CDnow and N2K Merger Creates Online Music Sales Greatest Hit

CDnow (Nasdaq: CDNW) and N2K (Nasdaq: NTKI) announced on Thursday the completion of the planned merger between the two companies, which they describe as resulting in the “leading global music e-commerce company as measured by customer base, revenue, positioning with key partners and product offerings.” The Company will be based in New York and will be known as CDnow, Inc. Beginning March 18, 1999, its stock will trade on Nasdaq under the symbol “CDNWD” for 20 days, then it will trade as CDNW.

“The completion of the merger cements our position as the premier force in the online music world,” said Jon Diamond, Chairman of the Board of CDnow, Inc. The merger creates the Internet’s leading online music entity, which, according to CDnow, has on a combined basis 1.6 million customers and $98.5 million (US$) in combined revenues at the end of 1998. In addition, the new company would have ranked as the 4th most visited e-commerce site for December 1998, according to Media Metrix, and already has a significant network of marketing alliances including AOL, Yahoo!, Netscape, MTV/VH1, Excite, Lycos/Tripod, GeoCities, and CBS Cable’s TNN, CMT and country.com. “Together, we will share our expertise in direct marketing, merchandising, personalization and editorial,” said Jason Olim, President and CEO of CDnow. “The completion of this merger allows us to implement a major cost reduction program.” The company currently operates two online music stores, CDnow and Music Boulevard. From March 17th through May 17th, Music Boulevard and CDnow will operate as independent platforms. On May 18th the two platforms will come together for the grand opening of the combined store, which will be called CDnow (at cdnow.com). CDnow is expected to offer its online customers 500,000 music-related products and 500,000 sound samples and content from Rolling Stone, CMJ Music Monthly and MTV/VH1. N2K Is No ‘B’ Side On February 3, 1999, N2K announced record earnings for 1998 with net revenues of $42,080,000, a 419% increase from revenue of $8,108,000 reported for the year ended December 31, 1997. As of December 31, 1998, N2K’s Music Boulevard had approximately 720,000 customers who have reportedly ordered and received product, of which 275,000 were first time customers added in the fourth quarter of 1998. This represents a customer acquisition ramp-up of over 60%, while approximately 51% of revenue in the fourth quarter came from existing customers. For 1998, N2K has added approximately 603,000 new customers. Competition from Amazon? CDnow is not alone in its claim to being the top online music seller. On January 26, 1999 Amazon.com announced its Fourth Quarter financial results, in which the company reported that its online music sales reached $33.1 million. On that day, Amazon described itself as the “No. 1 online music retailer.” But, that was before CDnow and N2K started to aggregate their sales figures, which exceed Amazon’s online music sales by far.