Confirmed: Universal Devours

Following a week of speculation, Universal Music Group Monday finally
annexed Redwood City, Calif.-based Inc. to its massive body of
music offerings for $23 million in stock.

Headquartered in Los Angeles, Universal Music Group will purchase EMusic’s
outstanding shares for $0.57 per share. Any shares not purchased in the
tender offer will be converted into the same cash price in a subsequent

The buy is a win-win for Universal, a music subsidiary of Vivendi Universal,
as it announced last Thursday that it would partner with fellow music behemoth Sony Music Entertainment and
Yahoo! to create an online music subscription called Duet.

In a conference call for that deal, executives for the involved were
companies were grilled unsuccessfully by reporters for details about the new
service, which like RealNetworks’ deal of the same nature, would offer music lovers
downloads and streams for fees.

Though specific elements of the Duet announcement were scant last week, it
would be logical to conclude that Universal will look to EMusic’s
subscription service platform as a possible model to hash out a system for
Debut, slated to debut this summer. Two foundation factors must be
considered for online music subscription services: technology and pricing
model. To be sure, Universal will examine EMusic’s mechanics closely.
Consumers are charged $9.99 monthly for unlimited downloads.

In addition to EMusic’s 165,000-track digital music catalog, Universal picks
up and brands, which EMusic controlled, in the

“We feel that EMusic complements Universal’s other digital and Internet
initiatives and we look forward to joining with them to offer music lovers
more and more compelling online destinations and experiences,” commented
Larry Kenswil, president, eLabs, Universal Music Group.

The tender offer will commence on or before April 20, 2001. EMusic reported
Friday that it was in talks to be acquired, but refused to confirm by whom.

Viewed by some in the industry as the anti-Napster because it championed
payment for online music downloads, the company was in an excellent position
to be acquired. EMusic weathered some layoffs and management departures, but it also launched a “fingerprints” solution in November to prevent the
illegal distribution of EMusic songs using the Napster service.,
subsequently sued Napster for that very infringement, and gave away free MP3 files a few weeks ago to Napster fans,
effectively showing the harangued file-swapping firm up.

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