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Filed by MP3.com, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: MP3.com, Inc.
Commission File No. 0-26697
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CONFERENCE CALL INFORMATION
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- Second quarter 2001 results conference call scheduled today at
1:30 p.m. PDT
- Conference call open to all interested parties through a
real-time audio webcast at the MP3.com corporate web site
www.mp3.com/investor and at www.prnewswire.com
- Conference call to be archived at www.mp3.com and at
www.prnewswire.com through 6:00 p.m. PDT, Wednesday, August 29,
2001
- MP3.com investor relations web site: www.mp3.com/investor
MP3.COM REPORTS SECOND QUARTER 2001
FINANCIAL RESULTS
- CONTINUED EPS IMPROVEMENT
- POSITIVE PRO FORMA EBITDA OF $662,000
- COMPANY CONTINUES ITS LEAD IN CREATING INDUSTRY DEFINING
TECHNOLOGY FOR THE DISTRIBUTION OF DIGITAL MUSIC
SAN DIEGO, CALIF. - AUGUST 1, 2001 - MP3.com, Inc. (Nasdaq: MPPP), the
Internet's premier Music Service Provider (MSP), today reported total net
revenues of $17.5 million for its second quarter ended June 30, 2001, compared
with $21.8 million for the first quarter of 2001, and $20.2 million for the
second quarter of 2000.
Pro forma net loss for the quarter was $1.6 million, or $0.02 per diluted
share(1). This compares with pro forma net loss of $2.2 million, or $0.03 per
diluted share, for the first quarter of 2001(2), and a pro forma net loss of
$5.2 million, or $0.08 per diluted share, for the comparable quarter of 2000(3).
On a GAAP basis, net loss for the second quarter ended June 30, 2001, was $11.6
million, or $0.17 per diluted share, compared with a net loss of $46.1 million,
or $0.69 per diluted share, reported for the first quarter of 2001, and $177.1
million, or $2.71 per diluted share, for the second quarter of 2000.
"Results for the quarter continue to demonstrate MP3.com's business momentum and
progress," stated Michael Robertson, chairman and chief executive officer for
MP3.com. "We are extremely pleased to report that we achieved positive pro forma
EBITDA of $662,000. By applying financial discipline, our second quarter
financial results demonstrate our ability to maintain the balance between
containing expenses and developing innovative revenue streams. Once again, our
operating results reflect our
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commitment to key business initiatives and confidence in our strategic vision
and leadership position in the digital music industry.
"The proposed merger announcement with Vivendi Universal signals a change in the
overall organizational structure of our company and is consistent with our
long-term goal of doing what is in the best interest of our shareholders,"
continued Robertson. "As we move forward, it is our intention to deploy our own
initiatives and work closely with our growing network of label partners, as well
as Vivendi Universal, to make available the enormous opportunities that
MP3.com's technologies have to offer. One of our key areas of focus will be the
continued development of more personalized premium services for consumers,
labels, independent artists and businesses."
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(1) Pro forma net loss and net loss per share calculations for the second
quarter of 2001 include amortization of deferred compensation, but
exclude amortization of goodwill and other intangible assets related to
the MP3Radio.com L.L.C. acquisition, non-cash expenses that reflect the
difference in amortization of prepaid multimedia royalty licenses using
the straight line method versus the units of measure according to the
terms of the license, legal costs related to the recovery of insurance
proceeds, reserves taken against the company's strategic investment
portfolio, a charge related to the class action and derivative
shareholder lawsuits, and a charge related to acquisition costs
specific to the proposed merger between MP3.com, Inc. and Vivendi
Universal, S.A.
(2) Pro forma net loss and net loss per share calculations for the first
quarter 2001 include amortization of deferred compensation, but exclude
amortization of goodwill and other intangible assets related to the
MP3Radio.com L.L.C. acquisition, non-cash expenses that reflect the
difference in amortization of prepaid multimedia royalty licenses using
the straight line method versus the units of measure according to the
terms of the license, and a charge related to the class action and
derivative shareholder lawsuits.
