Listen.com nabs assets of bankrupt services

Scour, the troubled online search service for digital entertainment files, has found itself a buyer to stay afloat.

The Los Angeles-based company, which filed for bankruptcy protection last month, has inked an agreement to sell its assets to San Francisco-based music site Listen.com for up to $5 million in cash and 527,918 shares of Listen.com’s stock.

Listen, which distribs its database of legal MP3 music files from 160,000 artists to several partners, including Excite@Home, Lycos, RealNetworks and Yahoo, is backed financially by all five major music labels.

However, Listen’s agreement for Scour is still subject to the competitive bidding process required under the U.S. bankruptcy laws, meaning that another company could easily land Scour by outbidding Listen by at least 2%.

Talks are already under way with other very major potential bidders, some say.

Liability-free deal

Should it go through, the sale will give Listen control of Scour’s assets, including its technical team and controversial Scour Exchange file swapping technology, but will not make the company responsible for Scour’s legal liabilities.

In July, the Motion Picture Assn. of America, the Recording Industry Assn. of America and the National Music Publishers Assn. sued Scour over allegations of copyright infringement, demanding $250 billion in damages.

The original Scour Exchange program, which like Napster enabled Netizens to download not only music but video and image files from computer hard drives, is skedded to shut down in a few weeks.

The RIAA is holding out for the closure of Scour Exchange before fully endorsing Listen’s takeover.

“I have been assured by Listen.com’s management that prior to the acquisition of Scour.com the file exchange service and search engine service will be shut down,” RIAA chief executive Hilary Rosen said in a statement. “Any resolution of the lawsuit will depend upon Scour and Listen.com following through on this commitment.”

Listen and Scour’s agreement was filed today in U.S. Bankruptcy Court for the Central District of California in Los Angeles for court approval. The boards of both companies approved the asset sale.

“The board and Scour management support the Listen.com acquisition, and we believe it is in the best interest of all of the company’s constituents,” said Dan Rodrigues, prexy of Scour.

Listen.com said it would discuss its specific plans for Scour’s assets after the court’s review is complete.

“We are committed to providing the best solutions for the delivery of legal digital media,” said Rob Reid, Listen.com’s founder and CEO. “By incorporating certain Scour assets into our service, Listen.com will soon be able to provide the most complete digital media search capabilities to our syndication partners and consumers.”

Life signs for online music

Deal follows Tuesday’s surprise partnership between Napster and the e-commerce arm of German media giant Bertelsmann, signaling that there is indeed life for maligned online music ventures.

Together with the pending Scour and Listen deal, the pacts provide a framework for the future of online music distribution. Yet serious questions regarding how technology can be adapted to the record industry’s stodgy structure of copyrights and royalty payments still exist.

Privately held Scour was founded in 1997 by five UCLA computer science students and was initially backed by Michael Ovitz and the Yucaipa Cos.

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