Bertelsmann may escape the legal wrath of its music industry peers, thanks to a decision rendered by Germany's top court on July 25. The Federal Constitutional Court in Berlin ruled to block delivery of a $17 billion lawsuit brought by other members of the recording industry over Bertelsmann's financial support of Napster. The block is good for at least six months and could be permanently renewed upon full examination of the lawsuit. Bertelsmann has already filed in US federal court in New York to have the suit dismissed.
The practice of "Transshipping"---selling a product outside one's designated territory---is widespread in the audio industry. It's commonplace for dealers to sell not only to walk-in customers, but also over the telephone or Internet to customers in other dealers' territories, usually at discounted prices. While not problematic on a small scale, the practice favors large-volume dealers over smaller ones, and is almost always a violation of a dealer's agreement with a manufacturer.
Loudspeaker manufacturer B&W has been extremely aggressive in the past two years in reining in abuses of its dealer agreements. Last year, the company cut off many dealers and stocking distributors in an attempt to tighten control over its distribution. Now, as a result of a program announced November 22 by KnowledgeLINK, many B&W dealers will be able to take sales online in complete compliance with their dealer agreements. Rotel dealers are also participating.
DualDisc has apparently stumbled hard right out of the gate. Earlier this year, test marketing of the DualDisc in Boston and Seattle indicated that music fans would eagerly accept the new format, one that combines standard Compact Disc audio content on one side with DVD (audio and video) on the other.
Genesis Technologies, one of the audio industry's most respected names throughout the 1990s, has ceased operation and has filed for protection from creditors under Chapter 7 of US bankruptcy law. The company's website (www.gen-tech.com) has gone dark. Genesis was more than a million dollars in debt near the end, according to a source familiar with the situation, who spoke on condition of anonymity.
At least one media conglomerate has seen the light. In a surprise move, German giant Bertelsmann AG broke ranks with the music industry and settled its copyright-infringement lawsuit with embattled Napster, in effect becoming the startup's tentative partner. The deal, reached on October 31, could mark the real beginning of the music industry's move into the Internet age. Bertelsmann is the parent organization of Bertelsmann Music Group (BMG), one of the world's major music labels, as well as online music retailer CDnow.
Napster has been saved from what appeared to be certain death. A last-minute deal struck by German media conglomerate Bertelsmann AG will revive the company, which was reportedly near bankruptcy. It's the end of a long-running soap opera and the beginning of a new era for the company that began the audio file-sharing phenomenon.