Gabriel rocks on to $11m music download fortune

Peter Gabriel, the former Genesis rock star, saw up to $10.83m (£5.95m) added to his personal fortune yesterday with sale of OD2, the digital music company in which he has an 18 per cent stake.

Peter Gabriel, the former Genesis rock star, saw up to $10.83m (£5.95m) added to his personal fortune yesterday with sale of OD2, the digital music company in which he has an 18 per cent stake.

The company, which runs music download services for consumer companies such as Coca-Cola and Virgin, has been bought by Loudeye, a Nasdaq-listed technology group that offers similar services in the US.

The initial consideration for OD2, which stands for On Demand Distribution, is $38.2m, but could rise by another $18.8m if certain performance criteria are met. The acquisition is being made in Loudeye shares. The deal will also make Charles Grimsdale, the company's chief executive, a millionaire, along with a number of other directors.

The transaction is reminiscent of some of the dot.com bubble deals. OD2 has never made a profit, although it is only four years old and had sales of $2.5m in the first three months of the year.

However, Loudeye believes that the digital distribution of music is set for explosive growth as more consumer companies look to offer music tracks to customers. OD2's first-quarter sales were an 80 per cent increase on the previous quarter and a 250 per cent increase on the same period a year before.

Mr Grimsdale said the market would not stop at music downloads and the enlarged group would soon be offering movie download services to business customers. Also, the distribution of music, film and games would not be limited to PCs over the internet but would also start making use of mobile phones and televisions with set-top boxes.

The enlarged group now has 4.6 million music tracks at its disposal, with licensing agreements signed with all five major record labels, including EMI and Universal, as well as numerous independent labels.

The combined business supplies digital download services to 200 customers including Wanadoo, HMV and MSN, the Microsoft internet portal.