CDnow Revenues, Loss Both Rise for 1Q

Internet music retailer CDnow Inc. said revenue for the first quarter ended March 31 was $10.0 million, a 288% increase from $2.6 million in the same period a year earlier.

The company posted a net loss for the first quarter of $9.2 million, or
$0.78 per share, compared to a net loss of $544,000, or $0.07 per share, for
the prior year quarter. The company had a net loss for the fourth quarter of
1997 of $6.6 million, or $0.90 per share.

CDnow said it added a record 135,000 new customers in the first quarter,
raising the total number of customers that had placed orders since inception
to 432,000. Approximately 51% of revenues in the first quarter came from
existing customers.

Operating expenses increased to $10.7 million for the quarter ended March 31,
1998 from $1.1 million in the prior year quarter and $7.6 million in the
fourth quarter of 1997.

Jason Olim, CDnow’s president and CEO, said that the increased revenues “reflect both consumer comfort with buying their music online and continued customer loyalty to CDnow.”

The company said revenues for the quarter were favorably affected by increased advertising and promotional activities, including a Grammy promotion and March 1998 storewide sale, as well as the continued implementation of strategic alliances.

At the same time these activities contributed to reduced gross margin and increased operating expenses.

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