Napster Needs CEO's New Blood

Jul 24 2001

It was fitting, perhaps, that during a year of courtroom drama, Napster has been led not by a music or Internet executive, but by an attorney, Hank Barry.

Now, however, most of the legal arguments have largely been fought and lost. And with Napster facing the immediate task of relaunching a service that is both legal and compelling enough, Barry needed to bring in someone with experience in at least one of the industries.

Barry got lucky finding a man with experience in both. On Tuesday, Konrad Hilbers was appointed CEO of Napster after Barry hired him away from his post as executive VP of BMG Entertainment, the music arm of German media conglomerate Bertelsmann. Hilbers experience isn't limited to music.

Before he joined BMG, Hilbers was an executive at AOL Europe where, he said, he grew enamored with the informal, entrepreneurial work style. It was a place, he said, where "you didn't have to have lunch with five vice presidents to decide what color the Christmas lights would be."

Hilbers was eager to get back to an Internet-based business. But before offering him the job, Barry first discussed the idea with Bertelsmann CEO Thomas Middelhoff. "Hank needs you for Napster," Middelhoff reportedly told Hilbers.

The appointment deepens Napster's relationship with Bertelsmann, which lent Napster $60 million in November to defend itself against a lawsuit brought by the music industry and convert itself into a paid service. One of Hilber's first priorities will be to formalize that relationship. Middelhoff has said the loan will be converted into a 58 percent stake when two conditions are met: Napster must relaunch as a legal service and find another major-label partner to participate in the system.

So far, Napster seems closer to meeting the first condition than the second. Barry said Tuesday that Napster is on schedule to relaunch as a paid service by the end of the summer, although that timetable seems subject to interpretation. While summer officially ends Sept. 21, Barry said "most of us think summer ends Labor Day, unless of course it's an Indian summer."

Hilber said Napster will launch with about 100,000 legal tracks from indie labels such as TVT, Beggars Group and Edel. It will also contain various tracks, including concert bootlegs, which the recording industry hasn't declared as off limits. The basic service will cost about $5, Hilber said, though they plan to experiment with a number of pricing options.

Napster will host the MusicNet service, which is jointly owned by Bertelsmann, AOL Time Warner, EMI Group and RealNetworks. But Barry said that Napster would probably relaunch before MusicNet does.

Hilbers greatest challenge, he said, is to be sure that when the service relaunches it won't be a complete disappointment to the Napster faithful. "It's a critical moment," Hilbers said. "We have [to have] the service up before the consumers go somewhere else."

Given the legal constraints that will be tough. "Unfortunately, it's a business model driven by court decisions," Barry said.