Roxio buys Pressplay for legal file-sharing

Battered file-swapping pioneer Napster may be dead, but its name will live on — thanks to an injection of new technology from one of the record industry’s first efforts at bringing music legally to the Internet.

Software maker Roxio will pay just under $40 million to acquire digital-music service Pressplay from its parents, Vivendi Universal and Sony, in a bid to resurrect the defunct peer-to-peer network Napster in a new, legal incarnation.

Roxio, which bought the Napster name and file-swapping technology in a bankruptcy proceeding last year, plans to use Pressplay’s technology as the backbone for a paid subscription network under the well-known Napster brand.

Gets Pressplay licenses

For an outlay of about $12.5 million in cash and 3.9 million shares of stock, Roxio also gets Pressplay’s licenses for more than 250,000 tracks from the five majors and several indies. Pressplay had cut deals that allowed its users to download the music, burn it to a CD and transfer it to portable players.

At the end of the transaction, Viv U and Sony will each hold on to about 10% of Roxio’s outstanding equity.

Pressplay topper Michael Bebel will report directly to Roxio chief exec Chris Gorog. Roxio financial chief Elliot Carpenter said the company will spend another $20 million getting the new Napster up and running and expects negative cash flows “until the service is up and running.”

Roxio chief exec Chris Gorog said the new service will get a major facelift prior to its unveiling, but that the mechanics will, at least initially, be very similar to those of the current Pressplay service — including its subscription-based model under which users are charged a flat monthly fee for unlimited downloading.

Keeps file-sharing

Further down the road, he says the service may incorporate some of the file-sharing functionality that made Napster a household name, but under a legal, paid framework.

German conglom Bertelsmann lent more than $85 million to Napster in a bid to help it build such a service, with few results. The media giant is now being sued by both publishers and rival Universal Music over its relationship with the copyright-flouting Netco.

Gorog said the new service may also incorporate different business models, including the a la carte downloading strategy that has proved highly successful in Apple’s recent online-music initiative, which sold more than 2 million tracks in its first two weeks of operation.

Roxio investors cheered the company’s move into the digital-music space, sending its shares up by more than 17% to close the day at $8.09.

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