Columbia House, a joint venture between Sony Corp. and Time-Warner Inc. will merge with CDNOW Inc.
While the new company’s name and president have yet to be selected, the result will be one of the world’s largest online music and video marketers. According to reports, industry analysts expect the company to compete directly with such established online retailers as Amazon.com and barnesandnoble.com.
Columbia House is a direct marketer of video and music CDs, offering club memberships to some 16 million customers. In 1998 it has sales of $1.4 billion. Although the largest music and video club in North America, it does not have a major Web presence, with only $100 million earned over the Internet. CDNOW has 2.3 million online members and 1998 sales of $98.5 million. The merger is intended to mix Columbia House’s marketing skills with CDNOW’s technological expertise and experience.
The merger is subject to regulatory review in both Canada and the United States. If it goes through, Sony and Time Warner will each own 37% of the company and supply four board members. CDNOW’s existing shareholders will own the remaining 26%. The company, which has an estimated market value of $2 billion, is expected to go public.
