Word: middelhoff
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...remarkable agreement between Napster and Bertelsmann pans out [BUSINESS, Nov. 13], the New York State liquor authority might want to investigate, as the legal age for drinking alcohol in New York is 21. In describing how the partnership came together, you noted that Bertelsmann chief Thomas Middelhoff and Napster founder Shawn Fanning consumed a bottle of "$219 Phelps Insignia Cabernet" wine with their power lunch at a New York City restaurant. Perhaps that was the reason why 20-year-old Fanning was so "entranced" by the German media giant. Should the deal turn sour, I'll wonder if the alcohol...
...Middelhoff, Napster was a natural solution to his long-standing pledge to make Bertelsmann king of the music-content world. "I realized that we had to pursue music from two sides," he said last summer. "There is content, but there is also online file sharing. We could not get ahead without file sharing." Bertelsmann's technology arm had been working on its own file-sharing system for months. "But we realized that all the technology gave us was an illegal way to distribute files," says Middelhoff. "We had to make it legitimate, and Napster already had a base to work...
...late August, Middelhoff decided to go after Napster himself. Ironically, he came to that conclusion after a meeting with Seagram chairman Edgar Bronfman Jr., a staunch Napster foe, in which they discussed ways to resolve the Napster question. "We walked out of Edgar's office, and Thomas and I looked at each other, and it just clicked," says Andreas Schmidt, president of the Bertelsmann E Commerce Group, who orchestrated the partnership. That day Schmidt got on the phone to Napster CEO Hank Barry and began eight weeks of intense transcontinental negotiations, from San Francisco to Miami, New York City...
...long way from that base to a real solution, however. Though other music companies last week voiced cautious approval of the Bertelsmann move, there is considerable resentment. Indeed, it took intense negotiations last month and, ultimately, management fiat for Middelhoff to get the support of top executive Strauss Zelnick at his own BMG. So far, nobody has indicated any willingness to drop the legal action against Napster. "We're still not on Napster's side," says Zelnick, laughing. "We're suing Napster. But we are also on the side of creating an array of legitimate distribution alternatives...
That is a long way off, particularly if the courts rule against Napster in the next several weeks. No matter, says Middelhoff. "I am always an optimist," he insisted to Fanning last Tuesday, as they walked briskly along Manhattan's Central Park South to announce their new partnership. "It's a beautiful, clear day, I think really a good day for a new beginning...