Artistdirect prices IPO to tune of $60 million

Online music company Artistdirect today priced its initial public offering at $12 a share, raising $60 million through the sale of 5 million shares.

The Encino, Calif.-based company will trade on the Nasdaq Stock Market under the ticker "ARTD." Proceeds from the IPO--underwritten by Morgan Stanley Dean Witter, Bear Stearns and Deutsche Banc Alex Brown--will be used for advertising and expansion.

The company builds Web sites for musicians and their fans through its Artistdirect Network, which offers music news, statistics and related content. Artistdirect also offers touring schedules and some downloadable songs.

Artistdirect hosts sites for 100 different artists--from classic rock group Pink Floyd to alternative favorite Limp Bizkit--and controls Downloadsdirect, a digital music hub.

The company reported revenue of $4.6 million in 1998 and $10.3 million for 1999. It incurred a net loss last year of approximately $57.8 million.

In January, the company received a $97.5 million equity investment from four of the five major music companies: Sony Music Entertainment, Universal Music Group, BMG Entertainment and Warner Music Group. EMI Recorded Music does not have a stake in the company.

Along with the record companies, Cisneros Television Group and Web giant Yahoo also have formed relationships with Artistdirect; Yahoo has a minority equity stake in the company.

The partnerships highlight a growing concern by music companies that are scrambling to develop businesses, either alone or with partners, to distribute music online while preserving copyright and royalty protection. In the past year, dozens of sites have launched or have been updated in an effort to attract the growing legion of online music fans.

Jupiter Communications projects that online sales of recorded music in the United States will grow from $327 million in 1999 to approximately $2.6 billion in 2003.

One Net music company, MP3.com, is a music collective of some 28,000 bands that post their songs online as downloadable files. The site's popularity soared following its IPO in July 1999.

Artistdirect's founders, chief executive Marc Geiger and president Donald Muller, are recording industry veterans. Before launching the company, Geiger was marketing vice president at American Recordings, and Muller worked at the William Morris Agency's contemporary music division. They helped organize the original 1990 Lollapalooza alternative music concert tour.

Despite the executives' experience, the company faces enormous competition from companies such as e-commerce behemoths Amazon.com and CDNow, as well as traditional retailers such as Tower Records.