(3) Pro forma net loss and net loss per share calculations for the second
quarter of 2000 include amortization of deferred compensation, but
exclude non-operating minority interest losses in MP3Radio.com L.L.C.,
reserves taken against the company's strategic investment portfolio,
and a charge for the estimated total costs related to copyright issues
associated with the My.MP3 service including the lawsuits filed by
major recording companies and other parties. Copyright issues also
include but are not limited to publishing rights, non-major label
content, legal and advisory fees.
SECOND QUARTER 2001 OPERATING HIGHLIGHTS
VIVENDI UNIVERSAL AND MP3.com TO COMBINE FORCES
During the second quarter, the proposed merger between MP3.com and Vivendi
Universal was announced in a move to strengthen the digital distribution
capacity and web audience of Vivendi Universal's online music initiative.
Working together, MP3.com's scalable technology infrastructure will be available
to power Vivendi Universal's distribution network for the delivery of digital
music and other diverse content across multiple platforms. MP3.com represents a
key acquisition for Vivendi Universal and is expected to strongly reinforce its
digital efforts in the strategic areas of online music, subscriptions, branding,
technology and content. It is expected that MP3.com will continue to function as
a premier distributor of music content for all record labels and independent
artists.
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Representing one of the first projects between the two companies, it was also
recently announced that MP3.com would provide the back-end technology for
pressplay, the joint venture between Universal Music Group, a subsidiary of
Vivendi Universal, and Sony Music Entertainment. Pressplay is expected to offer
millions of music fans a broad catalog of music from top artists in multiple
genres in addition to unique programming through its subscription service. In
addition, MP3.com has become an affiliate of the pressplay online music
subscription service.
Commenting on the proposed merger, Robin Richards, president of MP3.com, said,
"MP3.com has the potential to be a key player in the expansion of Vivendi
Universal's online digital music initiative. Our engineering and technology
expertise creates a tremendous advantage for Vivendi Universal in shaping and
expanding the future of the online music industry."
THE MP3.com BUSINESS
MP3.com is a technology leader in the delivery of online music and is recognized
as one of the top worldwide Internet brands. During the second quarter, the
company continued to focus its attention on generating new and innovative
revenue streams, improving artist services, enhancing the consumer's experience
with their digital music, and expanding its business and enterprise offerings.
NEW CONSUMER PRODUCTS
The PREMIER LISTENER SERVICE, also known as PLuS, was launched late in the
quarter and represents MP3.com's first major push to monetize its consumer user
base. The new subscription service offers two pricing levels: $2.99 per month or
$29.99 annually giving consumers hundreds of thousands of songs from digital
artists plus subscription channels and commercial CDs in a single, easy-to-use
program. Consumers can now access many forms of their music collections in one
convenient location.
NETCDs are MP3.com's online-only version of its popular DAM CD product and can
be accessed through a user's My.MP3 account. Representing what the company
believes to be the future of CDs, NetCDs are digitally delivered products that
can be accessed from any Internet-enabled device.
A sister product to Back the Band, STATION SHOUTOUTS allow users to purchase a
30-character, linked message on any station page.
NEW ARTIST PRODUCTS
In the company's continuing effort to support digital artists and help them
succeed in the Internet marketing environment, MP3.com created the COPYRIGHT
WIZARD as a tool to file a copyright registration with the U.S. Copyright
Office. Since its launch in June, hundreds of digital artists have taken
advantage of this service.
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Complementing the existing suite of features available through PROMO AUCTIONS,
whereby artists and labels can gain additional exposure at MP3.com by bidding in
online auctions to secure highly visible positioning throughout the web site,
the company launched new auctions for email newsletters and MP3.com Messenger.
Throughout the quarter, MP3.com's MUSIC LICENSING PROGRAM witnessed a steady
adoption by representatives of the media, including film, television, web sites,
games, corporate sponsors and broadcast advertising. This new way to search,
listen to and license music gives digital artists additional exposure and music
supervisors a wealth of untapped talent.
