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Tuesday, May 2, 2006 - Page updated at 12:00 AM

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Seattle-based Loudeye sells U.S. operations to Muze for $11 million

Seattle Times technology reporter

Seattle-based digital music company Loudeye has sold its U.S. operations to entertainment directory provider Muze for $11 million and said it will focus the bulk of its efforts on Europe.

Loudeye will remain headquartered in Seattle, with a handful of executives here, and will continue as a publicly traded company, said Chief Executive Mike Brochu. About 40 employees will go to Muze, which is opening a Seattle office. No employees are expected to be laid off, Brochu said.

In the deal, which closed Sunday, Muze is buying Loudeye's U.S.-based encoding services and its system for delivering digital media to vendors that sell songs and videos. Loudeye doesn't sell to customers directly, but supplies retailers with content and other services.

In all, Muze is buying about a quarter of Loudeye's total business. Muze provides entertainment product information to eBay, Tower Records, Amazon.com and others.

Most of Loudeye's employees will now be based in offices around Europe, where the bulk of the company's customers are today. Loudeye gained many of those customers in 2004, when it purchased On Demand Distribution (OD2), a company co-founded by musician Peter Gabriel.

Loudeye originally intended to meld OD2's operations with its U.S.-based business, but because the industry and the market were moving so rapidly it ended up developing both platforms on parallel tracks, Brochu said. Each platform had its own developers and code base, he said, and bringing them together was becoming problematic.

"We had to make a choice," he said. Moving to one platform will cut down on Loudeye's expenses and overlap, he said.

Loudeye's share price fell 5 cents, or 10 percent, on the news Monday to close at 44 cents. The Nasdaq Stock Market has said that Loudeye is in danger of being delisted because its share price has been less than $1 for 30 days.

The company is scheduled to announce first-quarter financial results next Tuesday.

Kim Peterson: 206-464-2360 or kpeterson@seattletimes.com

Copyright © 2006 The Seattle Times Company

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