Loudeye Announces Record Fourth Quarter and Full-Year 2004 Revenues and Provides Guidance for Significant 2005 Revenue Growth

Loudeye Announces Record Fourth Quarter and Full-Year 2004
Revenues and Provides Guidance for Significant 2005 Revenue Growth
Fourth Quarter Revenues Increase 124% From Prior Year and 29% From Prior
Quarter; Loudeye Guides That It Expects Revenues to More Than Double in 2005
Versus 2004 


SEATTLE, March 1  /PRNewswire-FirstCall/ -- Loudeye Corp. (NASDAQ:LOUD), a
worldwide leader in business-to-business digital media solutions, today
announced preliminary financial results for the fourth quarter and fiscal year
ended December 31, 2004.

Fourth Quarter and Fiscal Year 2004 Financial Highlights

-- Revenues. Revenues increased to $6.5 million in the fourth quarter, compared
with revenues of $5.1 million in the third quarter of 2004 and $2.9 million in
the prior year fourth quarter.  This represents a 29% increase from the third
quarter of 2004 and a 124% increase from the prior year fourth quarter. 
Contributing to the overall increase, revenues from Loudeye's digital music
store services grew to $3.5 million in the current quarter, an increase of 87%
from the third quarter of 2004.  For the year ended December 31, 2004,
Loudeye's revenues were $16.7 million, compared to $11.9 million in the prior
year, an increase of 40%.

-- Deferred revenue.  Deferred revenue was $5.7 million at quarter end,
compared with $5.5 million as of September 30, 2004 and $0.7 million as of
December 31, 2003.

-- Net Loss.  For the fourth quarter of 2004, GAAP net loss was $5.5 million or
$0.07 per share, compared to a GAAP net loss of $5.3 million or $0.07 per share
in the third quarter of 2004 and $1.7 million or $0.03 per share in the fourth
quarter of 2003. For the year ended December 31, 2004, GAAP net loss was $16.3
million or $0.22 per share, compared to a GAAP net loss of $19.2 million or
$0.39 per share for 2003.  Included in GAAP net loss for the fourth quarter of
2004 and the year ended December 31, 2004 were net foreign exchange transaction
losses of approximately $1.0 million and $0.8 million, respectively.  There
were no foreign exchange transaction gains or losses for the year ended
December 31, 2003 and the quarters ended September 30, 2004 and December 31,
2003.

-- Pro Forma Net Loss.*  Pro forma net loss for the quarter totaled $3.5
million or $0.04 per share, compared to a pro forma net loss of $4.3 million or
$0.05 per share in the third quarter of 2004 and $0.7 million or $0.01 per
share in the prior year fourth quarter. For the full year 2004, pro forma net
loss was $12.1 million or $0.16 per share, compared to a pro forma net loss of
$6.6 million or $0.13 per share for 2003.

-- Cash and Investments.  Cash, short-term, long-term and restricted
investments were approximately $43.7 million as of December 31, 2004.

* Pro forma net loss excludes charges related to depreciation and amortization
expense, charges related to stock-based compensation, increase in fair value of
common stock warrants, gain on sale of media restoration assets, net interest
income or expense, foreign exchange transaction gain or loss, and special
charges.  A reconciliation of Loudeye's GAAP financial results with its pro
forma financial results is set forth below.

Recent Highlights

-- Announced new or expanded digital music store services in the fourth quarter
of 2004, including new or expanded services for Coca-Cola, Home Entertainment
AB, Migros, Mobitel, MTV and Musica.

-- Signed a multi-year, multi-million dollar agreement to power a privately
branded digital music service for a leading national physical retailer,
scheduled to be launched in the Fall of 2005.

-- Launched a multi-year, strategic collaboration between Loudeye and Nokia to
provide a complete, privately branded mobile music service for operators in
over 30 countries worldwide.  These services benefit from a recently announced
long-term collaboration between Microsoft and Nokia regarding digital media
format support on Nokia handsets and the Windows Media Player.

-- Completed a $25.2 million private placement of common stock and warrants
with institutional investors.

-- Appointed seasoned technology veteran Mike Brochu president and chief
executive officer. Brochu brings over 20 years of senior level experience to
Loudeye, including senior executive and directorship positions in emerging
growth technology, software and digital entertainment companies, most recently
at Primus Knowledge Solutions and Sierra On-Line.

