The music industry went into a frenzy when a peer-to-peer music-sharing site called Napster appeared on the web in 1999.

The service, founded by college student Shawn Fanning and his uncle, let people exchange music for free. It grew to an estimated 25 million users in just two years, and many predicted the file-sharing phenomenon could spell the end of the music recording business.

To no one’s surprise, Napster quickly faced legal challenges. Record companies, including A&M Records, Capitol Records and Sony Music Entertainment, sued Napster for copyright infringement. Napster lost the case and its appeal was rejected.

The company could not recover from the lawsuits and shut down service in July 2001. The following year it declared bankruptcy and put its assets up for sale.

But the Napster name and logo were revived when Santa Clara software company Roxio purchased Napster’s assets for about $5.3 million. In 2003, Roxio acquired ailing subscription music service Pressplay and relaunched it under the Napster name. The service turned Napster into a legitimate company that sold subscriptions for access to music.

The following year, Roxio, a public company, sold its software division and began trading under the ticker symbol “NAPS” for Napster.

During the next four years, Napster’s subscriber base grew to 830,000, but still a fraction of the users it had when it was free. The company struggled to reach profitability and keep its stock up.

In its last quarterly filing with the Securities and Exchange Commission, Napster reported second quarter 2008 revenue of $30.3 million, down from $32.3 million in the same quarter the previous year, and a net loss of $4.38 million, compared with a loss of $4.24 million.

The company considered a sale in 2006 and was ultimately purchased by Best Buy for $121 million in 2008. At the time of the sale, subscribers had fallen to about 700,000.

After the sale to Best Buy, longtime Chief Executive Chris Gorog resigned and Christopher Allen, the company’s chief operating officer, was appointed general manager.

Allen is now overseeing Rhapsody’s absorption of Napster, a move that will combine the two services under the Rhapsody name and logo, and close down Napster’s operations.