CD Wow!, the UK online music retailer is to start selling digital music downloads, courtesy of distributor Loudeye, the pair announced today.

Details are sketchy - the company did not respond to our request for more information. But CD Wow! pitches itself as a low-cost retailer, with many of the CDs it offers priced below the £7.99 digital music services like Napster and iTunes commonly charge. CD Wow!'s CD prices included postage and packing.

CD Wow! may have to price album downloads and, by implication, single-track downloads too, below the equivalent CD - or the service will look expensive. This is unlikely to inconvenience Apple - CD Wow's downloads are unlikely to be iPod-compatible, even though the company makes a big play of the iPod line up it offers for sale - but it may well cause trouble for other Windows Media Audio-based suppliers.

Like other cut-price online retailers, CD Wow! has won increasing business from music, DVD and games buyers. The company has also built a number of partnerships with well known newspapers, ISPs and websites to provide CD retail services. Unlike pure-play download services, CD Wow! already has plenty of traction with UK music buyers.

This is good news for Loudeye, which this week announced a first quarter net loss of $7.5m (seven cents a share) on sales of $6m, up 200 per cent on the year-ago quarter, but down nine per cent on Q4 FY2004's $6.6m sales total. Similarly, net loss was up from the previous quarter's $5.6m (seven cents a share) and from the year-ago quarter's loss of $2.8m (four cents a share).

Deferred revenue - essentially money received for work not yet undertaken - came to $6.5m at the end of the quarter, up from $5.7m at the end of Q4 FY2004 and $796,000 at the end of Q1 FY2004.

Loudeye expects to see sales of around $35m for FY2005 as a whole. It will not say when or if it expects to become profitable. It had just under $35m in the bank at the end of the quarter. ®

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