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Emusic shares jam on AOL deal

EMusic.com (Nasdaq: EMUS) shares buzzed up 21 percent Monday morning after America Online, Inc. (NYSE: AOL) said EMusic, an e-tailer of downloadable music, will offer its wares on AOL's ICQ, Spinner and Winamp services.

EMusic shares were up 3 1/16 to 18 3/16 Monday morning, up 18 percent but well off their high of 35.

The agreement calls for EMusic.com and the ICQ, Spinner and Winamp brands to cross-promote downloadable music products through reciprocal links, Web advertising and other marketing initiatives. In addition, EMusic.com will develop co-branded sites with ICQ, Spinner and Winamp for downloadable music.

Under the non-exclusive, three-year agreement, EMusic.com will pay AOL a fixed marketing fee as well as a share of transaction revenues. AOL will also receive warrants in EMusic.com From its collection of over 20,000 songs, EMusic.com offers consumers complete albums for $8.99 or the ability to purchase individual tracks for 99 cents. Close to 50 million users of ICQ, Spinner and Winamp will be reached through the deal.

"The audience for digital downloads of music is growing exponentially," said Ted Leonsis, President of AOL Interactive in a press release. Last week Media Metrix reported an estimated 400% increase in home users of digital music over the past year, he added.

Competition is also growing. EMusic.com. vies with Musicmaker.com (Nasdaq: HITS) and the recently public MP3.com (Nasdaq: MPPP).

Emusic, formerly known as GoodNoise, changed its tune when it went public in June.