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EMusic boosts Net music push with Tunes.com buy

EMusic.com, a company that offers downloadable music, agrees to acquire privately held Tunes.com in a stock deal worth about $130 million.

EMusic.com, a company that offers downloadable music, today said it has agreed to acquire privately held Tunes.com in a stock deal worth about $130 million.

With the acquisition, EMusic hopes to aggressively expand its reach and overall visibility. Tunes.com, the Chicago-based firm that runs RollingStone.com and DownBeatJazz.com, is a heavily trafficked site with more than 28 million page-views and about 1.3 million unique visitors per month.

Today's acquisition highlights the furious pace of competition to gain a market foothold in the Internet music space. Companies like EMusic, RioPort and MP3.com are squaring off against each other as well as such Web giants as Lycos, America Online and Yahoo, which have quickly targeted downloadable music's potential as both an e-commerce opportunity and as a tremendous traffic generator.

The stock-for-stock transaction is valued at the closing price of EMusic.com stock on Nov. 26. The completion of the acquisition, which is expected next quarter, is subject to customary terms and conditions.

EMusic.com will issue about 9 million shares of its common stock for all outstanding shares of Tunes.com capital stock. In addition, EMusic.com will assume all outstanding options to purchase Tunes.com stock, which will be converted into the right to purchase about 1.6 million shares of EMusic.com common stock.

"Since its inception, EMusic.com has been focused on the emerging market for downloadable music," Gene Hoffman, chief executive of EMusic.com, said in a statement. "This acquisition is a logical and aggressive expansion of our business model--which significantly extends our reach and overall visibility."

Earlier this month, EMusic.com moved to acquire privately held Cductive.com in a transaction valued at around $38 million. Cductive.com represents more than 350 independent music labels in the United States, Europe and Japan.

With the integration, the two companies hope to position the EMusic family of Web sites as a leading destination for downloadable music and music information on the Internet.

EMusic also said the merger would create one of the largest downloadable music catalogs available for purchase.

The new company intends to integrate its Web properties to leverage the strength of their content. While continuing to focus on the sale of downloadable music, EMusic.com said it will try to enhance its site by incorporating RollingStone.com and DownBeatJazz.com's news, reviews and artist descriptions. RollingStone.com and DownBeatJazz.com will be able to provide music fans with one-click access to the Internet's best catalog of downloadable music.

"We believe that online music fans purchase music in two ways--they either go directly to a retail site with the intent to buy, or they make a purchase decision after reading an article or hearing a track through Internet radio," Hoffman added. "This acquisition allows us to integrate these channels in a seamless fashion."