As part of its ongoing review of operations, which started over a year ago, MediaBay recorded $13.3 million in asset write-downs and strategic charges for the third quarter ended September 30, 2001. The write-downs include approximately $1.1 million in costs associated with MediaBay's decision to close the Schaumburg, Ill., offices of its Radio Spirits subsidiary and move those operations to the company's Cedar Knolls, N.J., headquarters. The move is expected to be completed within the next few months and will result in a few job losses, according to MediaBay chief financial officer John Levy.
Other initiatives that are reflected in the charges include the write-down of inventory at Radio Spirits and Audio Book Club as a result of MediaBay's decision to offer fewer items for sale through those units. In addition, MediaBay has written down about $1.3 million in costs and expenses related to its downloadable audio business. The company has decided to "limit" its investment and marketing efforts in the downloadable field. "We still believe in downloadable audio, but the market has not evolved as quickly as anticipated," Levy told PW. According to MediaBay's quarterly filing with the Securities and Exchange Commission, the company had sales of $27,000 through Mediabay.com, its downloadable audio arm, in the most recent quarter, down from sales of $181,000 in last year's comparable quarter. For the nine months, sales were $230,000, compared to $1.2 million in the same period last year, and the unit had a loss of $2.4 million.
Despite the disappointing performance of Mediabay.com, total sales for the entire company rose 1.5%, to $9.8 million, in the third quarter. The Audio Book Club division did better than expected with revenues rising 9.0%, to $7.7 million, while sales at Radio Spirits fell to $2.2 million, from $2.7 million. Levy noted that during the quarter MediaBay's return rate fell to 21.1% from 24.3%, and its gross margins were up. The company also cut general and administrative costs by $550,000. "The company is performing much, much better than a year ago," Levy maintained, noting that the publisher had cash flow from operations of $195,000 in the period. The net loss for the quarter, including the $13.3-million charge, was $16.7 million, compared to a loss of $4.1 million in last year's third quarter.
For the nine-month period, total revenues fell 8.1%, to $30.4 million, and the net loss was reduced to $8.2 million, from $10.8 million.