CDnow cited as leading Internet music store in newly released Jupiter Music Industry study

Business Wire, June 20, 1997

NEW YORK--(BUSINESS WIRE)--June 20, 1997--

Landmark Study Reveals Explosive Growth Potential

of Internet Music Sales with CDnow as Early Market Leader

The newly released "Music Industry and the Internet" report by Jupiter Communications cites CDnow, Inc. as the leading Internet music store, with a 33% share of the market for Internet music sales, more than twice the size of its nearest competitor. The Jupiter study is the most definitive and comprehensive study conducted to date on the music industry and the Internet sites.

The study praises CDnow for its pioneering merchandising programs, wide variety of music genres and ability to attract advertisers. The report notes CDnow as being well-positioned to capitalize on the anticipated enormous growth of music-related merchandise on the Internet, which the Jupiter report predicts that by the year 2002, will increase from the current $23 million-per-year to a $2.8 billion-per-year industry.

"The Jupiter report is the most thorough analysis available on this fledgling industry," said Jason Olim, CDnow President. "They have certainly done their homework, and we are flattered that many of the innovations CDnow developed are recognized as having a major impact on the market. CDnow is ready to extend its leadership position in what Jupiter shows will be an exploding market."

CDnow, which attracts with more than a 1.5 million shoppers per month, pioneered many of the revenue generating programs cited by the Jupiter study as having the greatest growth potential and impact in the industry, including:

--Merchandising Partnerships: The sale of music through

partnerships and incentive programs has been a key revenue generator.

Relationships like CDnow's Merchandising Partnerships with high

traffic sites such as USA Today Online, AT&T WorldNet, Time Warner's

Pathfinder and JazzOnline, plus its Cosmic Credit consumer incentive

program will become a primary sales launching point in the future,

according to the study. CDnow reports having over 2,000 separate

partners.

--Music-related Merchandise: CDnow was also singled out for being

one of the first Internet music retailers to recognize potential in

music-related merchandise such as T-shirts and music books. The

Jupiter study cited this category as having significant

revenue-generating potential, and stated that CDnow "owned the bulk

of the online music merchandising market;" a category Jupiter says

will triple in 1997.

--Advertising: Advertising-generated revenues on music related

sites - now in its infancy stage -- are expected to grow to $642.7

million by 2002. CDnow, which boasts such advertisers as AT&T and

LandsEnd, and was one of the first online music retailers with a

significant advertising revenue stream, is expected to benefit as it

continues to command top advertising and promotional dollars from

heavy Internet advertisers.

--Convenience and Wealth of Information: CDnow enjoys a

particular advantage over traditional retail environments in its

ability to offer easy access to almost every album in print today, as

well as artist biographies and album reviews. CDnow's

easy-to-navigate inventory of 250,000 products, approximately 10

times the selection of a typical music store, as well as its support

of independent labels, has been a key to its success and large

customer base.

CDnow was developed in 1994, by twin brothers Jason and Matthew Olim, to provide the easiest access to the most expansive selection of music products and information. CDnow (www.cdnow.com) features more than 250,000 different products including CDs, cassettes, T-shirts, movies, music videos, CD-ROMs, music books and laser discs. CDnow provides customers with the convenient features lie advance orders of new releases and overnight delivery.

CONTACT: CDnow, Inc.

Marlo Zoda

215/283-4926 x 432

or

Dan Klores Associates

Rob Bailey (robailey@dkanews.com)

Lee Suravlas (lees@dkanews.com)

212/685-4300