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Technology Stocks : GDNO - Goodnoise, the next KTEL?
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To: The Prophet who wrote (78)2/9/1999 3:03:00 AM
From: Sanjay Varma  Read Replies (2) of 158
 
Prophet - I didn't know that Goodnoise owned emusic.com. Where did you find this information?

In 1998 I followed NTKI and CDNW, and invested in both. My feeling is that the street has cooled to online music retailers because slim margins and heavy competition will delay profits for *several years*. NTKI actually posted a greater loss per share in the most recent quarter, which is a bad sign. In contrast, AMZN began selling music in Fall 1998 and already has 25% of the market, which is equal to CDNW and NTKI's combined share.

Based on this history I am not sure that an emusic.com IPO could be successfully undertaken. In order to get customers, NTKI and CDNW locked themselves into very expensive deals with portals, in which they pay 3-8 million dollars to each portal to be the preferred merchant. Despite this exposure (which is now denied emusic.com since all the deals are multiyear) AMZN was able to claim 25% of the market in just a few months based on their pre-existing customer base.

While extensive cross promotion between emusic.com and Goodnoise would certainly benefit both web sites, I am skeptical because:
1. No cross-promotion currently exists
2. Combined customer base is very small

Since I am turning into the voice of negativity, let me just conclude by saying GDNO seems like it will continue to rise in the short term, so enjoy the run and don't sell too soon!

-Sanjay
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