Diamond Multimedia Prevails at Hearing for a Preliminary Injunction Requested by the Recording Industry Association of America; Rio PMP300 Portable Music to Ship in November.

LOS ANGELES--(BUSINESS WIRE)--Oct. 26, 1998--Diamond Multimedia Systems, Inc. (Nasdaq:DIMD), a leader in interactive multimedia and PC entertainment, announced today that the U.S. Central District Court of California, Judge Audrey Collins, denied the Recording Industry Association of America's (RIAA) application seeking a Preliminary Injunction to halt shipment of Diamond Multimedia's Rio PMP300 portable music player.

Diamond Multimedia will move forward with its plans to ship Rio during November in time for the holiday season.

"We are pleased with the ruling," said Andrew Bridges, attorney at Wilson Sonsini Goodrich & Rosati representing Diamond Multimedia.

"This suit was brought on by the RIAA as a violation of the Audio Home Recording Act (AHRA), which imposes technology restrictions on certain types of consumer audio recording devices. Diamond Multimedia's Rio, which is incapable of independent recording or serial copying, simply is not a device governed by the AHRA."

"The ruling is an important step towards establishing the Rio player and the market for MP3 as a popular format for artists to distribute their music over the Internet," said Ken Wirt, vice president of corporate marketing at Diamond Multimedia.

"We have always been confident that the Rio is a lawful device. Rio has no recording capability and does not permit serial copying. As a company with a large investment in intellectual property, we certainly support the RIAA's concerns over copyright protection and have offered to support their efforts in promoting only authorized and licensed music distribution.

"At the same time, Rio is an important technology development and we have made a substantial investment in developing and marketing Rio because we believe it enables musicians, other than just those with big record company contracts, to achieve broad distribution for their music, and it allows the public to participate in an exciting, emerging market.

"Diamond Multimedia's Rio is poised to be the first affordable and widely available portable MP3 player on the market and we expect to hit retail shelves and Internet e-commerce in November."

Diamond Multimedia has partnered with the largest online companies who distribute music in the popular MP3 format to help pioneer this emerging market. Diamond's announced partners include GoodNoise Corp., MP3.com, and MusicMatch.

"Today's ruling is a clear victory for music fans around the world," said Bob Kohn, chairman of GoodNoise Corp., the leading provider of legally licensed downloadable music.

"Digital music provided by new music companies like GoodNoise will give consumers access to music the way they want it. Thousands of consumers discover the tremendous benefits of downloadable music everyday and the shipment of Diamond's Rio PMP300 will be a significant milestone to fuel this revolution."

"This is a great decision for artists and freedom of expression. It also sends a signal to the music industry giants that they can't expect to extend their stranglehold on the music business to the Internet," said Michael Robertson, president of Z Company.

Diamond's Rio PMP300

Diamond's new Rio PMP300 is a portable, lightweight digital music player for mixing and storing up to sixty minutes of digital quality music and up to eight hours of voice quality audio from the Internet or a PC. The device uses MP3 compression and features a simple interface for easily transferring and converting files on the PC.

The Rio PMP300 is smaller than an audio cassette and has no moving parts so it won't skip, even during extreme movement. It is powered by a single AA alkaline battery for up to 12 hours of continuous playback. Add-on flash memory upgrade cards will also be available in half-hour and one-hour configurations.

Rio PMP300 will begin shipping in November for an estimated retail price of $199.95 and the flash memory upgrade cards will be available for an estimated retail price of $49.95 (1/2 hour configuration) and $99.95 (1 hour configuration) through Diamond Multimedia's online store at www.diamondmm.com/onlinestore.

About Diamond Multimedia

Diamond Multimedia is driving the interactive multimedia market by providing advanced solutions for home, business and professional desktop computer users, enabling them to create, access and experience compelling new media content from their desktops and through the Internet.

Diamond accelerates multimedia from the Internet to the user with products that include the Stealth and Viper(R) series of media accelerators, the Monster series of entertainment 3D and sound accelerators, the Fire series of professional 3D accelerators, the Micronics series of system boards, the Supra(R) series of modems, and the HomeFree line of home networking products.

Diamond's common stock is traded on the Nasdaq Stock Market under the symbol DIMD, and its web site address is www.diamondmm.com.

How to Contact Diamond Multimedia

There are many ways to reach Diamond for sales support, technical assistance, driver updates and general information:

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Internet Web Site:  http://www.diamondmm.com
Diamond Multimedia's Headquarters and Multimedia Division:
 408/325-7000; Fax: [phone]
Systems Business Unit (Micronics brand system boards)
 Main Phone Number: 510/651-2300
Communications Division (Supra brand modems) Main Phone Number:
 360/604-1400; Fax: [phone]
European Division (Germany):  [phone]; (U.K.): [phone];
 (France) [phone]
Korean Office (Seoul): [phone]; Fax: [phone]
Japanese Office (Tokyo): [phone]; Fax: [phone]
ASEAN Office (Singapore): [phone]; Fax: [phone]
Hong Kong Office: [phone]; Fax: [phone]
Australian Office (Sydney): [phone]; Fax [phone]
Swedish Office: [phone]; Fax [phone]
Product Support (Voice), United States: 541/967-2450; Europe (Germany)
 [phone]; Europe (U.K.) [phone]; Europe (France)
 [phone]; TDD/TTY Support 541/967-2451
Product Support (Fax), United States: 541/967-2401; Europe (Germany)
 [phone]; Europe (U.K.): [phone]; (France)
 [phone]
Pre-sales Information: 800/468-5846
24-Hour Fax-On-Demand Service: 800/380-0030
Investor Relations: 408/325-7476; 888/474-3463 (U.S. and Canada)
FTP site: ftp.diamondmm.com
BBS: 541/967-2444 (to 33.6 Kbps); Europe (Germany) BBS at
 [phone] (to 28.8 Kbps) or [phone] (ISDN); Europe
 (U.K.) at [phone] (to 33.6 Kbps)

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Note to Editors: Monster 3D, Supra and HomeFree are either trademarks or registered trademarks of Diamond Multimedia Systems, Inc. Monster(R) is a registered trademark of Monster Cable. Viper(R) is a registered trademark of Directed Electronics, Inc., Used under License. All other trademarks referenced are the service mark, trademark or registered trademark of their respective manufacturers. This announcement relates to products whose introductions are in North America. The product name, contents, prices and availability may differ elsewhere in the world according to local factors and requirements.

Except for historical information contained herein, the matters set forth in this press release, such as statements relating to the Company's ability to successfully exploit technological and market developments, the timing and success of new product introductions by the Company and its competitors, and the Company's ability to invest in new technologies and to enhance its existing systems are forward-looking statements that are subject to risks and uncertainties, including the impact of competitive products and pricing and alternative technological advances, the timely and successful development and market acceptance of new products and upgrades to existing products, and other risks as detailed from time to time in Diamond Multimedia's SEC filings, including its most recent Forms 10-K and 10-Q.