Konrad Hilbers, who sat at the helm of Napster for nearly a year, stepped down as efforts to pull the company out of its financial woes stalled.
Napster continues to battle a devastating lawsuit filed against it by the Recording Industry Association of America, representing the major recording companies, that shut down Napster's service last year. It has also had a tough time making deals with those labels to offer their music online. As a result, the company has indefinitely shelved its plans to launch a file-sharing service that complies with digital copyright laws.
Efforts to raise money from investors have also been unsuccessful. German media giant Bertelsmann, which has already poured upwards of $100m (£69m) into the company, made an unsuccessful bid last month to acquire the whole of Napster. That deal was rejected by some members of Napster's board, according to media reports yesterday.
"We deeply regret that we have not yet been able to find a funding solution that would allow Napster to launch a service to benefit artists and consumers alike," the company said in its statement.
Lacking a cash infusion or a service to sell to customers, Napster was forced to trim 30% of its staff last month.
Further cost-cutting measures are anticipated.
"We will be looking at additional steps in the coming week to further reduce expenses," the company said in its statement.