K-tel Shuts Down German Operation

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MINNEAPOLIS -- K-tel International, an online music and entertainment merchant active in the US and Europe, shut down its German subsidiary last month and began fulfilling its German Web site from the UK.

Dominion Vertriebs GmbH, a brick and mortar operation that sold consumer goods and music products through direct marketing, has been losing money over the last two years -- $1.6 million in 1998/99 on sales of $16 million.

Earlier this spring the company consolidated its two UK operations into one facility with anticipated savings of $500,000. And in the US the company fired 35 people, a move that should save the clearly troubled firm $1.7 million.

"The elimination of the German losses and the reduced UK overhead are all part of our plan to return to profitable operations in fiscal 2001," CEO Philip Kives said.

"What they have basically done," spokesman Brad Meyer said, "is decide to run Europe out of the UK so that they are only paying overhead on one location. A brick and mortar presence in several countries really was not needed." A Finnish operation was closed down earlier.

The German subsidiary launched the Web site in February of last year and used its already extensive DRTV spots to drive traffic to the web. It has a database of 1.8 million at the launch and was adding 40,000 names a month.

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