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CDNOW.com was an online retailer. The company was founded in February 1994 by twin brothers Jason Olim and Matthew Olim of Ambler, Pennsylvaniamarker. Initially launched as a telnet service in August 1994, CDNow became a retail website in September 1994—far earlier than most of the dot.com retailers that gained notoriety after 2000.

History

The operation was started in their parents' basement, using Valley Records Distributors as a drop-ship fulfillment center. With three employees, the company moved its headquarters a few miles down the road to a train station in Penllyn, Pennsylvania, which it outgrew when it reached 55 employees. It then moved to the old Strawbridge's building in Jenkintown, Pennsylvaniamarker, where it went public in February 1998, with 110 employees and annual (1997) revenues of around $18M. A short time later, CDNow acquired its largest competitor, another Philadelphia area company, N2K, whose online properties included Music Boulevard, Jazz Central Station, and other popular sites. During its extensive growth campaign, CDNow was an early innovator in internet advertising, preference-based retail recommendations, online video, the use of editorial content as a means to promote interest in all sorts of music, one of the first significant online vendors of video (movies, etc.), the creation of the first affiliate marketing program on the internet, email marketing, and more. As the company moved to Fort Washingtonmarker, its employees numbered over 500 (with offices in New York Citymarker, Londonmarker, and San Franciscomarker), and revenues exceeded $130 million. By 2000, CDNow downsized to about 400 employees, and was eventually bought by Bertelsmannmarker.

Decline

CDNow was among the first of the internet companies to show signs of struggle with the emerging internet economy business model (emphasize brand, profits will follow). In March 2000, Barron's published an article that focused on CDNow's increasing financial difficulties; it was the first of many articles that would follow, and would cover the demise of many promising internet companies. At the time, CDNow was set to merge with Columbia House, in a deal that would establish a new public company jointly held by CDNow's shareholders, Time Warner and Sony. The deal did not materialize, and instead, in the summer of 2000, Bertelsmann acquired CDNow for its new BeMusic internet music group (which was also to include BMG Direct, a record club), and was also related to Bertelsmann's financial involvement with Napster.

CDNow was one of the 1990s' most well known websites, first to offer the largest number of albums in quantity and variety available on the Internet, and second, as a source of All Star Music News and very substantial numbers of record reviews and other editorial content related to music, and third, as a source of the first online interviews with popular artist, and finally, CDNow was the first place to sample the most popular music in RealAudio format. The first samples were uploaded near the end of 1995, bringing the site the definitive Bookmark status on publications and web guides in those years.

Purchase by Amazon

Initially, Bertelsmann merged CDNow's operations with those of the BMG Direct record club in a venture called BeMusic. By 2001 Amazon.com purchased the rights to CDNOW and began operating the CDNOW web site, a move that gave little warning to CDNOW customers. By this time, the CDNow operation was largely absent; the brand continued, but as a part of Amazon. Amazon discontinued CDNOW's music profiling section, although it now offers a similar service. Rateyourmusic.com was indirectly created as a response to the loss of CDNOW's recommendation service.

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