Amid Net music mergers, Musicmaker.com looks at options

Musicmaker.com (Nasdaq: HITS) said Monday it has retained an investment bank to examine strategic alternatives following the recent EMI-Time Warner and Time Warner-America Online deals. Those deals prove that size matters in the online music sector and Musicmaker.com doesn't have the girth.

The company, whose shares closed at 6 11/16 Friday said it retained Allen & Company as its investment banker to advise the it on merger and acquisition opportunities "in the fast moving Internet music space."

"The trend indicates a growing consolidation of music content among major and independent record labels and the emergence of broadband technology as the key driver behind consumer popularity for digital delivery of music on the Internet," said Bob Bernardi, chairman of the company.

Musicmaker.com allows users to make custom CDs through the digital downloading of licensed music. The company has agreements with many of the players in the Internet music pool, including a five-year exclusive music license agreement with EMI. Shares in Musicmaker rose 5/16 to 6 3/4 on the day EMI's deal with Time Warner (NYSE: TWX) was announced.

EMI, the third largest record label in the world, has a 36 percent equity stake in Musicmaker. Musicmaker also has a three-year exclusive partnership agreement with Columbia House, and a three-year partnership deal with America Online (NYSE: AOL), both of which also own stakes in Musicmaker.com.

The company said it wants to keep pace with the rapid consolidation of the Internet music industry, which has accelerated with three recent blockbuster deals: the merger of AOL and Time Warner; the joint venture between Warner Music and EMI Music; and the merger between CDNow and Columbia House.