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ARTIST DIRECT FEELS THE PINCH

Revenue Down, Label Operating at a Loss, But They’ll Keep Trying, Field Promises
Artist Direct, the Internet music venture that also runs a start-up label as a joint venture with company Chairman/CEO Ted Field, today announced results for its second fiscal quarter ended June 30.

Net revenue for the quarter decreased 48% to $1.4 million, compared with $2.7 million a year ago. Net loss for the quarter was $15.2 million, compared with a net loss of $11.1 million a year ago. That works out to a loss of $4.40 per share, compared to a loss of $3.07 per share last year at this time.

EBITDA loss was $2.6 million, compared with $6.2 million a year ago and $2.6 million in the first quarter of 2002.

Revenue from e-commerce in the second quarter of 2002 decreased 34% to $1.1 million from $1.7 million during the same period in 2001. Media revenue for the first quarter was $323,000, a decrease of 69% from the same period in 2001. This was attributed to continued weakness in the advertising market, which the company expects to persist.

On the lighter side, as of June 30, 2002, Artist Direct had unrestricted cash and short-term investments totaling $25.9 million.

In conjunction with the earnings announcement, the company also announce that its board of directors has approved an increase in funding for Artist Direct Records, the joint-venture label with Field. Artist Direct is committed to provide ADR up to $15 million in 2002, approximately $12.75 million in 2003, and approximately $12 million in 2004. Some of that funding may be moved up, if approved by the board.

For Q2 2002, Artist Direct saw a loss of $9.6 million associated with its investment in and advances to ADR has lost $27.0 million since its inception in 2001, according to the company.

Said Field, “Results for the second quarter reflect continuing weak conditions both in the music industry and the overall economy. However, I remain very enthusiastic about our opportunity at ARTISTdirect Records and believe that our current roster of thirteen artists will produce the hits necessary to demonstrate the value of our investment in the label.”

ADR has 13 artists on its roster, including four Rock acts (Badly Drawn Boy, Blood Brothers, Custom and Mad at Gravity) and 9 Urban acts (Curtains, Sharli McQueen, NAAM Brigade, No Good, Phats Bossi, Pokafase, Poverty, Smilez N' Southstar, and Ericka Smith). The label has a worldwide distribution deal with BMG.

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