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| Founded | February 1994; 31 years ago (1994-02) |
|---|---|
| Founder | Jason Olim Matthew Olim |
| Defunct | 2013 |
| Fate | Acquired byBertelsmann,Acquired byAmazon.com, shut down |
| Headquarters | Ambler, Pennsylvania |
CDnow, Inc. was a dot-com company that operated anonline shopping website sellingcompact discs and music-related products. In April 1998, during thedot-com bubble, the company was valued at over $1 billion (~$1.74 billion in 2023). In July 2000, it was acquired byBertelsmann Music Group for $117 million (~$197 million in 2023); shortly thereafterAmazon was contracted to operate the website. At its peak, it employed over 750 people and had offices inFort Washington, Pennsylvania,New York City,London, andLos Angeles.[1]
CDnow was founded in February 1994 by twin brothersJason Olim and Matthew Olim in their parents' basement inAmbler, Pennsylvania.[2] Initially launched as aTelnet service in August 1994, CDNow became a retail website in September 1994 usingValley Records Distributors as a drop-ship fulfillment center.[3] With three employees, the company moved near thePenllyn train station inLower Gwynedd Township, Montgomery County, Pennsylvania and a couple years later it moved to theStrawbridge & Clothier building inJenkintown, Pennsylvania.[1] In December 1994, CDNow claimed to be the first company that allowed people to buy albums online.[4] At the time, it said it had over 140,000 different albums available for purchase on its web site.[4] In 1995, an article in theLos 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."[5]
In 1997, the company had revenues of $18 million and in February 1998, with 100 employees, the company became apublic company via aninitial public offering.[6] CDNow then embarked on a largeInternet advertising campaign, and was an innovator in preference-based retail recommendations,online video, the use of editorial content as a means to promote interest internetaffiliate marketing programs, andemail marketing. On March 17, 1999, CDNow acquired its largest competitor, another Philadelphia area company,N2K, whose online properties includedMusic Boulevard and Jazz Central Station.[7][8] In July 1999, the company announced a deal to merge withColumbia House, establishing a new public company jointly held by CDNow's shareholders,Time Warner andSony.[9][10]
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 thedot-com bubble burst,Barron's published a cover article called "Burning Up", which noted that the company was running out of cash.[11][12] In March 2000, the Columbia House merger was called off.[13] In June 2000, the company closed its London office to cut costs.[14]
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 addNapster to the service. Bertelsmann paid just $117 million (~$204 million in 2023), 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 million.[15] In April 2001, the company cut 40 employees, 10% of its staff.[16] In August 2001, the company closed its Japanese website and laid off 200 employees.[17]
In November 2002, Bertelsmann announced it would close CDnow's Fort Washington facility and lay off the company's remaining 33 employees.[18] Later that month, they signed a deal to outsource CDnow website operations to Amazon.[19] 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.[19] In 2011, the CDnow.com URL was redirected to a maintenance notice,[20] and in 2013, it was permanently taken offline.
The CDnow Story: Rags to Riches on the Internet byJason Olim and Matthew Olim
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