CDNow

{{Infobox company

| name = CDnow, Inc.

| logo = CDNow logo.png

| fate = Acquired by Bertelsmann,

Acquired by Amazon.com, shut down

| foundation = {{Start date and age|1994|2}}

| defunct = 2013

| location = Ambler, Pennsylvania

| founder = Jason Olim
Matthew Olim

}}

CDnow, Inc. was a dot-com company that operated an online shopping website selling compact discs and music-related products. In April 1998, during the dot-com bubble, the company was valued at over $1{{nbsp}}billion (~${{Format price|{{Inflation|index=US-GDP|value=1000000000|start_year=1998}}}} in {{Inflation/year|US-GDP}}). In July 2000, it was acquired by Bertelsmann Music Group for $117{{nbsp}}million (~${{Format price|{{Inflation|index=US-GDP|value=117000000|start_year=2000}}}} in {{Inflation/year|US-GDP}}); shortly thereafter Amazon was contracted to operate the website. At its peak, it employed over 750 people and had offices in Fort Washington, Pennsylvania, New York City, London, and Los Angeles.

Establishment and growth

CDnow was founded in February 1994 by twin brothers Jason Olim and Matthew Olim in their parents' basement in Ambler, Pennsylvania.{{cite news | url=https://technical.ly/philly/2012/07/31/cdnow-3-lessons-from-one-of-pioneering-dot-com-era-online-music-retailer/ | title=CDNow: 3 lessons from Fort Washington-based pioneering 1990s-era online music retailer | first=Juliana | last=Reyes | work=Technically Media | date=July 31, 2012}} Initially launched as a Telnet service in August 1994, CDNow became a retail website in September 1994 using Valley Records Distributors as a drop-ship fulfillment center.{{cite book |last1=Olim |first1=Jason |title=The CDnow Story: Rags to Riches on the Internet |date=January 1, 1999 |publisher=Top Floor Pub |isbn=0966103262}} With three employees, the company moved near the Penllyn train station in Lower Gwynedd Township, Montgomery County, Pennsylvania and a couple years later it moved to the Strawbridge & Clothier building in Jenkintown, Pennsylvania.{{cite news | url=http://www.philadelphiaweekly.com/news/cd-then-and-now/article_824d64c9-ca38-57cc-ab24-e4c228c0f9f1.html | title=CD Then ... and Now | first=Jonathan | last=Valania | work=Philadelphia Weekly | date=February 27, 2002 }}{{Dead link|date=September 2024 |bot=InternetArchiveBot |fix-attempted=yes }} In December 1994, CDNow claimed to be the first company that allowed people to buy albums online.Beach, Patrick (December 22, 1994). "[https://www.newspapers.com/image/128249909/ Tunes on Infobahn]". The Des Moines Register Datebook (Des Moines, Iowa). p. 10D. At the time, it said it had over 140,000 different albums available for purchase on its web site. In 1995, an article in the Los Angeles Times said that CDNow had brought the web "one step closer to the day when artists will market directly to consumers, cutting out distributors such as record labels."Kaplan, Karen (July 12, 1995). "[https://www.newspapers.com/image/155275382 Listening Boom: Music-Oriented Sites Lead the World Wide Web Hit Parade]". The Los Angeles Times. p. D1, D7.

In 1997, the company had revenues of $18{{nbsp}}million and in February 1998, with 100 employees, the company became a public company via an initial public offering.{{cite news | url=https://www.cnet.com/news/cdnow-goes-public-with-a-bang/ | title=CDnow goes public with a bang | work=CNET | date=February 10, 1998}} CDNow then embarked on a large Internet advertising campaign, and was an innovator in preference-based retail recommendations, online video, the use of editorial content as a means to promote interest internet affiliate marketing programs, and email marketing. On March 17, 1999, CDNow acquired its largest competitor, another Philadelphia area company, N2K, whose online properties included Music Boulevard and Jazz Central Station.{{cite web | url=https://www.sec.gov/Archives/edgar/data/1050372/0001036050-99-000535.txt | title=Form 8-K | publisher=U.S. Securities and Exchange Commission | date=March 17, 1999}}{{cite news | url=https://www.wired.com/1999/03/cdnow-now-is-the-time/ | title=CDNow: Now is the Time | agency=Reuters | publisher=Wired | date=March 18, 1999}} In July 1999, the company announced a deal to merge with Columbia House, establishing a new public company jointly held by CDNow's shareholders, Time Warner and Sony.{{cite magazine | url=https://www.wired.com/1999/07/cdnow-columbia-house-to-merge/ | title=CDNow, Columbia House to Merge | first= Joanna | last= Glasner | magazine=Wired | date=July 13, 1999}}{{cite news | url=https://www.deseret.com/1999/7/13/19455381/columbia-house-merging-with-online-retailer-cdnow/ | title=Columbia House merging with online retailer CDNow | agency=Associated Press | publisher=Deseret News | date=July 13, 1999}}

