TELECOM Digest OnLine - Sorted: AOL Buys Circuit City's Music Now

AOL Buys Circuit City's Music Now

Derek Caney (
Thu, 3 Nov 2005 11:59:43 -0600

By Derek Caney

AOL said on Thursday it bought Circuit City Stores Inc.'s digital
music subscription service MusicNow LLC, a move that thrusts Time
Warner Inc.'s Internet unit into competition with RealNetworks, Yahoo,
Napster and other subscription services.

Financial terms of the deal were not disclosed, but a source familiar
with the matter said AOL paid less than $25 million.

MusicNow will offer downloads at 99 cents each, comparable to iTunes,
and it will offer monthly subscriptions for $9.95 for unlimited
downloads or streaming, which refers to listening to music online
without downloading it.

For an additional $5 a month, listeners can download songs to a
compatible digital music player.

RealNetworks Inc's Rhapsody subscription service is $9.99 a
month. Napster sells its service for $9.99 a month. Yahoo's service is
$6.99 a month, or $4.99 a month if one buys a 12-month
subscription. Last month, CNET reported that Yahoo was raising its
price to $11.99 a month for users who want to download music to
digital music players.

AOL currently has a partnership with Apple Computer Inc.'s iTunes, by
far the largest online music service. But that partnership is aimed at
members of AOL's Internet service.

The MusicNow service is available to any Internet user through AOL's
Web site. The move reflects AOL's focus on providing services through
its Web site rather than solely to its own membership.

The strategy allows AOL to build its online advertising revenue at and derive subscription revenue from the music service.

MusicNow also allows AOL to reach music listeners who don't own
Apple's iPods, which are only compatible with iTunes and no other
online service. Conversely, iTunes users can only download songs to

"AOL's partnership with iTunes is strong, has been fruitful for both
companies, and will continue," said AOL spokesman Nicholas Graham.

AOL said the agreement was signed on September 27th and closed early
this week.

Copyright 2005 Reuters Limited.

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