MUSIC COMPANIES IN HARMONY; COLUMBIA HOUSE, CDNOW TO JOIN.Byline: Seth Sutel Associated Press Associated Press: see news agency. Associated Press (AP) Cooperative news agency, the oldest and largest in the U.S. and long the largest in the world. Sony and Time Warner are staking out some key real estate in cyberspace Coined by William Gibson in his 1984 novel "Neuromancer," it is a futuristic computer network that people use by plugging their minds into it! The term now refers to the Internet or to the online or digital world in general. See Internet and virtual reality. Contrast with meatspace. by merging their jointly owned music club, Columbia House, with the major online music retailer CDNow. The deal announced Tuesday gives CDNow access to Columbia House's four decades of direct marketing experience and its millions of music customers. It also gives Sony and Time Warner, both of which own major music studios, an established online sales platform to sell CDs and, eventually, digitally downloaded music. The new company has yet to receive a name or a chief executive, but company officials pressed the point that it will have its own stock. The companies hope having its own stock will enable the venture to ride the Internet wave on financial markets, enabling it to use the shares to pay for future acquisitions and to draw top management talent with stock options. Sony and Time Warner will each hold 37 percent of the new enterprise, and CDNow shareholders will own the remaining 26 percent of the venture, which analyst Rob Martin at Friedman, Billings, Ramsey & Co. estimated will have a market value of more than $2.5 billion. Columbia House will continue to operate as a membership-based music club, and CDNow will remain an online music retailer with a wider selection. Columbia House offers about 15,000 music titles, and CDNow offers more than half a million. The deal provides important advantages to each player. The online retailer will get financial backing and cheap access to music put out by Sony and Time Warner, and the two media conglomerates gain a solid foothold foot·hold n. 1. A place providing support for the foot in climbing or standing. 2. A firm or secure position that provides a base for further advancement. foothold Noun 1. in the emerging area of online music sales. Even more importantly, the online retailer will be able to tap Columbia House's 45 years of direct marketing expertise and database of 16 million active music customers. CDNow has an active base of 2 million customers, but hopes to boost that number significantly. The new company also will receive promotion and marketing support from Time Warner across its range of media holdings, which include cable TV networks, a large stable of magazines and the WB broadcast television network. At a news conference announcing the deal, Gerald M. Levin Gerald M. "Jerry" Levin (b. 6 May, 1939, Pennsylvania, USA) is an American businessman. He attended Haverford College, where he is a member of the Board of Directors. Levin spent most of his career with Time Inc. , chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Time Warner, said, ``The business that we believe will benefit the most from the Internet revolution will be music. . . . We're on the cusp of an enormous expansion in the music business.'' CDNow still has a strong position as an online specialty retailer, but it has been leapfrogged in online music sales by Amazon.com, which only started selling music last year. CDNow was a relatively early arrival in the Internet area, setting up shop in 1994, and it acquired a rival company N2K this year. The deal comes just one day after another major media conglomerate conglomerate, in business conglomerate, corporation whose asset growth, often very rapid, comes largely through the acquisition of, or merger with, other firms whose products are largely unrelated to each other or to that of the parent company. , The Walt Disney Noun 1. Walt Disney - United States film maker who pioneered animated cartoons and created such characters as Mickey Mouse and Donald Duck; founded Disneyland (1901-1966) Disney, Walter Elias Disney Co. announced its own push into cyberspace with the merger of its online businesses with those of Infoseek to form a new company operating a portal site Noun 1. portal site - a site that the owner positions as an entrance to other sites on the internet; "a portal typically has search engines and free email and chat rooms etc. , Go.com. While there are many differences with the music deal announced Tuesday, in both cases executives from the traditional media companies said they would place a strong emphasis on profitability, unlike Internet companies such as Amazon.com which have focused on growth at the expense of immediate profits. In a clear sign that Time Warner expects its online effort to generate profits, the company last month named its chief financial officer, Richard Bressler, to head up a new division focusing on Internet ventures, Time Warner Digital Media. In an interview Tuesday, Bressler said he expects the new online music company formed with Sony and CDNow to have net profits within two years. ``We have experience making profit in this area - P-R-O-F-I-T, in case anyone forgot how to spell it,'' Bressler said, pulling a handful of cash out of his pocket to illustrate his point. ``I don't think anyone else out there has a model for making money in this area.'' CDNow's stock fell after the deal was announced, a move analysts attributed to investor uncertainty over how to value the assets of Columbia House. CDNow shares slumped $1.9375 or 8.7 percent, to $20.3125 on the Nasdaq. Analysts were generally upbeat about the deal's contributions to the earnings of Time Warner and Sony. Nonetheless, Time Warner's shares slipped 31.25 cents to $75.75 on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. , where Sony's U.S. shares were up 56.25 cents at $118.0625. In the future, having access to CDNow will provide Sony and Time Warner with an online vehicle for selling music via digital downloading  The perspective and/or examples in this article do not represent a world-wide view. Please [ edit] this page to improve its geographical balance. , which is just in its infancy. The music industry had been wrangling over a format that will make pirating difficult and ensure that music companies and musicians get paid royalties. Two other music companies, Seagram Co.'s Universal Music Group and Bertelsmann's BMG BMG Bundesministerium für Gesundheit (Germand: Federal Ministry for Health) BMG Be My Girl BMG Blue Man Group BMG Bertelsmann Music Group BMG Be My Guest BMG Browning Machine Gun BMG Bulk Metallic Glass Entertainment, also have announced a joint initiative to build up Web sites and launch an online music store A Web-based service that sells copyrighted songs and albums for a fee. With Apple's iTunes being the most popular, an online music store is a legitimate music distribution organization that pays royalties to the music's copyright holders. . CAPTION(S): Photo PHOTO (Color) From left, Jonathan Diamond, chairman of CDNow, Nobuyuki Idei Nobuyuki Idei (出井伸之, Idei Nobuyuki; born November 22, 1937) was the Chairman and Group Chief Executive Officer of Sony Corporation. He is also a director of General Motors and Nestlé. , president and CEO of Sony Corp., Gerald M. Levin, chairman and CEO of Time Warner and Jason Olim, CDNow president and CEO, field questions Tuesday. Bebeto Matthews/Associated Press |
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