"Our record revenues in the fourth quarter were primarily driven by growth in
our digital music store business, which delivered a significant increase in
consumer transactions through our white-labeled services globally. Revenues
increased both due to new stores launched worldwide and increased traction with
existing stores, benefiting from increased marketing and consumer adoption,"
said Mike Brochu, Loudeye's president and chief executive officer. "We were
successful in 2004 in achieving our strategic goals of global expansion, record
revenues and an improved balance sheet.  With the market for digital media
distribution growing rapidly via online and mobile services, our global
deployments and advanced mobile platform have positioned the company well for
continued financial and operational growth in 2005."

Forward-Looking Financial Guidance

While future results are subject to change, Loudeye currently anticipates that
revenues for the full-year 2005 will be approximately $35 million to $40
million, with slight to moderate revenue growth in the first quarter of 2005
compared to the fourth quarter of 2004, and stronger sequential quarterly
revenue growth for the remainder of the year. Loudeye anticipates that its pro
forma net loss will be wider in the first quarter of 2005 as compared to the
fourth quarter of 2004, due primarily to charges for severance expenses and
Sarbanes Oxley compliance-related expenses, in aggregate totaling approximately
$0.7 million in the first quarter.  Loudeye expects to achieve pro forma
profitability by the end of 2005.

"Our expectation for significant revenue growth in 2005 is supported by current
growth trends in our existing online digital music distribution services as
well as positive industry trends overall.  Our ability to achieve the high end
of the guidance range is dependent in part on continued development of the
emerging mobile music distribution sector and increased penetration of 3G and
other broadband mobile services," said Larry Madden, Loudeye's executive vice
president and chief financial officer.  "This anticipated growth, combined with
a balance between continued investment in R&D and a focus on operational
efficiencies, will enable us to achieve our pro forma profitability guidance by
the end of 2005."

Forward-looking financial guidance reflects management's expectations as of the
date of this release and is based upon limited available information which is
dynamic and subject to risk and uncertainty.  Loudeye's forward guidance for
2005 excludes the impact of accounting changes relating to stock compensation,
which are currently scheduled to be effective in the third quarter, and any
potential future acquisitions. Results may be materially affected by many
factors including those described in the Forward-Looking Statements section
below.

The historical results below represent management's current expectations and
are preliminary and may be subject to change based upon the completion of the
2004 audit and the filing of Loudeye's Form 10-K for the fiscal year ended
December 31, 2004.

Fourth Quarter 2004 Webcast Information

Loudeye management will conduct an audio webcast to discuss these financial
results.  The public is invited to listen in on this webcast. Management will
discuss financial and operating results for the quarter and end the call with a
question and answer session.  Management will also provide a slide presentation
to accompany its statements, available in conjunction with the audio webcast. 
Information regarding the fourth quarter 2004 results' webcast and slide
presentation is as follows:

   Date:                Tuesday, March 1, 2005
   Time:                5:00 p.m. EST / 2:00 p.m. PST
   Audio Webcast:       5:00 p.m. EST / 2:00 p.m. PST; Webcast from
                        http://www.loudeye.com/en/aboutus/earningscalls.asp
                        This webcast will be available until March 16, 2005
                        at 5:00 p.m. EST
   Slide Presentation:  Participants accessing the audio webcast will be
                        able to view an accompanying management slide
                        presentation synchronized with the audio webcast.

  About Loudeye Corp.


Loudeye is a worldwide leader in business-to-business digital media solutions
and the outsourcing provider of choice for companies looking to maximize the
return on their digital media investment. Loudeye combines innovative products
and services with the world's largest music archive, a broad catalog of
licensed digital music and the industry's leading digital media infrastructure,
enabling partners to rapidly and cost effectively launch complete, customized
digital media stores and services. For more information, visit
http://www.loudeye.com/.

