Diamond Multimedia to Fight Legal Action Filed by the Recording Industry Association of America.

SAN JOSE, Calif.--(BUSINESS WIRE)--Oct. 9, 1998--"Diamond Multimedia Systems, Inc., (Nasdaq:DIMD), a leader in interactive multimedia and PC entertainment, has been subjected to the Recording Industry Association of America's (RIAA) oppressive practices designed to prevent shipment of the company's recently announced Rio PMP300 portable music player which supports the popular compression format, MPEG1, Layer 3 (MP3)," said Ron Moore, general counsel at Diamond Multimedia.

The RIAA has not yet served a copy of the complaint to Diamond Multimedia.

"The RIAA's claim that the Rio player and similar devices are in violation of the 1992 Audio Home Recording Act is unfounded," said Diamond Multimedia's Vice President of Corporate Marketing, Ken Wirt. "The Rio PMP300 portable music player is a playback-only device, and does not record. Rio simply holds audio content that is already stored on a computer's hard drive and plays back that content."

Diamond Multimedia Systems does not support in any way the unauthorized distribution of unlicensed music and has taken steps to clearly support anti-piracy publicly and in promotional material. Diamond Multimedia has also responded to the RIAA that it will actively participate in working together to halt the illegal distribution of music on the Internet. "The RIAA's stance that there would be little, if any, market for devices such as Rio were it not for the prevalence of illicit MP3 music files on the Internet is grossly false," said Wirt.

According to Michael Robertson, president and CEO of Z Company who owns the world-popular MP3.com website, "MP3 is an excellent format for artists. Nearly 800 artists have signed-up to use MP3, including larger artists like the Beastie Boys who currently have a Top Ten CD hit, and larger labels such has Hollywood Records who have also released hit songs in the MP3 format. Directly counter to the RIAA's position, the majority of traffic in MP3 is legal. Over four million legal songs have been downloaded from MP3.com site alone. The growth rate of people downloading legal content on the MP3.com website is 45 percent a month indicating a large and legal market for MP3. Furthermore, there are other Internet music companies, such as GoodNoise, who plans to have over 15,000 commercially available, downloadable MP3 tracks from well-known artists by the end of 1998."

"Clearly, it appears that the RIAA's lawsuit against Diamond is being driven by the interests of its largest members, the big five record labels, who are seeking to maintain their control of music distribution and prevent the unfettered freedom of musicians without recording contracts at their member companies to distribute their music to a broad audience," said Wirt. "Upcoming musicians, numbering in the thousands, are using the Internet to their advantage to create awareness in a cost-effective manner, which is clearly a threat the the major record label's current distribution model."

Diamond Multimedia maintains its stance that the Rio is not a recording device and analogizes the RIAA's claim to outlawing ink jet printers because an individual may print out a personal copy of a newspaper article from a website. "Clearly the claims made by the RIAA are a smoke screen to slow down the digital distribution of music until the major record labels are ready to capitalize on the revenues to be gained by the great momentum being created by the Internet," said Bob Kohn, founder and chairman of GoodNoise Corporation.

Diamond Conference Call Today

Diamond Multimedia hosted a media conference call today at 1:00 p.m. PDT. To replay the conference call, dial 1-800-475-6701 access code 410989.

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: -0-

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]; (UK):  [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 (UK)  [phone]; Europe
(France)  [phone]; TDD/TTY Support  541-967-2451
Product Support (Fax), United States: 541/967-2401; Europe (Germany)
[phone]; Europe (UK):  [phone]; (France)
[phone]
Pre-sales Information:  1-800-468-5846
24-Hour Fax-On-Demand Service:  1-800-380-0030
Investor Relations:  408/325-7476; 1-888-474-3463 (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 (UK)
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.