BUSINESS AND ENTERPRISE OFFERINGS
Launched in early June, AUDIO HOSTING is MP3.com's B2B tool that leverages the
company's already existing audio file storage and distribution system to stream
high-quality audio content directly from MP3.com's servers via links on any web
site. Subscribers upload their own audio files in mp3 format, and then the
service provides hi-fi, lo-fi and download links for their content.
The MP3.com DEVELOPERS NETWORK is a resource created for developers and enlists
their support in developing next-generation products and services to enable
consumers to access MP3.com and their personal music content from any
application, web page or device. In the second quarter, the company released its
Music InterOperating System (Music IOS) with the MusicDB CD identification
service for developers seeking to enhance their products with artist, track and
title information.
MP3.com's PREMIUM PRODUCT SERVICE gives subscribing merchants and their products
an extra marketing push gaining valuable exposure to their core audiences.
Through this service, a merchant's product will receive featured placement on
the web site in the hardware/software section, including a product graphic, as
well as email marketing through MP3.com's hardware/software newsletter.
To provide the ultimate music experience for consumers, the company leveraged
its My.MP3 technology and launched PROMOTIONAL NETCDs. Offering music incentives
as added value to their product offerings, product partners such as Ericsson and
McAfee are using this product to reach Internet consumers. Consumers that
respond to these promotional offers receive a genre-based compilation CD of
various MP3.com digital artists.
Record labels, movie studios, game companies and independent artists are gaining
access to millions of MP3.com users through the use of the company's targeted
email product, SINGLESERVING. Ubi Soft International, a global producer,
publisher and international distributor of interactive entertainment products,
used this email marketing tool to promote its game Myst III: Exile. To date, the
song posted on MP3.com's web site, which is the same song in the game, has
received nearly 160,000 promotional song plays.
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MP3.com's BUSINESS MUSIC SERVICES (BMS), as well as its RADIO PROGRAM, continued
to move forward during the quarter. BMS currently has over 1,000 contract
locations and recently signed with Crows Nest Entertainment to take over the
account management, sales and service of 550 Petco stores and 125 Rubio's
restaurants reallocating the BMS staff's concentration to what it does best --
software and content development for businesses. The Radio Program increased the
number of affiliate radio stations to 243 utilizing MP3.com's web tool and music
charts. The company's syndicated radio shows air weekly on 123 stations with a
combined consumer audience of over 11.4 million listeners per week.
INTERNATIONAL EXPANSION
In Europe, MP3.com posted a 16 percent increase quarter-over-quarter in artists;
songs grew 19 percent and the number of emailable customers increased by 13
percent, demonstrating the company's continuing popularity overseas. During the
second quarter, the company worked with two technology giants, Microsoft and
Ericsson, to provide integrated marketing campaigns featuring the use of email
and site advertising, as well as specialized messaging to MP3.com users in
selected European markets using RDB cookie site advertising and targeted email.
Following the recent launch of our Asian Group and the introduction of
japan.mp3.com, MP3.com established strategic relationships with four new
Japanese record labels and their publishers making additional content available
to music fans and bringing popular Japanese music groups to the site including
heavy-metal, pop and rock acts.
KEY METRICS
As announced last quarter, the company's key metrics will focus on the number of
artists on the web site, number of songs to date, and the number of listens.
- The total number of approved artists rose to more than 165,000, an
increase of more than 9 percent over the first quarter and over double
the number of artists reported in the second quarter of 2000.
- The number of listens, which consists of songs delivered online, either
played or saved, was over 169 million, slightly below the 174 million
reported for the first quarter of 2001. When compared to the same
period one year ago, listens increased approximately 70 percent
year-over-year.
- During the quarter, MP3.com achieved a significant milestone as it
exceeded the million-song level with total approved songs ending the
quarter at 1,095,050. Artists continue to select MP3.com as their
primary choice in promoting their music online.
