CDNow Eliminates Ad Sales Staff; 55 Laid Off

In what was described as “strategic and organizational shifts” at online music retailer CDNow, Bertelsmann AG’s e-commerce group (BeCG) has eliminated the company’s advertising sales force and laid off 55 employees.

Bertelsmann, which acquired CDNow for $117 million last August, said it would continue CDnow’s co-marketing programs, which includes a high-profile commerce link with the file-swapping Napster service.

“The moves were made in order to focus the company on product sales, its core source of revenue. In order to be competitive and to offer the best choice and the best service for our customers at the brest price, we are always looking at how to improve operations,” said BeCG chief executive Andreas Schmidt.

In a statement, Schmidt said CDNow’s office in Silicon Alley would become the East Coast editorial hub for the site’s content offerings while the West Coast editorial office would continue reporting music news.

Schmidt’s e-commerce group combines all of its e-commerce companies, which also includes a stake in New York-based Barnes & Inc.

Prior to the Bertelsmann acquisition, CDNow was notorious in Alley circles for its high burn rate and cash flow problems.

The company lost more than $119 million in 1999 and was stuck with million-dollar pay outs to distribution portals like AOL. CDNow’s operating expenses for 1999 topped $150 million.

Ryan Naraine is a senior editor at atNewYork, an publication.

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