America Online, Inc., today announced that it has acquired the business of a digital music subscription company called MusicNow LLC. The agreement was signed September 27th and closed early this week. Financial terms of the deal were not disclosed. The company was previously held by Circuit City Stores, Inc., of Richmond, Virginia.

AOL also announced that a broad public preview of the new web-based digital music service is now available ( http://www.aolmusicnow.com ). AOL will be gradually upgrading current MusicNet @ AOL subscribers to the new service, called “AOL Music Now”.

Founded as “FullAudio” in 1999 and purchased by Circuit City in 2004, MusicNow will continue to be based in Chicago, Illinois. AOL Music Now will operate as a stand alone, wholly-owned subsidiary of AOL Premium Services LLC, a subsidiary of AOL in the Digital Services business unit. The company’s 40 employees, including President Gary Cohen, will report to Amit Shafrir, President, AOL Premium Services, LLC; and Ed Fish, Senior Vice President and General Manager, AOL Premium & Subscription Services.

“The MusicNow transaction allows us to superserve our AOL members and expanding web audience with a truly best-in-class, full-service, digital music platform – giving us the opportunity to offer an unparalleled music service,” said Mr. Fish in the press release. “Combined with leading programming on AOL Music, the easy-to-use features for music browsing, discovering, sharing, and purchasing of MusicNow provides a new level of customization and personalization of online music. AOL’s users have been asking for these next-generation features to be a part of their music experience – and AOL Music Now will deliver them.”

“We’re thrilled to join AOL,” said Gary Cohen, President of MusicNow in the press release. “Over the past six years, MusicNow has focused on building an easy-to-use service of unprecedented accessibility that delivers a highly personalized experience. The goal now is to become the number one music service. With AOL’s entertainment properties, scale, and marketing opportunities, we’re confident we’ll get there. It’s a powerful opportunity.”

Representing the next generation of digital music services, AOL Music Now will provide visitors with the option to browse and purchase music on an a la carte ($.99 per track) or subscription basis from any Internet-connected PC, without downloading separate media player software. Subscriptions to the new service will be available for $9.95 per month for unlimited streaming and downloading to a computer, or $14.95 for unlimited streaming and downloading to a computer and any ‘PlayForSure’ compatible portable music device. Songs can be managed with a Windows Media Player, or compatible player.

The AOL Music Now service will also offer unique personalization features, such as daily custom playlists and community features, such as the ability to view and share music profiles with other visitors. The service will be integrated with the AOL.com portal ( http://www.aol.com ) and AOL Music ( http://www.aolmusic.com ).

MusicNow carries a complete digital music collection of over one million songs from the four major music labels – EMI, Sony/BMG, Universal Music Group, and the Warner Music Group. It has also been successful at building relationships with an expanding list of independent labels — including V2, Rounder, Epitaph, Tommy Boy, Roadrunner, Blue Note, The Orchard, and Astralwerks.

During the current AOL Music Now preview period, existing subscribers to both the MusicNow and the MusicNet @ AOL services will be notified via email that they will be upgraded to the new AOL Music Now service in the coming months. Subscribers to each of these services will maintain their current, respective price plans under AOL Music Now. New subscribers to AOL Music Now can select from one of two price plans ($9.95/month or $14.95/month).

MusicNow, LLC is AOL Inc.’s fourth announced corporate acquisition in 2005 – following the acquisitions of Weblogs, Inc. in September, and Xdrive, Inc. and Wildseed, Ltd. in August.

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