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QUARTERLY CONFERENCE CALL
Information not covered in this press release may be discussed in our quarterly
conference call scheduled for 1:30 p.m. PDT today. To listen to MP3.com's
quarterly conference call covering its second quarter 2001 financial and
operating results, interested parties can access a real-time audio web broadcast
at the MP3.com corporate web site at www.mp3.com and also at www.prnewswire.com.
For those unable to listen to the live broadcast, the call will be archived at
www.mp3.com and at www.prnewswire.com until 6:00 p.m. PDT, August 29, 2001.
ABOUT MP3.com
MP3.com, Inc. has created a unique and robust technology infrastructure designed
to facilitate the storage, management, promotion and delivery of digital music.
As the Internet's premier Music Service Provider (MSP), the company is dedicated
to giving consumers music when they want it and where they want it, using any
web-enabled device. The company's web site hosts what MP3.com believes is the
largest collection of digital music available on the Internet, with over one
million song and audio files posted from more than 165,000 digital artists and
record labels. Dedicated to growing the digital music space, the company's
products and services include on-demand subscription music channels, an
innovative business music services program, a syndicated radio program and
others. Additionally, through the company's MSP technology initiative and its
Music InterOperating System, MP3.com is partnering with a variety of
forward-looking businesses to expand its digital music strategy. MP3.com's
common stock is listed for trading on the Nasdaq National Market under the
ticker symbol MPPP. MP3.com, My.MP3, Singleserving, PLuS, NetCD, Copyright
Wizard and Station Shoutouts are trademarks or service marks of MP3.com. The
company is based in San Diego, California. For more information on MP3.com,
visit www.mp3.com.
NOTE CONCERNING PROXY MATERIALS
Vivendi Universal and MP3.com have filed a definitive proxy statement/prospectus
and other documents regarding the proposed merger described in this document
with the Securities and Exchange Commission. Investors and security holders are
urged to read the definitive proxy statement/prospectus because it contains
important information about Vivendi Universal and MP3.com and the proposed
transaction. A definitive proxy statement/prospectus has been sent to security
holders of MP3.com seeking their approval of the transaction. Investors and
security holders may obtain a free copy of the definitive proxy
statement/prospectus and other comments filed by Vivendi Universal and MP3.com
with the SEC at the SEC's web site at www.sec.gov.
MP3.com, Vivendi Universal and their respective directors, executive officers
and certain members of management and other employees may be deemed to be
participants in the solicitation of proxies of MP3.com stockholders to approve
the proposed merger. Such individuals may have interests in the merger including
as a result of holding options or shares of MP3.com stock. A detailed list of
the names, affiliates and interests of the
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participants in the solicitation is contained in the definitive proxy statement
that was filed by MP3.com with the SEC.
The definitive proxy statement/prospectus and other documents may also be
obtained free of cost by directing a request to the following Investor Relations
contacts:
Vivendi Universal, Investor Relations:
Paris: Ariane de Lamaze, 011-33-1-71-71-1084
New York: Eileen McLaughlin, 212-572-8961
For MP3.com Investor Relations: Karen Silva, 858-623-7222
Statements in this press release that are not strictly historical are
"forward-looking" statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such
statements include references to expected growth in content and other metrics on
the MP3.com web site; activities and events expected to occur in connection with
the company's various business groups, products, services and technological
initiatives; the company's proposed acquisition by Vivendi Universal; the
company's MSP and Music IOS business activities and strategic partnerships; the
company's anticipated expansion internationally; and activities related to
copyright lawsuits and other legal proceedings. These statements involve a high
degree of risk and uncertainty, are only predictions, and actual events or
results may differ materially from those projected in such forward-looking
statements. Factors that could cause or contribute to differences include risks
related to the company's various litigation proceedings, including but not
limited to the risk that all such proceedings may not be resolved favorably for
MP3.com; risks related to activities, events, benefits or specific synergies
expected to occur in connection with Vivendi Universal's proposed acquisition of
MP3.com including the risk that the required regulatory clearances or other
closing conditions might not be timely obtained or satisfied; risks related to
uncertainty regarding the projected growth of digital online music and related
industries; risks related to uncertainty regarding the company's ability to
build and sustain its technology, music and content infrastructure; risks
related to the company's new and uncertain business model; risks related to
uncertainty concerning expected growth or changes in MP3.com's online music
metrics, including industry or company changes with regard to the calculation of
such metrics; risks related to uncertainty regarding acceptance of the company's
products and services, including market acceptance of My.MP3, Music IOS and
related services; and risks related to the company's limited operating history
and risks associated with the company's rapid growth. All of these risks and
uncertainties referenced are more fully detailed from time to time in the
company's reports to the Securities and Exchange Commission, including its
report on Form 10-K for the year ended December 31, 2000 and any subsequent
reports on Form 10-Q.
