Net Deal Has Music Seller Rockin’


In a music industry version of the Internet mania that has hit the Nasdaq Stock Market in recent days, a smallish record company saw its stock explode Wednesday morning after announcing a deal to sell its music over the Internet.

Platinum Entertainment Inc., based in the Chicago suburb of Downers Grove, Ill., leaped $5.88, or 80%, in early trading Wednesday before settling back to close at $10.13, up $2.75 or 37%, on 9.7 million shares traded--more than 20 times the stock’s average daily volume.

It was apparently all on the strength of an announcement that Platinum would team up with Liquid Audio of Redwood City, Calif., to make Platinum’s catalog of 13,000 songs available for purchase over the Internet.

Liquid Audio’s technology enables music to be transmitted securely online--that is, with software that protects against copyright theft and keeps track of royalties.


By October, according to the announcement, customers will be able to download songs onto their personal computers and create their own custom CD compilations.

The only flies in that ointment are that few home computers now have the hardware for downloading music onto blank CDs and that, except in the estimated 400,000 U.S. homes equipped with high-speed Internet transmission equipment, it can take hours to download a dozen or so songs.

Platinum’s catalog--geared toward gospel, blues and country music--is not top-heavy with million-selling artists, although it does have a number of songs by such acts as the Beach Boys, the Blues Brothers and Dionne Warwick.

Platinum, which had sales of $30 million last year and has yet to log a profit, made the announcement in New York on Wednesday at Plug.In ’98, an annual conference for the digital music-distribution industry.


Steven D. Devick, the company’s chairman, interviewed at the conference, was asked whether the morning stock run-up--which briefly expanded Platinum’s market capitalization by $30 million--was justified by the news.

“Our [profit] margin on Internet sales is 80% versus 30% at retail [outlets], so yeah, I think it deserves it,” he said.