Decline

CDNow was among the first of the Internet companies to show signs of struggle with the dot-com business model. On March 20, 2000, as the dot-com bubble burst, Barron's published a cover article called "Burning Up", which noted that the company was running out of cash.{{cite news | url=https://www.barrons.com/articles/SB953335580704470544 | title=Burning Up | first=Jack | last=Willoughby | work=Barron's | date=March 20, 2000 | url-access=subscription}}{{cite web |last1=Garrity |first1=Brian |title=CDnow Stock Drops After Report It's Low On Cash |url=http://www.allbusiness.com/retail-trade/miscellaneous-retail-retail-stores-not/4393077-1.html |access-date=21 December 2018 |archive-url=https://web.archive.org/web/20100608131213/http://www.allbusiness.com/retail-trade/miscellaneous-retail-retail-stores-not/4393077-1.html |archive-date= 8 June 2010 |date=21 March 2000}} In March 2000, the Columbia House merger was called off.{{cite news | url=https://www.nytimes.com/2000/03/14/business/cdnow-deal-with-sony-and-time-warner-is-called-off.html | title=CDNow Deal With Sony and Time Warner Is Called Off | first=Matt | last=Richtel | work=The New York Times | date=March 14, 2000 | url-access=subscription}} In June 2000, the company closed its London office to cut costs.{{cite news | url=https://www.bizjournals.com/philadelphia/stories/2000/06/19/daily3.html | title=CDNow reportedly closes office | work=American City Business Journals | date=June 19, 2000}}

In July 2000, Bertelsmann Music Group acquired the company, intending to combine it with its BMG Direct record club as a new venture called BeMusic, and eventually add Napster to the service. Bertelsmann paid just $117{{nbsp}}million (~${{Format price|{{Inflation|index=US-GDP|value=117000000|start_year=1998}}}} in {{Inflation/year|US-GDP}}), a price that was down over 90% from the valuation of the company at its peak in April 1998. The founding Olim brothers received a total of $17{{nbsp}}million.{{cite news | url=https://money.cnn.com/2000/07/20/deals/bmg_cdnow/ | title=Bertelsmann buys CDNow | work=CNN | date=July 20, 2000}} In April 2001, the company cut 40 employees, 10% of its staff.{{cite news | url=https://www.wsj.com/articles/SB987610284984448432 | title=Web Seller CDnow Cuts More Staff Amid Integration With Music Club | first=Stephanie | last=Miles | work=The Wall Street Journal | date=April 18, 2001}} In August 2001, the company closed its Japanese website and laid off 200 employees.{{cite news | url=http://www.timesherald.com/article/JR/20010831/FINANCE01/308319994 | title=CDNow staff to dip at Fort Washington | work=The Times Herald (Norristown, Pennsylvania) | date=August 31, 2001}}

In November 2002, Bertelsmann announced it would close CDnow's Fort Washington facility and lay off the company's remaining 33 employees.{{cite news |last1=Kanaley |first1=Reid |title=The song's over for CDNow: Last employees set to go |url=https://www.inquirer.com/mld/philly/business/4478715.htm |work=The Philadelphia Inquirer |date=9 November 2002 |archive-url=https://web.archive.org/web/20030216063424/http://www.philly.com/mld/philly/business/4478715.htm|archive-date=16 February 2003}} Later that month, they signed a deal to outsource CDnow website operations to Amazon.{{cite news | url=https://www.nytimes.com/2002/11/26/business/bertelsmann-to-let-amazoncom-run-cdnow.html | title=Bertelsmann to Let Amazon.com Run CDNow | first=Saul | last=Hansell | work=The New York Times | date=November 26, 2002}} The new deal retained a revised version of the BMG Direct model called the "Preferred Buyers Club", offering a 20% discount for club-edition records; all other music was sold at standard Amazon prices. In 2011, the CDnow.com URL was redirected to a maintenance notice,{{cite web |last1=Internet Archive |title=cdnow.com |url=http://www.cdnow.com/ |archive-url=https://web.archive.org/web/20110807124630/http://www.cdnow.com/ |url-status=dead |archive-date=August 7, 2011 |website=cdnow.com archive |access-date=August 7, 2011}} and in 2013, it was permanently taken offline.

CDNow

Establishment and growth

Decline

References

Further reading