In a move that could slow down growth for major online music retailers such as CDNow (Nasdaq: CDNW) and Amazon.com (Nasdaq: AMZN), the two largest record companies in the U.S. announced today that they are teaming up to sell music online.
Universal and BMG have agreed to a joint venture to create a series of Web sites to sell music. Shares of Universal’s parent company Seagrams (NYSE: VO) were up 3-13/16 to 58-3/4 in early trading. BMG, meanwhile, is owned by German media company Bertelsmann AG. Amazon.com was trading down 11-1/2 to 171-3/8, and CDNow fell 7/8 to 15-3/16.
Amazon.com and CDNow have to be concerned about the possibility of more record companies opening up their own online stores and especially worried about whether some of these companies will stop selling their products to online retailers.