Liquid Audio, a well-regarded music technology company whose recent troubles are more befitting of an episode of "Behind the Music," will meet with its shareholders for the most important vote in the company"s six-year lifespan. At stake is a planned merger, control over the board of directors, and the future of the company over demands by some shareholders who want to liquidate it to save its still-substantial cash reserves.
If shareholders decide to shutter Liquid Audio, it would mark the third silencing of a Net music company in the past few weeks. On Sept. 4, an Illinois federal judge said he would order the Madster file-trading system, formerly known as Aimster, to halt song swapping. One day earlier, a federal judge blocked the $9 million sale of Napster to German media giant Bertelsmann, a decision likely to force the onetime powerhouse out of business
While Napster and Madster ran into a legal buzz saw with their file-swapping services, Liquid Audio attempted to play by the rules by working with record companies and copyright holders. But in the end it could meet the same fate.
"It"s a finite universe," said P.J. McNealy, research director at GartnerG2. "Usually there"s one dominant company and two or three others as alternatives. (Liquid) seems to have missed that latter category." That squeaky-clean path has contributed to this week"s shareholder meeting, where dissident shareholders are attempting to oust the current board of directors and liquidate the company"s cash reserves, which totaled more than $80 million last June.