CDNow
| File:CDNow logo.png | |
| Founded | February 1994 |
|---|---|
| Founder | Jason Olim Matthew Olim |
| Defunct | 2013 |
| Fate | Acquired by Bertelsmann, Acquired by Amazon.com, shut down |
| Headquarters | Ambler, Pennsylvania |
CDnow, Inc. was an early Internet enterprise specializing in an online shopping platform for compact discs and music-related merchandise. During the 1998 dot-com bubble, it reached a valuation surpassing $1 billion before being purchased by Bertelsmann Music Group in 2000 for $117 million; subsequently, Amazon took over site operations. At its height, CDNow employed more than 750 staff members across offices located in Fort Washington, Pennsylvania, New York City, London, and Los Angeles.
Founding and Expansion
Twin brothers Jason Olim and Matthew Olim established CDNow in February 1994, initially operating from their parents' basement in Ambler, Pennsylvania. The company debuted as a Telnet service in August 1994 and transitioned to a retail website by September 1994, utilizing Valley Records Distributors for order fulfillment. Beginning with a team of three, the firm relocated multiple times within Pennsylvania to accommodate growth. By December 1994, CDNow asserted it was the first business to facilitate online album purchases, offering an inventory exceeding 140,000 albums.
By 1997, the company’s revenue had reached $18 million. In February 1998, with a workforce of approximately 100 employees, CDNow went public through an initial public offering. The business made significant investments in digital advertising and introduced innovations such as preference-driven retail suggestions, online video content, editorial marketing initiatives, affiliate programs, and email marketing campaigns. On March 17, 1999, CDNow acquired its main rival N2K—based in Philadelphia—which operated Music Boulevard and Jazz Central Station. In July 1999, CDNow declared plans to merge with Columbia House to create a new publicly traded entity jointly owned by CDNow shareholders alongside Time Warner and Sony.
Downturn
CDNow became one of the earliest Internet firms to face challenges related to the dot-com economic model. As the bubble burst on March 20, 2000, Barron's reported liquidity issues within the company. The proposed merger with Columbia House was abandoned in March 2000. By June of that year, CDNow shut down its London branch as part of cost-cutting measures.
In July 2000, Bertelsmann Music Group acquired CDNow for $117 million—a price reflecting a decline of over 90% from its April 1998 peak valuation. The founding Olim brothers earned $17 million from this transaction. Bertelsmann intended to merge CDNow with its BMG Direct record club under a new venture named BeMusic, with plans to incorporate Napster into the service eventually. In April 2001, CDNow reduced its workforce by 40 employees (10%), followed by closure of its Japanese website and layoffs of 200 staff members in August 2001.
By November 2002, Bertelsmann announced the shutdown of CDNow’s Fort Washington site and dismissed the remaining 33 employees. Later that month, operations were outsourced to Amazon, which maintained a modified version of BMG Direct’s "Preferred Buyers Club," offering a 20% discount on club-exclusive records while other music titles were sold at Amazon’s regular prices. The domain CDNow.com redirected users to a maintenance message in 2011 before being permanently decommissioned in 2013.
Further reading
The CDnow Story: From Humble Beginnings to Internet Success authored by Jason Olim and Matthew Olim