Flush with $35 million in new financing from a group of institutional investors that includes Satellite Asset Management, Goldman Sachs and Coghill, MediaBay CEO Jeffrey Dittus said the company will push ahead with its plan to build a digital distribution platform for audio. "Getting the debt off our shoulders feels fantastic," Dittus said.

MediaBay will use the new funding to repay its senior debt and to convert its subordinated debt and some preferred stock to common stock. After the debt restructuring, MediaBay will still have $16 million in cash to help finance its plans to expand its digital distribution business.

Dittus said MediaBay will launch its Larry King On-line Audiobook and Entertainment Club next month. The King service will serve as a prototype for other branded offerings. "We think celebrities, authors and entertainers can be used to drive traffic," Dittus said. He declined to discuss the business model for the King club, noting only that it will involve "a monthly subscription fee for a defined amount of content."

The company should also begin offering digital audio through Microsoft's MSN Music service "by the end of the second quarter," Dittus said. The service will feature digital editions of audio works from a number of publishers, including Random House, Simon & Schuster, Penguin and HarperCollins. Dittus is also high on prospects for a new continuing-education line to be headed by Greg Voynow.