The accompanying condensed consolidated statements of operations and balance
sheets are an integral part of this announcement.
# # #
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MP3.com, INC.
UNAUDITED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
----------------------------------- -----------------------------------
JUNE 30, 2001 JUNE 30, 2000 JUNE 30, 2001 JUNE 30, 2000
------------- ------------- ------------- -------------
Revenues $ 17,533 $ 20,178 $ 39,283 $ 37,673
Cost of revenues 2,513 3,812 5,567 7,568
------------ ------------ ------------ ------------
Gross profit 15,020 16,366 33,716 30,105
Operating expenses:
Selling and marketing 6,893 11,961 17,384 22,380
Engineering and product
development 5,259 6,125 10,854 11,404
General and administrative 4,730 6,597 10,286 14,359
Amortization of deferred
compensation and stock-based
compensation 746 1,934 1,717 6,336
------------ ------------ ------------ ------------
Total operating expenses 17,628 26,617 40,241 54,479
------------ ------------ ------------ ------------
Operating loss (2,608) (10,251) (6,525) (24,374)
Interest income, net 1,013 5,016 2,713 10,694
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Pro forma net loss $ (1,595) $ (5,235) $ (3,812) $ (13,680)
============ ============ ============ ============
Pro forma net loss per share:
Basic and diluted loss per share $ (0.02) $ (0.08) $ (0.06) $ (0.21)
============ ============ ============ ============
Weighted avg. shares outstanding 67,381,000 65,384,000 67,185,000 65,430,000
============ ============ ============ ============
Note 1: Pro forma results for the quarters ended June 30, 2001 and 2000 are
presented for informational purposes only and are not prepared in accordance
with generally accepted accounting principles. These results present the
operating results of MP3.com, excluding the following:
- During the three months ended June 30, 2001, amortization
expense for certain prepaid multimedia royalty licenses of
$1,689,000, representing the excess amount of straight line
amortization over units of measure according to the financial
terms of the license agreements. This charge would be included
in cost of revenues.
- During the three months ended June 30, 2001, amortization of
goodwill related to our acquisition of the remaining 53.5% of
MP3Radio.com L.L.C. from Cox Interactive Media, Inc. of
$350,000. This amortization would be included in general and
administrative.
- During the three months ended June 30, 2001, a charge of
$303,000 associated with legal costs related to insurance
recovery. This charge would be included in general and
administrative.
- During the three months ended June 30, 2001, a charge for
acquisition costs of $3,160,000 related to the proposed merger
between MP3.com and Vivendi Universal. This charge would be
included as an operating expense.
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- During the three months ended June 30, 2001, a charge of
$3,270,000 related to the class action and derivative
shareholder lawsuits. This charge would be included as an
operating expense.
- During the three months ended June 30, 2001, a charge of
$1,200,000 for impairment of strategic investments. This charge
would be included as a non-operating expense.
