If investors treated CDnow on the same trailing revenue basis as rival
N2K perhaps shares in the Web-based music e-tailer could be trading north
of $30 a pop.
Both firms hover at about $300 million market cap, and both ran about 35%
since going public, but it’s CDnow’s revenue leadership so far that’s the
key difference. Welcome to the jukebox of unfettered love or simply
unchained melody.
Take a look at our number crunching comparative analysis:
CDnow & N2K Side By Side
IPO Comparison | CDnow | N2K |
CDNW | NTKI | |
Shares offered | 4.1 | 3.3 |
IPO share price | $ 16.00 | $ 19.00 |
x Shares outstanding | 14.35 | 11.71 |
= IPO capitalization | $ 229.60 | $ 222.43 |
IPO Proceeds | $ 65.60 | $ 63.27 |
Share closing price 02.23.98 | $ 21.50 | $ 25.63 |
Market capitalization 02.23.98 | $ 308.53 | $ 299.98 |
Percent difference | 34% | 35% |
1997 revenue | $ 17.37 | $ 11.26 |
1997 losses | $ (10.75) | $ (28.74) |
Revenue multiple | 18 | 27 |
N2K, which may be better known as the name behind Music Boulevard, went
public last November at $19 per share, generating a lot of hoopla and noise
that gave it first-to-market (Wall Street) recognition. Its $11.3 million
sales for 1997, however, puts it a distant second to CDnow which had $17.4
million sales last year and posted less losses than N2K.
Going forward, Media Metrix named Music Boulevard the fastest growing music
site on the Internet in its January number releases. N2K’s fourth-quarter
revenue reached $4.8 million, a rate that puts it on target for about $20
million revenue for 1998. CDnow posted better than that for 4Q with $7.9
million revenue or more than $30 million annualized at that rate.
The key differentiators here are marketing and dealmaking skills. In this
area, N2K seems to have outmuscled CDnow, signing deals with AOL, MTV, The
Grammys, Netscape, and WebTV. N2K spent $11.5 million in marketing dollars
in 1997, more than its entire revenue.
N2K ramped up a $30 million promo deal with CBS Cable, the leading provider
of country music entertainment via its TNN: The Nashville Network and CMT:
Country Music Television cable networks, as well as country.com with which
N2K created Country Music Boulevard. The company also has an agreement
with a kiosk firm for touch screen music sales in supermarkets.
While recording companies scale back Web efforts and shy from the big
plunge, will CDNow or N2K become the Amazon.com of this space? Or will
Amazon, looking to expand its product line beyond books, ramp up music as
another revenue route. The hit parade is just starting.
