Listen.com Scoops Up Scour’s Assets

Listen.com said Wednesday it will buy the assets of bankrupt Scour, Inc., further accelerating the warming of relations between the major record labels and the file-sharing community.

San Francisco, California-based Listen.com, which distributes digital music and runs an Internet radio service, has the financial backing of all five major record labels. Word of the deal, which requires court approval, came just two days after Napster said it had struck an agreement with Bertelsmann AG to create a fee-based membership service.

Bertelsmann’s BMG Entertainment is among the record labels that has poured money into Listen.com. The other labels include EMI Recorded Music, Sony Music, Universal Music Group and Warner Music Group.

No Legal Entanglement

Listen.com was careful to note that it is seeking to buy Los Angeles-based Scour’s assets without taking on its sizeable legal woes and that it will use Scour’s technology to boost the legitimate distribution of music.

“We believe that Listen.com can develop Scour’s assets into a means to distribute multimedia content in a way that respects rights holders,” said Listen.com founder and chief executive officer Rob Reid.

Scour’s file-search technology will be integrated into the Listen family of products, which are syndicated to the music sections of such portals and Web sites as Yahoo!, RealNetworks, Lycos, AltaVista and NBCi.com.

Scour Burns Out

Founded in 1997, Scour lived a relatively short but high-profile life after Hollywood mogul Michael Ovitz took charge. Aimed at extending the success of Napster into the digital-video arena, Scour soon became the second-largest file-sharing network but also found itself pounded by the same legal woes that had plagued Napster.

Over the summer, the Motion Picture Association of America, the Recording Industry Association of America and the National Music Publishers Association joined to sue Scour for copyright infringement, making it impossible for the company to acquire additional venture funding and forcing massive layoffs.

Soon after, in early October, it filed for bankruptcy protection, a move that froze all legal action.

Details to Come

Listen and Scour did not say whether the recording industry would back off its lawsuit against Scour as part of the deal. Listen executives said they will reveal more details of the deal once it is approved by the U.S. Bankruptcy Court for the Central District of California in Los Angeles.

Scour President Dan Rodrigues said the deal is “in the best interest of all of the company’s constituents.”

Taken together, the Napster and Scour deals signal a drastic shift in strategy for the music industry, which initially seemed determined to eliminate the file-sharing services through legal attacks.

“Since Napster’s launch, intellectual property owners demonized networked file sharing, even though it gained traction among consumers,” said Aram Sinnreich, an analyst with Jupiter Communications. Until recently, “record labels had yet to assess the upside of this technology.”