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A company backed by the five major music labels hopes to acquire the assets of Scour — the Napster-like file-sharing company that those same five labels, along with six major film studios, sued in July. The San Francisco-based online music company Listen.com has offered to fork over $5.5 million in cash and 500,000 of its own shares to save Scour from complete financial ruin. In documents filed Nov. 1 in the U.S. Bankruptcy Court for the Central District of California, Listen.com said it had put in a bid to buy the Scour Search Engine, MyCaster and the peer-to-peer file-sharing service Scour Exchange. Scour Exchange is at the center of a copyright lawsuit filed against Scour by the entertainment industry in July. The news comes during the same week that the German media giant Bertelsmann shocked the world by unveiling a strategic alliance with the Napster, a similar service that has attracted even greater notoriety. This news is different. For one thing, Listen.com was never a direct antagonist in the legal fight against Scour in the way that Bertelsmann has been against Napster. Furthermore, now that the Listen.com bid could enable Scour to elude financial disaster, Scour’s managers have asked the bankruptcy court to shut down Scour Exchange. The lawsuit is all but resolved. Hilary Rosen, the president of the Recording Industry Association of America, said in a statement, “I have been assured by Listen.com’s management that prior to the acquisition of Scour.com, the file-sharing service and search engine service will be shut down, and any resolution of the lawsuit will depend on Listen and Scour following through on this commitment.” At this point, it’s up to the bankruptcy court to decide whether Listen gets Scour. The bid has triggered a process whereby the court, which has an obligation to protect the interests of Scour’s creditors, must seek higher bids before it can award the purchase to Listen. A representative at Scour would not comment on whether other potential suitors have come forward. In documents filed in bankruptcy court last month, Scour said it owed creditors about $4 million, on assets worth $1.2 million. At the time, the company’s management said it had been forced to file for bankruptcy protection partly because the entertainment industry’s lawsuit had scared off potential new investors. Moreover, its business began growing rapidly after news of the suit alerted consumers to the service. Increased traffic to the site put new demands on the company’s existing technology. For its part, Listen.com says it was interested in Scour because of its most controversial aspect: its file-sharing technology. Listen.com CEO Rob Reid says he believes Scour’s system is “superior to Napster,” because its peer-to-peer technology handles video files and has a greater ability to scale. However, he says, “We’re interested in legal file-sharing.” Reid didn’t deny that the company had also talked to Napster about a working relationship. Reid himself has strong ties to that company through his previous employer, 21st Century VC, an offshoot of Hummer Winblad, Napster’s lead backer. Though he wouldn’t detail Listen’s plans for the property, Reid did say he expects to build a file-sharing service that the company can syndicate to content owners. Reid says the labels were notified last Nov. 2 about Listen’s plans. “There’s beginning to be a shift in the rights-holder community that peer-to-peer is here to stay,” Reid says, referring to the music labels and movie studios that had resisted file-sharing technology. All five major labels — Warner Music Group, BMG, EMI, Sony (SNE) Music and Universal Music Group — back Listen.com. The purchase of Scour’s assets would be only Listen.com’s second acquisition. The company purchased the online radio network WiredPlanet in September for between $1 million and $1.5 million. Related Articles from The Industry Standard: Let the Music Play Scour Files for Bankruptcy Listen.com to Buy Streaming-Audio Site Copyright � 2000 The Industry Standard

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