and a Napster spokesman declined to comment after the hearing. Attorneys in the case couldn’t be reached.