Legal Issues

by Mike Masnick

Bertelsmann Settles With EMI Over Napster Investment Dispute

from the over-and-done-with dept

Back in the days of the original Napster, the only major label to recognize that Napster represented an opportunity, rather than a threat, was Bertelsmann (BMG). Berteslmann eventually invested in Napster before the court system shut it down and forced the assets to be sold off. After all of that happened, various other major record labels decided to punish Bertelsmann by suing the company for investing in Napster. This was quite surprising -- because usually you have shareholders suing a company for its mismanagement rather than other companies suing shareholders for what a company did. It was a case that investors of all stripes (especially venture capitalists) should have been watching closely, as a finding against Bertelsmann could mean that other investors could be held liable for what the companies they invested in did. As the case went forward, things got awkward last year when Universal Music, who had kicked off the lawsuits against Bertelsmann, bought BMG, leading the two companies to quickly settle. The latest news is that Berteslmann has now settled with EMI as well, while still not admitting any liability. It's good that Bertelsmann never needed to admit liability, but it would have been nice to have a judge point out that making investors liable for what their portfolio companies do is simply not reasonable.

Reader Comments (rss)

(Flattened / Threaded)

  1. identicon
    mit, Mar 27th, 2007 @ 3:11am

    This could have been a major case of shooting yourself in the foot

    reply to this | link to this | view in thread ]

  2. identicon
    fuse5k, Mar 27th, 2007 @ 3:44am

    music industry

    I bet bertelsman were just hanging on until they were bought up by a major.

    Its all the same in the music industry... The big four(or is it three) buy up all of the other companies when they sign a good artist.

    reply to this | link to this | view in thread ]

  3. identicon
    John, Mar 27th, 2007 @ 6:16am

    How much more consolidation can we see in the music industry. If I'm correct, it's still a big "4" right now...I can't see music improving at the rate these large company's keep growing. Long live independent labels!!!!!!!!!!!!!!

    reply to this | link to this | view in thread ]

  4. identicon
    Anonymous Coward, Mar 27th, 2007 @ 8:33am

    Investors liable?

    Every stock holder in xyz corporation liable now? Let the suing begin!

    reply to this | link to this | view in thread ]

  5. identicon
    Woadan, Mar 27th, 2007 @ 12:36pm


    The article states that Universal bought BMG. However, that is untrue. Sony and BMG merged.

    reply to this | link to this | view in thread ]

  6. identicon
    |333173|3|_||3, Mar 28th, 2007 @ 6:49pm

    Already Liable

    Indiectly, tehy are liable in practice, becasue any payout eh company has to make comes either from increasing prices (which may not be practical), or reducing dividends to shareholders. Whenever the latter option is taken, the shareholders are effectively paying the fine.

    reply to this | link to this | view in thread ]

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