The assets of Scour Inc., the defunct entertainment "dot-com" operation once backed by former super-agent Michael Ovitz, were auctioned off Tuesday in Bankruptcy Court to a key rival, marking the effective end of the controversial Beverly Hills firm.
CenterSpan Communications Corp., a software developer based in Hillsboro, Ore., won out against rival bidders Liquid Audio Inc. and Listen.com. CenterSpan's winning bid was $9 million, consisting of $5.5 million cash and the rest in stock.
Scour was created in 1997 by a group of UCLA students who developed a computer search engine that hunted for multimedia files, such as music, video and pictures.
Earlier this year, as song-swapping online music service Napster Inc. faced daunting legal battles from the recording industry, Scour was building a reputation among online consumers as a possible rival.
Initially a darling of the Los Angeles new-media set, the buzz about Scour's search technology attracted the attention of Ovitz and supermarket magnate Ronald Burkle.
After Scour ceased operating, observers wondered which firm would emerge as the key rival to Napster in the booming market for online music and digital entertainment.
That company now appears to be CenterSpan.
CenterSpan plans to use Scour's technology to enhance its communication and file-sharing software, said Chief Executive Frank Hausmann.
"Clearly, we see the technology as a perfect fit with what we are going to roll out next year--a legal version of Napster and Scour," Hausmann said.
Scour's debts are about $4 million.
But Scour also faces at least two major lawsuits over copyright infringement.
The company has laid off all but nine of its 70 employees and it filed for Chapter 11 bankruptcy protection in October.
Ovitz and Burkle took a majority stake in Scour in 1999 and moved the company's offices to Beverly Hills. Both men had representatives in court Tuesday but declined to comment on the proceedings.
Hausmann said he expects Ovitz and Burkle to recoup at least part of their money. But, because of the type of stock the company's young founders hold, "it's highly likely they will never see any of our stock" or receive any sort of compensation from the bid, Hausmann said.
Judge Kathleen P. March rejected Listen.com's bid for Scour's assets in language that was sometimes as colorful as it was harsh.
March criticized Listen.com's valuation of its own privately held stock at $14.78 a share. She noted that Listen.com, which had hired a CPA to set and explain that valuation in court filings, had refused to show the accountant its financial records, citing privacy concerns.
"It's the kind of answer you get from Ponzi schemes, too," said March, who later set a value of Listen.com's stock for the auction at $2.96 a share.
Listen.com's final bid was $8.5 million, with $5.5 million in cash and stock worth $3 million.
Liquid Audio dropped out of the auction.
CenterSpan's stock closed Tuesday at $10.50, down 88 cents.