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Circuit City buys MusicNow

Store keeping pace in retail downloadable tune war

A correction was made to this article on Apr. 4, 2004.

HOLLYWOOD — Retail chain Circuit City is acquiring online music store MusicNow in a bid to build out its own digital music service and fend off competition for its CD-selling business.

Financial details were not disclosed.

Formerly called FullAudio, MusicNow focused primarily on building digital music services for other companies until last year, when it launched its own store. One of its primary partners has been Circuit City competitor Best Buy, an alliance that’s likely to end with the new deal.

For its part, Best Buy recently announced it is working with Tower Records, Virgin Music and others to build a digital music consortium called Echo.

MusicNow has been largely eclipsed by higher-profile competitors such as iTunes and Napster, putting it in danger of obsolescence without a major new partner. Circuit City plans to use MusicNow’s infrastructure and access to major-label and independent content to build its own online music store and offer digital music in its 600 physical locations.

“In addition to being one of the leading music and electronics retailers in the world, Circuit City brings to our business an important set of resources,” said MusicNow CEO Scott L. Kauffman. “Having a company with those characteristics to support MusicNow is essential for competing in this dynamic market.”

Circuit City’s Web site currently offers digital music from partner company Liquid Audio, which is also powering the recently launched online music store of Circuit City competitor Wal-Mart. While the Wal-Mart store has received generally poor reviews, it is the cheapest online music offering at just 88¢ per track.

Circuit City didn’t say how it plans to design its new service. MusicNow’s current offering is the industry standard 99¢ per track or $9.95 per month for unlimited streaming.

Move comes as America Online’s inhouse digital music store MusicNet revealed plans to expand into Europe with the appointment of Mark Mooradian as a new exec VP based in London.

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