NetRadio, using Internet radio content, launches music store based on Web
June 10, 1998
BYLINE: Jonathan Gaw; Staff Writer
A A A New Hope-based Navarre Corp. jumped into the increasingly crowded online music store field Tuesday, announcing that its NetRadio Network subsidiary has launched CDPoint, offering more than 250,000 music titles.
Saying CDPoint will use traffic to NetRadio, a Web site that delivers radio-like content over the Internet, to sell music at a click of a mouse, Navarre officials said it had an edge over competitors that are either significantly larger or have a head start.
"The value of the concept was to develop compelling content that we controlled, draw traffic and then drive that traffic to buy something," said Eric Poulson, Navarre's chairman and chief executive.
The stock market, however, reacted by punishing Navarre's stock. On trading four times heavier than usual, Navarre's stock lost nearly a fifth of its value, falling from $ 6.25 to $ 5.03 .
"It's the phenomenon of 'buy on the rumor and sell on the news'; I don't know that there's any more [to it] than that," said R.J. Steichen analyst Dennis Nielsen. "The volatility in the small caps is just beyond belief."
That is doubly true lately of Internet retailing stocks.
Even though Navarre's stock is off sharply from its closing high seven weeks ago of $ 9.50, it's still twice as high as it was in late March.
Meanwhile, other local companies that recently have converted to Internet retailing have gone through similar stock price palpitations. Most notably, K-Tel International Inc. stock had been near dormant, trading at $ 3.25 in early April on volume so light that there were days that it never traded at all. Then, the television purveyor of dance mixes and compilation records used the word "Internet" in a press release and its stock soared.
After hitting a peak of $ 33.93 in early May on volume of 25.8 million shares, more than three times the number of shares outstanding, the stock has been on a constant downward slide, closing Tuesday at $ 11.25.
The jury is out on exactly what will make for the best Internet strategy, as dozens of music sellers scramble onto the Web. As products and services move to the Internet, price has been key as items such as common stocks and books have become commodified.
"Every bit that you have to differentiate yourself from just a warehouse of music helps," said Bill Burnham, an analyst at Deutsche Bank Securities in San Francisco. "It's likely that this industry will boil down to buying scale and advertising intensity."
Navarre hopes that its NetRadio site, which draws listeners by playing music online and has 3 million listening sessions per month, will draw buying traffic.
"The majority of music shoppers buy on impulse, and I can go after those purchases," said Paulson.
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