S3's Diamond Multimedia Announces Musicland Stores to Promote and Sell Rio Players; Musicland's Digital Music Strategy Shows Growing Mainstream Adoption of Rio Audio Players

Business Wire, May 15, 2000

Business Editors, High-Tech Writers

VANCOUVER, Wash.--(BUSINESS WIRE)--May 15, 2000

S3, Incorporated (Nasdaq:SIII), the leader in digital audio, and Musicland Stores Corporation (NYSE:MLG), the nation's leading specialty retailer of home-entertainment software products, today announced they will collaborate to distribute the third-generation of Rio digital audio players in Media Play, Sam Goody and On Cue stores, and on the company's E-commerce Web sites: SamGoody.com, MediaPlay.com and OnCue.com.

With the marketing partnership, S3 has the opportunity to broaden consumers' access to Rio devices through a retailer that hasn't traditionally provided digital audio players.

"The agreement provides further proof of the mainstream adoption of digital audio by consumers," said Mike Reed, director of marketing for S3's Diamond Multimedia. "Now music fans will be able to purchase the latest players where they buy their favorite music."

Musicland's move to offer new digital audio hardware comes as part of a "clicks-and-bricks" growth strategy, the company's on-going move to integrate Internet technologies and traditional retail outlets.

"Thanks to S3's groundbreaking Rio devices, with technology that is protective of the copyrights of the content providers, digital audio is a growing means for the sale of music," said Gil Wachsman, vice chairman of Musicland. "Through our `clicks-and-bricks' strategy, we intend to be front and center in the digital delivery evolution, selling music downloads along with players and physical CDs. This agreement offers a perfect example of how we are leveraging new technologies to expanded opportunities for our business and our customers."

The family of Rio audio players will be in stores later this spring.

About S3 Incorporated

Following its acquisition of Diamond Multimedia and the transfer of its graphics chip assets to a joint venture company, S3 has been relaunched as a digital media company focused on creating products and partnerships that help build the digital home. Combining significant financial assets with a strong technology portfolio, that includes the Rio family of digital audio players and the HomeFree series of home networking solutions, S3 is uniquely positioned to capitalize on high growth opportunities in the rapidly converging Internet and consumer device markets

Except for historical information contained herein, the matters set forth in this press release are forward-looking statements that are subject to risk and uncertainties, including the impact of competitive products and pricing and of alternative technological advances, and other risks detailed from time to time in S3's and Musicland's SEC reports, including their annual reports on Form 10-K for the year ended December 31, 1999. S3 is a registered trademark of S3 Incorporated. The S3 corporate logo, Diamond Multimedia, and HomeFree are trademarks of S3 Incorporated. Rio is a trademark of RioPort.com, Inc. and is used by S3 under license from RioPort.com, Inc.