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Merged CDnow, N2K focus on downloads

The firms complete their merger today, and the chairman says digital music downloads will be the key to the company's future.

2 min read
Now that CDnow and N2K have merged, the combined company will focus on digital downloading of music rather than packaged CD sales, the chairman said today.

The two online music retailers completed their $520 million merger today after a shareholder vote, creating a 450-person company to be known as CDnow.

The CDnow site and N2K's Music Boulevard sites will continue to operate separately until May 18, when they will be combined at the CDnow site. "Digital downloading will be the core function of the new platform," said CDnow Chairman Jon Diamond, who was formerly CEO of N2K.

The design of the new site will be a fusion of both sites, but Music Boulevard's black background, reminiscent of rock-concert T-shirts, won't survive the merger, Diamond said.

The combined company expects to save at least $60 million over the next 18-24 months by cutting redundancies in their operations. Cost reductions have included layoffs in both companies, Diamond said.

CDnow also hopes its greater reach--it will now have more than 1.6 million registered customers, up from 980,000 before the merger--will improve its position when it negotiates with Internet portal sites for key placement.

It is also looking for a better positioning on Wall Street, which has not been enthusiastic about CDnow or N2K's prospects in the face of advancing competition from Amazon.com, which entered the music market in June and did $50 million in sales in the next six months.

Shares of CDnow rose 0.625 to 18.4375 in trading Wednesday, while N2K shares gained 0.8125 to 15.125.

Diamond attributed the low stock prices to the quiet period imposed on the two companies between the time the merger was announced in October and today's closure. "We haven't had been able to talk to the investment community since last summer," he said. The merger was delayed by new Securities and Exchange Commission rules, he added.