Alliance Entertainment Corp. to Acquire Digital On-Demand Inc. in Stock-For-Stock Transaction.

CORAL SPRINGS, Fla.--(BUSINESS WIRE)--Oct. 18, 1999--

Yucaipa Commits $70 Million To Fund Growth Strategy

Alliance Entertainment Corp. ("Alliance"), one of the nation's largest home entertainment product distribution, fulfillment and infrastructure companies, announced today that it has signed an agreement to acquire Digital On-Demand Inc., a leading distributor of digital entertainment content into retail environments.

Existing shareholders of Digital On-Demand will become shareholders of Alliance. Additionally, The Yucaipa Companies ("Yucaipa"), a private investment company which purchased Alliance in April of 1999, has committed to invest $70 million in the combined company and will continue to be the controlling shareholder of Alliance.

Digital On-Demand, a privately held company based in Carlsbad, California, will become a wholly owned subsidiary of Alliance. Tom Szabo, currently Chief Executive Officer of Digital On-Demand, will continue to direct the Digital On-Demand business and will report directly to Eric Weisman, President and Chief Executive Officer of Alliance.

In announcing the transaction, Eric Weisman stated: "As online and traditional retailers continue to converge, they will need dynamic infrastructure solutions in order to effectively compete in the marketplace. The integration of Digital On-Demand's proprietary digital network into Alliance's best-of-breed distribution and fulfillment capabilities, together with both companies' web-based operations, will enable the new company to offer the most comprehensive business-to-business solutions."

Digital On-Demand is a leader in the digital distribution of entertainment media through the development of its proprietary RedDot Network. RedDotNet is capable of distributing content (including music, movies, and interactive games) in a secure, high quality format to retail stores nationwide over its high speed network connecting retailers to the company's digitized content servers. The current in-store digital distribution machines ("DDMs") enable consumers to find, preview and select music for purchase. Proprietary real time manufacturing stations then burn the album in CD format as well as print cover graphics and liner notes. The DDMs also permit the downloading of content to SDMI compliant devices.

The RedDotNet system was first implemented in May 1998 following an agreement with The Walt Disney Company to provide on-demand in-store production capabilities to retail locations in Disneyland and Walt Disney World. Earlier this year, Digital On-Demand signed agreements to digitally distribute content from Sony Music Entertainment and EMI Recorded Music, thereby adding thousands of titles from leading artists. Digital On-Demand is currently installing its RedDot Network in major music specialty retailers such as Transworld Entertainment, Wherehouse Music, Musicland and Virgin Entertainment as well as mass merchants such as Kmart and Target.

Ron Burkle, managing general partner of Yucaipa, stated: "This transaction is a natural extension of Alliance's philosophy of working in partnership with both our suppliers and our customers. We are completely committed to pursuing all of the existing strategic initiatives of Digital On-Demand. We are committing this $70 million equity investment as growth capital to build the digital network for RedDotNet and to further Alliance's `brick-and-mortar' and e-commerce growth strategy."

"Alliance adds depth to our label relationships and execution infrastructure in the retail environment," commented Tom Szabo. "With their expertise in physical distribution and our virtual inventory approach, we will have the unique ability to optimize any form of retailer inventory in the developing ` bits-and-mortar' paradigm. The resources of the new company will provide the foundation for further development of innovative business-to-business solutions which will help our customers meet the challenges of today's converging marketplace."

Alliance Entertainment Corp.

Alliance Entertainment Corp. (www.aent.com) is one of the nation's largest home entertainment product distribution, fulfillment and infrastructure companies providing both brick-and-mortar and e-commerce home entertainment retailers with complete business-to-business solutions. Alliance offers an extensive product inventory (including CDs, cassettes, DVDs, videos, video games and related merchandise) as well as cutting edge technology, wide ranging support services, and innovative retail-enabling capabilities for today's converging marketplace. The company is also a leading content provider through the All Media Guide (AMG) databases. AMG's customers license its e-commerce enabling entertainment databases to support their Internet retailing businesses. AMG is also a developer of proprietary Web sites for music (www.allmusic.com), movies (www.allmovie.com), and games (www.allgame.com).

Digital On-Demand Inc.

Digital On-Demand Inc. (www.digitalon-demand.com) is a leading distributor of digital entertainment content into retail sales environments over its proprietary RedDot Network. System installations offer entertaining point-of-sale access to music content in a variety of new formats. By creating unlimited, universal digital access, Digital On-Demand increases the flexibility of the brick-and-mortar distribution model, allowing content providers and retailers to adapt faster than ever to changing technology and consumer demands. In April 1999, Digital On-Demand received the Microsoft Award for Best NT Retail Application. Digital On-Demand and RedDotNet have offices in Carlsbad, Burbank and San Francisco, California.

The Yucaipa Companies

Based in Los Angeles, California, The Yucaipa Companies is a private investment firm specializing in acquiring and operating companies in the retail, distribution, logistics and technology areas. Since 1986, Yucaipa has organized and completed seventeen transactions with an aggregate value in excess of $25 billion.