Columbia House Announces Reorganization

The Columbia House Company, the world's largest direct marketer of music and video entertainment products, announced a sweeping reorganization designed to create a more streamlined company with an emphasis on e-commerce. The announcement was made by Scott Flanders, Chairman and CEO of the new company that will result from the pending merger of Columbia House and CDNOW. When the merger is completed, there will be three divisions of the new company - Columbia House, columbiahouse.com and CDNOW - all reporting to Flanders. Columbiahouse.com To Accelerate Online Migration Of Columbia House MembersThe new columbiahouse.com division will build on the company's existing Web business, which ended 1999 with sales of $100 million and over 3 million active accounts. One of the division's goals is to accelerate the online migration of Columbia House's 13 million offline members. As part of the strategy, Flanders named Bill Ostroff President of columbiahouse.com. and Brian Wood President of Columbia House. ""We are making a significant strategic investment in columbiahouse.com to enhance the value of online membership and to offer new services that will make it easier for more people to buy more products from us than ever before,"" said Flanders. ""We also anticipate substantially lowering our infrastructure and transaction costs as customers take advantage of our expanded online services. ""Bill Ostroff is an outstanding choice to lead our new online division,"" Flanders continued. ""He has been instrumental in creating our online strategy and in growing our business to its current levels, and with these additional resources I look forward to our becoming a leader in the fast growing online entertainment marketplace."" Ostroff joined the company in 1998 as Vice President, Columbia House Interactive. From 1997 to 1998, Ostroff was General Manager of Newyork.Citysearch.com, an online guide to New York City. He worked at Ticketmaster from 1986 to 1997 where he held a variety of positions including Vice President, New Media, and Vice President, Marketing. Ostroff was a member of the original team that developed and launched Ticketmaster.com. He received his MBA from the University of Chicago in 1990.New Executive Named To Head Columbia HouseFlanders also promoted Brian Wood, from Executive Vice President of the company's video unit, to President of Columbia House. In his new role, which is effective immediately and reports directly to Flanders, Wood will oversee the company's core music and video divisions, which serve 13 million members and generate a billion dollars a year in revenues.""Brian now oversees a billion-dollar division that successfully serves 13 million members,"" said Flanders. ""We fully recognize that many of these members are satisfied ordering music and video through the mail, and we intend to continue to serve their needs with the same level of excellence and support.""Brian's leadership, strategic vision and management talent established Columbia House as one of the pioneering companies in the video business in the early '80s,"" said Flanders. ""He skillfully guided the fortunes of our video business, so that today it accounts for nearly half of the revenue that The Columbia House Company generates each year. Brian has also done a remarkable job positioning the video division to capitalize on the growth of the DVD business, which is one of the fastest-growing home entertainment technologies ever available to consumers."" Wood has led the Columbia House video business since its inception in 1981. He is one of the industry's pioneers in establishing the lucrative home video sell-through business. He graduated from Carnegie Mellon University with a Masters in Industrial Administration in 1976.New Chief Information Officer NamedFlanders also announced the appointment of Tom Beauchamp to the newly created position of Senior Vice President, Chief Information Officer of Columbia House. He will hold the same position in the new public company to be formed upon completion of the merger of Columbia House and CDNOW. Beauchamp is an experienced senior technology executive who specializes in working with large multidivisional companies and building modern information technology infrastructures that allow divisions to communicate and interact more efficiently. ""Tom's mission is to help us use technology more efficiently to improve our offline business and build our Web infrastructure technology,"" said Flanders. ""His demonstrated skill in this area will help us integrate our e-commerce efforts more successfully into our existing business, which we believe will result in greater cost reductions."" Beauchamp was formerly senior vice president and chief information officer at Oxford Health Plans. In 1979, he received an MBA in Finance from California State University, Fullerton.Columbia House Chairman And CEO To RetireFlanders also announced that Richard Wolter, Chairman and CEO of The Columbia House Company, will retire after 34 years with the company. For over three decades, Wolter has played a leading role in the growth and expansion of Columbia House, especially in positioning the company to capitalize on the emerging CD and VHS formats. In 1983, he was appointed President and in 1993, he became Chairman and CEO. During Wolter's years as president and chairman, the company's sales increased five-fold and its membership expanded from four million to 16 million members. ""Richard is one of the true giants in the direct marketing industry and his contributions have helped establish Columbia House as the world's leading direct marketer of home entertainment products,"" said Flanders. ""We are fortunate that Richard has agreed to continue with the company during the transition period. He will oversee financial and legal operations until new holding company executives are appointed to lead those areas. Richard will also continue to supervise operations on an interim basis. Thereafter, he will continue his association with us as a consultant. His direct marketing skills and breadth of experience will be invaluable resources as we move forward.""About Columbia HouseSince its inception in 1955, The Columbia House Company has established itself as the world's largest direct marketer of music and video home entertainment product. With more than 16 million members in the United States, Canada and Mexico, the company provides direct-to-consumer marketing of more than 16,000 music titles and 7,000 video titles through its entertainment clubs. Last September, Scott Flanders was named Chairman and CEO of the new public company that will result from the proposed merger of Columbia House and CDNOW. In 1998, he co-founded Telstreet.com, an e-commerce company specializing in helping consumers shop for wireless products and services. Prior to joining Telstreet.com, Flanders served as president of Macmillan Publishing, the world's largest computer and reference publisher. Flanders received a J.D. from Indiana University and is also a C.P.A. In July 1999, CDNOW, Inc., a leader in music and video commerce, content and community, entered into a definitive agreement with Sony Corporation of America and Time Warner Inc. to merge with Columbia House, which is owned equally by Sony Corporation and Time Warner Inc. The new public company that will result from the proposed merger will be owned 37 percent each by Sony and Time Warner. CDNOW's existing stockholders will own the remaining 26 percent. The changes in today's announcement do not involve CDNOW, which will merge with Columbia House after receipt of the necessary regulatory and shareholder approval.

Source: The Columbia House Company