CDnow, Inc. was a dot-com company that operated an online shopping website selling

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s and music-related products. In April 1998, during the dot-com bubble, the company was valued at over $1billion (~$ in ). 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 c ...

for $117million (~$ in ); shortly thereafter

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

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

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, and

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Establishment and growth

CDnow was founded in February 1994 by twin brothers Jason Olim and Matthew Olim in their parents' basement in Ambler, Pennsylvania. 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. 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. 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'' is an American Newspaper#Daily, daily newspaper that began publishing in Los Angeles, California, in 1881. Based in the Greater Los Angeles city of El Segundo, California, El Segundo since 2018, it is the List of new ...

'' 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 share capital, stock which are intended to be freely traded on a stock exchange or in over-the-counter (finance), over-the-counter markets. A public (publicly traded) co ...

via an

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. 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

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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. 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 Warner Media, LLC ( doing business as WarnerMedia) was an American multinational mass media and entertainment conglomerate owned by AT&T. It was headquartered at the 30 Hudson Yards complex in New York City. It was established as Time Warne ...

and

Sony is a Japanese multinational conglomerate (company), conglomerate headquartered at Sony City in Minato, Tokyo, Japan. The Sony Group encompasses various businesses, including Sony Corporation (electronics), Sony Semiconductor Solutions (i ...

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. 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 to the service. Bertelsmann paid just $117million (~$ in ), 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