- During the three months ended June 30, 2000, a charge of
$150,000,000 for the estimated total costs related to the
copyright issues associated with the My.MP3.com service
including the lawsuits filed by major recording companies and
other parties. Copyright issues also include, but are not
limited to, publishing rights, non-major label content, and
legal and advisory fees. This charge would be included as an
operating expense.
- During the three months ended June 30, 2000, a charge of
$21,570,000 for impairment of strategic investments. This charge
would be a non-operating expense.
- During the three months ended June 30, 2000, non-operating
minority interest losses in an unconsolidated subsidiary of
$263,000.
Note 2: Pro forma results for the six months ended June 30, 2001 and 2000 are
presented for informational purposes only and are not prepared in accordance
with generally accepted accounting principles. These results present the
operating results of MP3.com, excluding the following:
- During the six months ended June 30, 2001, amortization expense
for certain prepaid multimedia royalty licenses of $3,510,000,
representing the excess amount of straight line amortization
over units of measure according to the financial terms of the
license agreements. This charge would be included in cost of
revenues.
- During the six months ended June 30, 2001, amortization of
goodwill related to our acquisition of the remaining 53.5% of
MP3Radio.com L.L.C. from Cox Interactive Media, Inc. of
$1,012,000. This amortization would be included in general and
administrative.
- During the six months ended June 30, 2001, a charge of $303,000
associated with legal costs related to insurance recovery. This
charge would be included in general and administrative.
- During the six months ended June 30, 2001, a charge for
acquisition costs of $3,160,000 related to the proposed merger
between MP3.com and Vivendi Universal. This charge would be
included as an operating expense.
- During the six months ended June 30, 2001, a charge of
$44,698,000 related to the class action and derivative
shareholder lawsuits. This charge would be included as an
operating expense.
- During the six months ended June 30, 2001, a charge of
$1,200,000 for impairment of strategic investments. This charge
would be included as a non-operating expense.
- During the six months ended June 30, 2000, employee related
costs of $6,583,000 of which $6,030,000 is non-cash stock-based
compensation associated with the acceleration of stock option
vesting. All of these costs relate to selling and marketing.
- During the six months ended June 30, 2000, a charge of
$1,704,000 associated to acquisition-related costs related to
the TransComputing International Corporation (d.b.a.
seeUthere.com) pooling transaction, which was not completed.
These costs would be included as an operating expense.
- During the six months ended June 30, 2000, a charge of
$150,000,000 for the estimated total costs related to the
copyright issues associated with the My.MP3.com service
including the lawsuits filed by major record companies and other
parties. Copyright issues also include, but are not limited to,
publishing rights, non-major label content, legal and advisory
fees. This charge would be included as an operating expense.
- During the six months ended June 30, 2000, a charge of
$21,570,000 for impairment of strategic investments. This charge
would be included as a non-operating expense.
- During the six months ended June 30, 2000, non-operating
minority interest losses in an unconsolidated subsidiary of
$1,668,000.
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MP3.com, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JUNE 30, 2001 DECEMBER 31, 2000
------------- -----------------
(UNAUDITED)
Assets
Cash, cash equivalents & marketable
securities $ 76,805 $ 98,846
Restricted cash -- 30,000
Accounts and unbilled receivables, net 5,720 6,430
Prepaid expenses and multimedia
content royalties and other current
assets 24,038 19,829
-------- --------
Total current assets 106,563 155,105
Property and equipment, net 17,431 20,270
Strategic investments, net 10,210 11,410
Prepaid multimedia content royalties
and marketing and promotion
expenses and other assets 47,553 51,814
-------- --------
Total assets $181,757 $238,599
======== ========
Liabilities and stockholders' equity
Accounts payable, accrued litigation settlement
costs and accrued expenses $ 59,436 $ 63,390
Deferred revenues 2,284 1,104
-------- --------
Total current liabilities 61,720 64,494
Other liabilities 456 389
Total stockholders' equity 119,581 173,716
-------- --------
Total liabilities and stockholders' equity $181,757 $238,599
======== ========
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