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. Last Updated: 07/27/2016

Firm Bets $15Mln on Music Web Site

SAN FRANCISCO -- Napster, an Internet music site that has incurred the wrath of the recording industry, announced new financing and new leadership from a leading venture capital firm Monday, signifying a stamp of approval for the start-up.

The venture firm, Hummer Winblad Venture Partners, said it had led a $15 million round of investment in Napster, which enables Internet users to exchange music files kept on their own home and office computers. The company, founded last September, had previously raised only $2 million in capital.

Hummer Winblad also said it has placed one of its partners, Hank Barry, as the company's interim chief executive.

Napster is facing lawsuits from the Recording Industry Association of America, which represents the major record labels, and from several musicians who contend Napster facilitates music piracy by allowing individuals to exchange copyrighted songs. Tens of thousands of copyrighted songs are available through the site, according to lawyers for the rap artist Dr. Dre and the heavy-metal band Metallica.

Napster's lawyers counter that the company should not be held accountable if some members use the service to exchange copyrighted music, asserting that it should not have to play the role of the police and that the songs are not kept on its own computers. Barry, a former copyright and entertainment lawyer, said he planned to "vigorously pursue all pending litigation."

He said the venture capital firm saw "tremendous opportunity" in Napster, given the popularity of the site, which says it has 10 million registered users. It is particularly popular among college students.

Barry said the key would be finding a business model that "works for everybody," including consumers, musicians and the recording industry. He did not specify what such a business model might be, though several sites that compete with Napster have talked of experimenting with advertising and subscription-based models.

The investment by Hummer Winblad suggests that file-sharing technology is attracting new mainstream backing, regardless of the position of the recording industry.

Napster, based in San Mateo, California, previously rece ived a $2 million round of financing from Angel Investors and from private individuals. The company has 33 employees. Napster will use at least some of the new money to expand its staff and move to new offices, said Elizabeth Brooks, Napster's vice president for marketing.

The level of Hummer Winblad's investment is not unusual, though it is atypical for a venture capital firm to install one of its own partners as an interim chief.

But Barry said he was suited for the task given his background: He was a musician and record producer in the 1970s, and he practiced entertainment, copyright and technology-related law before joining Hummer Winblad.

Barry replaces Eileen Richardson, who came on as interim chief executive last September. Richardson will remain as an adviser, the company said.

Shawn Fanning, the 19-year-old who developed the Napster technology and founded the company, remains involved in "coding and engineering," Brooks said.