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ANOTHER ONE BITES THE DUST
Custom CD Site Musicmaker.com Shuts Doors,
Liquidates Assets, Joins Club

Alan Greenspan's surprising interest rate cut (and subsequent Wall Street goose) came just a day or so too late for the good folks at Musicmaker.com.

Yesterday (1/3), the board of the custom CD netco recommended that shareholders vote to dissolve the company and liquidate its assets. A company statement, cited by Webnoize, said Musicmaker was unable to secure a buyer willing to offer more funds than would result from liquidation.

Just two weeks ago, Musicmaker's largest shareholder, BCG Strategic Investors, strategically advised a shutdown.

The company let users select songs they wished to purchase off its Web site and then burned them onto a compact disc, which was then mailed to the customers. The discs cost $9.95 for the first five songs, plus $1 for each additional song.

Despite striking alliances with players such as America Online and EMI Music, the netco had difficulty landing big labels and the artists they carry, the Washington Post reported. Thus leaving the company's library stocked with classical and blues—but lacking the songs that topped the pop charts.

EMI sold its stake in the company back to BCG in December.

"We found that unless you actually own the content that the customers want, you'll have a tough time giving them everything they need," said Musicmaker CFO Mark Fowler.

The storyline is becoming all too familiar. Musicmaker was founded in 1996. It raised $67 million in its July 1999 IPO. The stock first sold at $140 a share, trading as high as $239 a share, giving the company a market capitalization of nearly $800 million.

"We've done everything possible we could have to give the consumer their music their way," Fowler said. "We tried, and now we think that the best value we can get for the shareholder is to liquidate and distribute the proceeds."

At the close of trading yesterday, Musicmaker's shares were at $2.88, although investors reacted favorably to the liquidation announcement in after-hours trading, driving the price up as high as $5.69. Fowler believes the cash value of the company to be in the $7-$9 range.

In September, Musicmaker announced it was laying off 30% of its staff in an effort to reduce its burn rate from $12 million to $10 million.

"We were in this for the business," Fowler said. "We wanted to be either the next CD or the next 8-track. It looks like right now we're kind of stuck in the 8-track mode."

BLACKOUT TUESDAY: HOW THE MAJORS RESPONDED
(6/5a)
HARLESTON, HABTEMARIAM LAUNCH UMG TASK FORCE
(6/5a)
SONY MUSIC SETS UP $100M FUND
(6/5a)
10K OPENS FUND TO AID BLACK YOUTH
(6/5a)
BLACK MUSIC MONTH: THE REVOLUTION WILL NOT BE TELEVISED
(6/5a)
WHAT NEXT?
The biz ponders action after some reflection.
GRAMMY SPECULATION
100% guaranteed to be somewhat accurate, probably.
BLACK MUSIC MONTH
...continues.
TRUMP'S IN THE BUNKER
Just to inspect it, though.
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