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EMusic Lays Off 66, Three Managers Depart

EMusic.com Inc. Friday fired 36 percent of its staff and announced the departure of three executives, effectively joining the legion of music download sites who say they need to restructure in the face of cash shortages.

The downloadable music seller let 66 people across all of its departments in an attempt to stop the fiscal hemorrhaging. The company hopes to focus on its advertising and promotional revenue through RollingStone.com and downloadable music sales through EMusic.com.

After the deed is done, EMusic, which will consolidate its two New York offices into one, expects to save more than $16 million in cash expenses in 2001.

The company also announced the resignations of Executive Vice President and Chief Financial Officer Joseph Howell, EVP for Business Development James Chapman and Chief Operations Officer, EVP and General Counsel Peter Astiz.

Emily Rupp, EMusic's vice president and corporate controller, has been appointed CFO and will assume Howell's responsibilities. Astiz will continue to serve as general counsel through a transitional period.

EMusic is hardly alone. Since the dawning of the New Year, Musicmaker.com has gone bankrupt, Loudeye Technologies Inc. fired 50 staffers and Listen.com pared its workforce by 25 percent.

EMusic spokesperson Steve Curry told InternetNews.com Friday that two main factors triggered the slide at EMusic, which he said extends to the digital music industry as a whole -- illegal distribution of digital music and the significant market decline for Internet advertising.

On Dec. 19, Emusic.com filed a copyright infringement complaint against MP3.com Inc., a rival that earlier resolved similar litigation by five major record labels.

EMusic, which says it has digital rights to about 13,000 albums from 600 record labels, claimed that the MP3.com service infringed its rights to an undetermined number of those albums.

"It's a difficult sector right now," Curry said. "With the whole Napster issue and advertising slowdown... But MP3 players are selling well and online music remains popular. We do see a light at the end of the tunnel."

Gene Hoffman, EMusic's president and CEO, said he was confident in the digital music subscription service business model despite setbacks in the industry.

"Despite the challenges in the Internet advertising market, we continue to be pleased with the traffic growth and potential of RollingStone.com," Hoffman said. "We experienced record growth in our audience during the past quarter and we continue to add new user features and content as well as innovative promotional opportunities for advertisers."

Founded in January 1998, Redwood City, Calif.-based EMusic operates one of the most popular families of music-oriented Web sites -- including RollingStone.com, EMusic.com, DownBeat.com and IUMA.

EMusic expects to make financial results for the quarter public on January 24, 2001.