Hummer Winblad, the venture capital firm, jumped on the Napster bandwagon Monday when it closed a $15 million round of financing with the embattled company.
Winblad partner Hank Barry will take the mantle of interim CEO from Eileen Richardson, who will stay on in a limited advisory position. VC partner John Hummer will sit on Napster's board of directors, as will Barry.
"We are extremely pleased to be part of the Napster community," Barry said in a written statement. "With over 10 million registered users within its first nine months, Napster's file sharing application has become the most rapidly adopted technology in the history of the Internet."
According to a study by Webnoize Research, a digital entertainment think tank, 57 percent of college students surveyed use the Napster program at least once a week and 63 percent report spending more time listening to downloaded music than they did a year ago.
"Consumers have taken to Napster not just because it provides access to popular music for free, but also because it offers something mostly missing from the online music experience: a rich search and discovery process, with immediate gratification," wrote Ric Dube, the Webnoize analyst who authored the report.
Barry's goal is to make sure that the company can now find a way to negotiate the gap between the users trading files for free with the copyright holders who want to put Napster out of business.
"There is a tremendous opportunity here," Barry said. "The people in this company are going to work hard to further refine this business model to provide real value for all of the constituencies that use the application. And then we want to the get all the parties involved with this: artists, publishers, the labels and the people that use the application. We want to get everyone involved with this process."
But the future of the company is far from assured. As fast as college students are downloading the application, politicians and copyright holders are attacking the company.
The Progressive Policy Institute, a Democratic research organization, released a paper Monday in part outlining how the Digital Millennium Copyright Act should be changed to reduce piracy online. The institute will present its findings to the House Small Business Committee hearings on Wednesday.
While the DMCA is being tweaked, the company is also facing legal challenges. The company's legal imbroglio with the Recording Industry Association of America still looms on the horizon.
The RIAA filed a suit against Napster on December 7, claiming the file-trading application created a safe haven for digital piracy. The company's defense was that it was an ISP and not liable for activity occurring on its network. On May 8, a federal judge rejected Napster's defense, paving the way for a court hearing later this summer.
The RIAA suit seeks damages of $100,000 per copyright infringement, with estimated damages reaching above $100 million. The RIAA is also attempting to obtain a preliminary and permanent injunction to the service.
Napster also has to contend with heavy metal band Metallica's continued insistence on removing users who offer up copyrighted material for illegal trading.
On May 18, Metallica sent Napster a list of 332,293 more names the band believes are illegally trading its files with the application. The move came just one week after the band initially asked the company to remove 317,377 names.
Even the support that the company has received from Limp Bizkit has been called into question.
Napster is footing the bill for the band's summer tour to the tune of $1.8 million. The band will play 24 free shows in 3,000-5,000 seat amphitheaters in 10 cities, including Boston, New York, and San Francisco.
According to sources at Listen.com, an online MP3 music guide, the band is only supporting Napster because it was the highest bidder for the sponsorship.
