Sonic Foundry Announces New Encoding Services Division

Sonic Foundry, Inc. (Nasdaq: SOFO), a leading media solutions provider, today announced the formation of its Media Services division, a new business unit designed specifically to offer complete encoding services to the music, film, broadcast, and corporate markets. Leveraging its complete line of award-winning media production and encoding technologies, the Media Services division will offer businesses a comprehensive and high quality solution for encoding large catalogs of digital media for final delivery over the Internet.

Sonic Foundry Chairman and Chief Executive Officer, Rimas Buinevicius, stated, "We are witnessing a major phenomenon in the way the Internet and broadband delivery will be used as a communications and entertainment vehicle. The formation of our new Media Services division is a natural evolution from Sonic Foundry's position as a leading developer of software tools for the Internet media market. Many key media content owners and providers, both large and small, recognizing our capabilities, have approached us directly, asking for this value added service. We feel the time is right for an experienced, high-end, quality-driven company to take advantage of this vast market opportunity."

Media Services will target all segments of the worldwide communications industries, including music, film, broadcast, corporate, and interactive media. Prime service examples include transforming and encoding existing audio music for delivery over the Internet as well as converting all forms of broadcast video into the most popular streaming media formats.

The Company's recent advancements in the streaming media, video, and on-line music markets underscore Sonic Foundry's unique position to execute on a rapidly increasing market need for media production and encoding. Internally developed media production automation tools now allow the Company to leverage its technology into a complete turnkey service business designed to encode, verify, and move high volumes of media over the Internet.

"We are excited to offer business clients production and encoding services based on our latest technology advances in Internet media production," said Mr. Buinevicius. "The new service offering will allow us to encode significant amounts of media at competitive prices without sacrificing the most important element — quality."

The Company also announced the promotion of Brad Fentress to Vice President of Business Development, who will lead the new division, and the appointment of David Mighell as Director of Business Development for Media Services. Fentress also will continue to direct the Company's OEM and Business Development efforts. Since March, 1998, Fentress was Director of Business Development and was instrumental in the formation of many of Sonic Foundry's strategic partnerships with such industry leaders as Hewlett-Packard, RealNetworks, Creative Labs, and Microsoft.

Most recently, Mighell was ICP Deployment Program Manager for Windows Media Technologies at Microsoft. During his five-year tenure at Microsoft, he was at the heart of developing and evangelizing streaming media production tools and solutions. From 1995, he charged media production systems development for MSNBC, launching in July, 1996, the first fully automated newsroom production process suite for streaming media.

Mr. Buinevicius, stated, "We have worked closely with David since 1995, and we welcome him to our Company. His experience with Microsoft and streaming media production tools will be a key catalyst in the successful development of our newly formed media division."