CDnow and First USA Announce E-Commerce Deal

CDnow (Nasdaq: CDNWD), the leading music e-commerce company, announced a multi-year, multi-million dollar agreement with First USA, the world’s largest Visa credit card issuer. The alliance makes First USA the exclusive credit card issuer on CDnow, giving First USA significant online advertising and marketing exposure throughout the store.

Under the agreement, First USA will promote its credit card products and services on CDnow (cdnow.com) through integrated placements and sponsorships, including banner ads, buttons, text links and special offers that take CDnow customers to a First USA marketing page where they can apply for credit cards.

According to Jason Olim, president and CEO of CDnow, “Partnerships between financial institutions and Internet retailers are key to addressing consumer concerns regarding the security of shopping online and will extend the mass market’s acceptance of the Internet as a sales channel.”

This partnership marks a significant extension of CDnow’s business model, which, according to Bob Saltzman, vice president of corporate sales and advertising, is expected to include other long-term advertising and sponsorship relationships in the future. Saltzman predicts that, “This deal and others like it will significantly impact [CDnow’s] gross margins and be instrumental in achieving future profitability.”

The Players

CDnow

On March 17, 1999, CDnow, Inc. and N2K Inc. announced the completion of the planned merger between the two companies, creating the leading global music e-commerce company as measured by customer base, revenue, positioning with key partners and product offerings. The merger creates the Internet’s leading online music entity, which would have had, on a combined basis, 1.6 million customers and $98.5 million (US$) in revenues at the end of 1998. In addition, the new company ranked as the 4th most visited e-commerce site for December 1998, according to Media Metrix, creating one of the most desirable online sites for advertisers such as First USA.

CDnow.com offers approximately 500,000 music related items, album recommendations, custom CDs, music samples, reviews and features from top music writers. The company’s network of strategic partners includes AOL, Yahoo!, Lycos/Tripod, Netscape, Excite, WebCrawler, GeoCities, MTV/VH1, Rolling Stone Network, and CBS Cable’s TNN, CMT and country.com.

First USA

First USA, a subsidiary of BANK ONE Corporation (NYSE: ONE), is the world’s largest Visa credit card issuer, and recently announced a half-billion-dollar deal with America Online. The First-USA/AOL deal is considered to be the largest Internet marketing deal in history. BANK ONE Corporation, with assets of more than $260 billion, is the fourth-largest bank holding company in the U.S.