Significantly higher operating expenses resulted in a net loss of $1.5 million at MediaBay for the first quarter ended March 31, despite a 12.8% increase in sales, to $10.7 million. The higher expenses included an increase of $513,000 in bad debt expenses, which MediaBay blamed on a rise in subscriptions sold over the Internet: those customers have higher nonpay rates than members added through direct mail. Costs also included $420,000 in legal fees in connection with an unspecified lawsuit filed by MediaBay.

Among MediaBay's segments, its Radio Spirits unit had the strongest sales gain in the quarter, with revenue up 42%, to $2.6 million. The World's Greatest Old-Time Radio continuity program, which Radio Spirits launched in last year's third quarter, had sales of $648,000 in the period, and a radio advertising campaign helped lift direct mail sales of its radio programs. Sales in MediaBay's Audio Book Club division rose 2.5%, to $8.1 million.

MediaBay chairman Carl Wolf said that while the company was encouraged by its sales increase, it was disappointed about the net loss. The company has had losses for the last five years.