America Online Inc has signed another one of those exclusive marketing deals that keep on driving its share price up towards the stratosphere, despite never having made a cent since it went public. Online music retailer N2K Inc is to become the exclusive music retailer with AOL’s MusicSpace and within applicable music area on AOL. For this privilege, N2K will give AOL a minimum of $18m over three years, with the first $12m of it coming by December 1 this year. Loss-making N2K is going to find that money by way of an initial public offering, through which it hopes to raise about $43m. AOL also gets a share of sales and advertising revenues based in certain thresholds. N2k initially filed for flotation in December last year, but canceled it due to adverse market conditions. It has similar deals with Microsoft Corp’s WebTV Networks Inc and @Home Networks Corp. In the quarter ending March 31 it lost $4.5m net on revenues of $1.1m. Its balance sheet showed cash of $1.1m at the end of the quarter. There seems no end to AOL’s ability to leverage its strong brand identity and large subscriber base – recently boosted to 11.5 million by the CompuServe Corp acquisition – to cut deals lke this, and no doubt its plucking of such low-hanging fruit will continue. This is all in spite of the fact that people only need an ISP to get this stuff over the web.
