CDNOW, Columbia House to Share Stage

Online music retailer CDNOW, Inc. Tuesday announced it will merge with Columbia House, the direct music marketer owned by Sony Corp. and Time Warner Inc., to form a new public company.

Under terms of the agreement, the new company, which has yet to be named, will be owned 37 percent each by Sony and Time Warner. CDNOW’s existing stockholders will own the remaining 26 percent. No other financial terms of the merger were disclosed.

Columbia House will continue to operate as a “club membership” company, offering music and video products, and CDNOW will continue its online music retailing operations. Columbia House reportedly sells in excess of 15,000 music titles, while CDNOW estimates its sales in excess of 500,000 titles.

The merger is designed to create a “major entertainment, e-commerce and direct marketing company,” the firms said. Sony and Time Warner each have committed to promoting the new company as part of their e-commerce strategies.

“This innovative, multi-partied transaction is an important corporate initiative for Sony that advances our strategy to create new business platforms, and reflects our determination to become a leader in entertainment-based new
media,” said Nobuyuki Idei, president and CEO of Sony Corp.

The new company will have a 12-member board of directors, composed of four designees each from
Sony and Time Warner, CDNOW’s president and CEO Jason Olim, two independent directors, and
the CEO of the new company.

Olim will serve as CEO of the new company’s Online/Retail division and Richard C. Wolter, chairman and CEO of Columbia House, will continue to head the club operations of the new company as CEO.

“This merger will dramatically accelerate our growth and fulfill our vision of leading the digital revolution in the music industry,” said Olim and Jonathan Diamond, chairman of CDNOW, who will leave the company after the merger is complete.

“We are excited to tap the 16 million music- and video-buying customers of Columbia
House, to expand our brand development through advertising and integration on Sony and Time
Warner’s entertainment, media and communications properties, and to develop a close, mutually
supportive relationship with Sony and Time Warner’s music divisions.”

No stranger to mergers, CDNOW recently completed its $522 million merger with N2K in March.

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