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By CNET Networks, 4 September 2002 08:00

NEWS A federal judge has blocked the $9m sale of Napster to German media giant Bertelsmann, a decision likely to force the onetime file-swapping powerhouse out of business. The surprise decision isn't likely to have much effect on the tumultuous online music world because Napster has not operated its file-swapping service for more than a year. But the ruling appears to close the book on a company that became a consumer favourite while being reviled by much of the entertainment industry. By late Tuesday afternoon most of Napster's remaining 42 employees had been laid off, according to a source close to the company. A few employees are staying on to take the company through bankruptcy but most key individuals - including company founder Shawn Fanning - will be gone. "As a result of the record companies' and music publishers' opposition, Napster's creditors will be denied substantial repayment and the company will likely be forced into Chapter 7 liquidation," Napster CEO Konrad Hilbers said in a statement. "As with most start-up technology businesses, Napster's technology is of little value without the talented team that created it, so it is an occasion of loss on many levels." Visitors to the Napster home page found a stark message: "Napster was here." Bertelsmann's reaction was muted. The company had already made it clear that it was no longer enthusiastic about purchasing the assets and previous reports had indicated Napster would likely have been shuttered anyway. "We accept the court's decision that the sale of Napster's assets to Bertelsmann has been denied and that the purchase will not proceed," the company said in its own statement. For more on this story see: http://www.silicon.com/a55383 . John Borland writes for CNET News.com.