CDnow, Inc. was a dot-com company that operated an

online shopping Online shopping is a form of electronic commerce which allows consumers to directly buy goods or services from a seller over the Internet using a web browser or a mobile app. Consumers find a product of interest by visiting the website of t ...

website selling

compact disc The compact disc (CD) is a digital optical disc data storage format that was co-developed by Philips and Sony to store and play digital audio recordings. In August 1982, the first compact disc was manufactured. It was then released in O ...

s and music-related products. In April 1998, during the

dot-com bubble The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet. Between 1995 and its peak in March 2000, the Nasdaq Comp ...

, the company was valued at over $1billion. In July 2000, it was acquired by

Bertelsmann Music Group Bertelsmann Music Group (BMG) was a division of a German media company Bertelsmann before its completion of sale of the majority of its assets to Sony Corporation of America on 1 October 2008. Although it was established in 1987, the music co ...

for $117million; shortly thereafter

Amazon Amazon most often refers to: * Amazons, a tribe of female warriors in Greek mythology * Amazon rainforest, a rainforest covering most of the Amazon basin * Amazon River, in South America * Amazon (company), an American multinational technolog ...

was contracted to operate the website. At its peak, it employed over 750 people and had offices in

Fort Washington, Pennsylvania Fort Washington is a census-designated place and suburb of Philadelphia in Montgomery County, Pennsylvania, United States. The population was 5,446 at the 2010 census. History Prior to the Revolutionary War the Fort Washington area was settl ...

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, and

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Establishment and growth

CDnow was founded in February 1994 by twin brothers

Jason Olim Jason Olim was CEO and co-founder of CDNow, Inc., one of the first e-commerce companies (founded in February, 1994). He has earned Entrepreneur of the Year awards from the Small Business Association, Arthur Andersen, the Greater Philadelphia Chamb ...

and Matthew Olim in their parents' basement in

Ambler, Pennsylvania Ambler is a borough in Montgomery County, Pennsylvania. It is located approximately 16 miles (26 km) north of the Center City Philadelphia. History Lenape The historical territory of the Lenni Lenape was in the Delaware River Valley, in a ...

. Initially launched as a

Telnet Telnet is an application protocol used on the Internet or local area network to provide a bidirectional interactive text-oriented communication facility using a virtual terminal connection. User data is interspersed in-band with Telnet control i ...

service in August 1994, CDNow became a retail website in September 1994 using Valley Records Distributors as a drop-ship fulfillment center. 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 Jenkintown is a borough in Montgomery County, Pennsylvania. It is approximately 10 miles (16 km) north of Center City Philadelphia. History The community was named for William Jenkins, a Welsh pioneer settler. Jenkintown is located just ...

. In December 1994, CDNow claimed to be the first company that allowed people to buy albums online.Beach, Patrick (December 22, 1994).
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 The ''Los Angeles Times'' (abbreviated as ''LA Times'') is a daily newspaper that started publishing in Los Angeles in 1881. Based in the LA-adjacent suburb of El Segundo since 2018, it is the sixth-largest newspaper by circulation in the ...

'' 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." In 1997, the company had revenues of $18million and in February 1998, with 100 employees, the company became a

public company A public company is a company whose ownership is organized via shares of stock which are intended to be freely traded on a stock exchange or in over-the-counter markets. A public (publicly traded) company can be listed on a stock exchange ( ...

via an

initial public offering An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investme ...

. CDNow then embarked on a large

Internet advertising Online advertising, also known as online marketing, Internet advertising, digital advertising or web advertising, is a form of marketing and advertising which uses the Internet to promote products and services to audiences and platform users. ...

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 Affiliate marketing is a marketing arrangement in which affiliates receive a commission for each visit, signup or sale they generate for a merchant. This arrangement allows businesses to outsource part of the sales process. It is a form of ...

programs, and

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. On March 17, 1999, CDNow acquired its largest competitor, another Philadelphia area company, N2K, whose online properties included

Music Boulevard Music Boulevard, or musicblvd.com, was a retail music information and sales website founded in 1995 by Telebase Systems. In 1997 the Music Boulevard website, operated by N2K, became among the first websites to offer piracy-protected music singles ...

and Jazz Central Station In July 1999, the company announced a deal to merge with

Columbia House Columbia House was an umbrella brand for Columbia Records' mail-order music clubs, the primary iteration of which was the Columbia Record Club, established in 1955. The Columbia House brand was introduced in the early 1970s by Columbia Records ...

, establishing a new public company jointly held by CDNow's shareholders,

Time Warner Warner Media, LLC ( traded as WarnerMedia) was an American multinational mass media and entertainment conglomerate. It was headquartered at the 30 Hudson Yards complex in New York City, United States. It was originally established in 1972 by ...

and

Sony , commonly stylized as SONY, is a Japanese multinational conglomerate corporation headquartered in Minato, Tokyo, Japan. As a major technology company, it operates as one of the world's largest manufacturers of consumer and professional ...

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

burst, '' Barron's'' published a cover article called "Burning Up", which noted that the company was running out of cash. In March 2000, the Columbia House merger was called off. In June 2000, the company closed its London office to cut costs. In July 2000,

acquired the company, intending to combine it with its BMG Direct record club as a new venture called BeMusic, and eventually add

Napster Napster was a peer-to-peer file sharing application. It originally launched on June 1, 1999, with an emphasis on digital audio file distribution. Audio songs shared on the service were typically encoded in the MP3 format. It was founded by Sha ...

to the service. Bertelsmann paid just $117million, 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 $17million. In April 2001, the company cut 40 employees, 10% of its staff. In August 2001, the company closed its Japanese website and laid off 200 employees. In November 2002, Bertelsmann announced it would close CDnow's Fort Washington facility and lay off the company's remaining 33 employees. Later that month, they signed a deal to outsource CDnow website operations to Amazon. 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, and in 2013, it was permanently taken offline.

Establishment and growth

Decline

References

Further reading