EMUSIC INTERESTED IN THE MEAT ON NAPSTER'S BONES

Financially strapped online music company EMusic.com opened discussions with legally troubled song swapper Napster about possible future co-marketing collaborations and other joint venture opportunities. But, because of Napster's recent trial tribulations, talks have stalled.

Negotiations between the two have been complicated by a U.S. appellate court's ruling Friday that will allow Napster to keep operating while the copyright infringement case filed by the major record labels proceeds (hitsdailydouble.com, 7/28).

"There have been some very preliminary discussions between EMusic and Napster," an EMusic spokesman told Reuters. "We have been looking at things like business development deals and possible co-marketing arrangements."

EMusic CEO Gene Hoffman told analysts in a conference call Thursday (7/27) that his company would be interested in some of Napster's assets, namely its user lists and its e-mail lists.

Sources familiar with the discussions said, however, that recent court developments might have put the kibosh on any deal.

Napster's discussions with EMusic "were based on the assumption that Napster was facing an injunction that would essentially shut down the service," said a source familiar with the situation. "But with the injunction on hold, Napster will probably be evaluating many different possibilities and opportunities."

EMusic is the latest company to venture into talks with the controversial online company, which has had informal meetings with several major and independent online and traditional music companies about future relations.

Some sources say that EMusic floated discussion talks with the much-publicized Napster to the media in an attempt to spin the company's potential relevance and to crack that $3-a-share ceiling.