Empire-building Vitaminic swallows Peoplesound

Vitaminic hopes that its latest acquisition will give it the power to match Napster and MP3.com

Digital music dot-com Vitaminic's goal of building a global site moved a step forward today with the acquisition of rival MP3 download site Peoplesound.

Rumours of the deal surfaced late last week. The takeover will cost Vitaminic just under £21m, which it is paying in newly issued shares to Peoplesound's investors, which include Europ@web and Ladybird Capital. According to a spokesman, this means that no-one who put money into Peoplesound will be left out of pocket. "This deal is good news for the Internet community, because in this takeover everyone will recoup their investment," said a Peoplesound spokesman.

The deal will make Vitaminic the largest digital music download site in Europe, and the third largest worldwide behind MP3.com and Napster.

Both Vitaminic and Peoplesound were set up in 1999 in response to the MP3 boom. Each allowed users to download free songs from unsigned bands in the MP3 format, or pay to download a track from an artist signed to an independent or major label. According to the Peoplesound spokesman, it is "too early to say" whether Peoplesound will continue as a separate Web site or if it will be assimilated into Vitaminic.

Peoplesound was set up by Ernesto Schmitt, who became one of the UK's better known Web entrepreneurs. He had hoped to float Peoplesound on the stock market, but this plan -- like those of many dot-coms -- was foiled by the Internet crash of spring 2000. Schmitt is expected to continue to work with Peoplesound, but the new management structure has not yet been agreed.

Gianluca Dettori, chief executive officer of Vitaminic, claimed that the deal made good business sense because the two companies were dominant in different geographical territories and had complementary resources. "Peoplesound's attractive portfolio of services for the music industry fits very well with our strategy including Zipmind, our recently created publishing company," said Dettori in a statement.

The Internet is changing the face of the music industry forever. Find out more in ZDNet UK's MP3 News Section.

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