Forward-Looking Statements

This press release, management's audio webcast and the slide presentation
accompanying management's audio webcast contain forward-looking information
within the meaning of the Private Securities Litigation Reform Act of 1995,
including forward-looking financial guidance such as statements about expected
revenues for the year ended December 31, 2005, sequential quarterly growth
rates for 2005, pro forma net loss for the first quarter of 2005 and pro forma
profitability targets for 2005. The words or phrases "expects" and
"anticipates" and similar words and phrases are intended to identify such
forward-looking statements. As disclosed in our quarterly report on Form 10-Q/A
for the quarter ended September 30, 2004, we have identified material
weaknesses in our internal control over financial reporting. The material
weaknesses we have identified to date relate to insufficient staffing,
competence and controls surrounding adequate monitoring and oversight within
our accounting and financial reporting functions and insufficient analysis,
documentation and review of the selection and application of generally accepted
accounting principles to significant non-routine transactions. We also expect
to conclude that we will not be able to demonstrate through testing that our
internal control over financial reporting was effective as of December 31, 2004
because our remediation efforts of the material weaknesses discussed above were
not complete as of the December 31, 2004 measurement date. We have identified
additional deficiencies in internal control over financial reporting which we
are in the process of evaluating to determine whether the deficiencies
constitute significant deficiencies or material weaknesses, and we may identify
further material weaknesses during the course of management's assessment of our
internal control over financial reporting. The existence of a material weakness
or weaknesses is an indication that there is more than a remote likelihood that
a material misstatement of our financial statements will not be prevented or
detected in a future period. The forward- looking statements contained in this
press release are based on current estimates and actual results may differ
materially due to risks, including the completion of Loudeye's review of its
financial performance for the fourth quarter and year ended December 31, 2004,
and completion of Loudeye's audit for the fiscal year ended December 31, 2004;
performance and integration of our new president and chief executive officer;
the possibility of adverse changes in the market for distribution of digital
audio and video that Loudeye serves; adverse or uncertain legal developments
with respect to copyrights surrounding the creation and distribution of digital
content; pricing pressures and other activities by competitors; the failure of
Loudeye's hosting infrastructure; the complexity of Loudeye's services and
delivery networks; any problems or failures in the structure, complexities or
redundancies of Loudeye's network infrastructure; failures in third party
telecommunication and network providers to provide required transmission
capacity; lack of market acceptance for Loudeye's products and services; the
possible delay in the adoption of digital media or related applications on the
web in general; and other risks set forth in Loudeye's most recent Form 10-Q,
Form 10-K and other SEC filings which are available through EDGAR at
http://www.sec.gov/. Loudeye assumes no obligation to update the
forward-looking statements.

Use of Non-GAAP Financial Information

This press release, management's audio webcast and the slide presentation
accompanying management's audio webcast contain financial metrics that are not
based on generally accepted accounting principles in the United States, or
GAAP. Management believes the pro forma presentation enhances an overall
understanding of Loudeye's financial performance, and is used by management for
that purpose.  To supplement Loudeye's consolidated financial statements
presented on a GAAP basis, we have included non-GAAP "pro forma" measures of
operating results which exclude certain costs and expenses identified below.
The pro-forma net loss and pro forma net loss per share presented in the press
release and webcast exclude charges for depreciation and amortization expense,
charges related to stock-based compensation, increase in the fair value of
common stock warrants, gain on the sale of media restoration assets, net
interest income or expense, foreign exchange transaction gain or loss and
special charges.  Included below in this press release is a tabular
reconciliation of the non-GAAP financial measures to Loudeye's GAAP financial
results for the quarter ended December 31, 2004.

Estimated pro forma profitability provided in Loudeye's Forward-Looking
Financial Guidance above is calculated consistently with Loudeye's historical
practice of calculating pro forma net loss by excluding certain charges,
expenses and one-time gains or losses, such as depreciation and amortization
expense, charges related to stock-based compensation, increase in the fair
value of common stock warrants, gain on the sale of media restoration assets,
net interest income or expense, foreign exchange transaction gains or losses
and special charges.  Because these charges, expenses, gains or losses and
one-time items that we exclude in calculating pro forma net loss are subject to
change and fluctuation, we are currently not providing guidance concerning when
we expect to report GAAP net income.

Since Loudeye has historically reported non-GAAP results to the investment
community, management believes the inclusion of non-GAAP financial measures
provides consistency in its financial reporting.  Further, these non-GAAP
results are important indicators that management uses for planning and
forecasting in future periods and for making financial and operating decisions.
Although Loudeye believes, for the foregoing reasons, that its presentation of
non-GAAP financial measures enhance investors' understanding of Loudeye's
business and performance, these non-GAAP financial measures are inherently
limited in that they exclude a variety of charges and credits that are required
to be included in a GAAP presentation, and do not therefore present the full
measure of Loudeye's recorded costs against its revenues. Management
compensates for these limitations in non-GAAP results by also evaluating the
company's performance based on traditional GAAP financial measures. 
Accordingly, investors should consider these pro forma results together with
GAAP results, rather than as an alternative to GAAP basis financial measures.

                      LOUDEYE CORP. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
           (Unaudited, in thousands, except per share amounts)


                                    Three Months Ended       Years Ended
                               December September December    December
                                  31,      30,      31,          31,
         PRELIMINARY             2004     2004     2003     2004      2003

   REVENUES                    $6,540   $5,080   $2,924   $16,742   $11,948

   COST OF REVENUES             4,598    3,480    1,418    11,323     7,206

          Gross margin          1,942    1,600    1,506     5,419     4,742
          Gross margin
           percent                30%      31%      52%       32%       40%

   OPERATING EXPENSES
     Research and development   1,349    1,325      320     4,017     1,688
     Sales and marketing        1,507    1,478      419     4,456     3,286
     General and
      administrative            3,333    3,798    1,672    11,323     7,778
     Amortization of
      intangibles and other
      assets                      196      325      157       787     1,100
     Stock-based compensation     120       21      344       306     1,298
     Special charges               12      350      262       312     8,699
      Total operating expenses  6,517    7,297    3,174    21,201    23,849

   OPERATING LOSS              (4,575)  (5,697)  (1,668)  (15,782)  (19,107)

   Increase in fair value of
    common stock warrants          --       --      (26)       --      (248)
   Gain on sale of media
    restoration assets             43      273       --       156        --
   Other income (expense)        (998)      93      (20)     (663)      181
   NET LOSS                   $(5,530) $(5,331) $(1,714) $(16,289) $(19,174)

   Basic and diluted net loss
    per share                  $(0.07)  $(0.07)  $(0.03)   $(0.22)   $(0.39)

   Weighted average shares -
    basic and diluted          81,848   79,285   56,131    73,845    49,797



  NON-GAAP PRO FORMA
   INFORMATION:

  Net loss                    $(5,530) $(5,331) $(1,714) $(16,289) $(19,174)
   Adjustments to reconcile
    GAAP net loss to pro
    forma net loss:
     Depreciation and
      amortization                903      977      355     2,919     2,378
     Stock-based compensation     155       65      362       423     1,360
     Increase in fair value
      of common stock
      warrants                     --       --       26        --       248
     Gain on sale of media
      restoration assets          (43)    (273)      --      (156)       --
     Interest (income)
      expense                     (27)     (93)      21      (176)      (61)
     Foreign exchange
      transaction loss          1,016       --       --       833        --
     Special charges (1)           12      350      262       312     8,699
   Pro forma net loss         $(3,514) $(4,305)   $(688) $(12,134)  $(6,550)

   Basic and diluted pro
    forma net loss per share   $(0.04)  $(0.05)  $(0.01)   $(0.16)   $(0.13)

   Weighted average shares -
    basic and diluted          81,848   79,285   56,131    73,845    49,797

  (1) Special charges of $8,699 relate primarily to the impairment of assets
      in accordance with our long-lived asset policy.  During the year ended
      December 31, 2003, we recorded impairment charges for goodwill,
      intangible assets and property and equipment of approximately $5,300,
      $685 and $670 respectively.  The remaining costs related to corporate
      restructurings and facilities consolidations.


                      LOUDEYE CORP. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                        (Unaudited, in thousands)


                                                         December 31,
             PRELIMINARY                            2004              2003

  ASSETS
  Current assets:
      Cash, cash equivalents and
       marketable securities                      $38,880           $21,940
      Accounts receivable, net                      5,333             1,781
      Prepaid and other                             1,298               345
      Assets held for sale                             --               363
           Total current assets                    45,511            24,429

  Long-term investments                             2,288                --
  Restricted investments                            2,568               316
  Property and equipment, net                       5,661             1,123
  Goodwill                                         43,549                --
  Intangible assets, net                            3,700                86
  Assets held for sale                                 --               730
  Other long-term assets, net                         539               360

           Total assets                          $103,816           $27,044


  LIABILITIES
  Current liabilities:
      Accounts payable                             $4,012            $1,229
      Line of credit                                   --             1,285
      Accrued compensation and benefits               929               378
      Other accrued expenses                        4,966             1,155
      Accrued special charges                         403             1,670
      Accrued acquisition consideration            15,924                --
      Deferred revenue                              4,353               485
      Current portion of long-term debt
       and capital leases                           1,135             1,348
      Liabilities related to assets
       held for sale                                   --                98
           Total current liabilities               31,722             7,648

  Deferred revenue                                  1,343               228
  Common stock payable related to
   acquisition                                      3,193               --
  Long-term debt and capital leases,
   net of current portion                           1,000             2,135

           Total liabilities                       37,258            10,011

  STOCKHOLDERS' EQUITY                             66,558            17,033

           Total liabilities and
            stockholders' equity                 $103,816           $27,044


DATASOURCE: Loudeye Corp.



CONTACT:  media, Karen Demarco of mPRm Public Relations, [phone],

or ; or investors, Mike Dougherty of Loudeye Corp.,

[phone], or 



Web site:  http://www.loudeye.com/ 

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