Sonic Foundry Media Services Selected by BMG Distribution as Audio Encoding Partner

Sonic Foundry, Inc. (Nasdaq: SOFO), the leading developer and marketer of digital media and Internet software tools, services, and systems, today announced a comprehensive business-to-business service agreement with BMG Distribution, a unit of BMG Entertainment, to encode sample audio CDs released through BMG Distribution.

Sonic Foundry Media Services[TM] will utilize its state-of-the-art encoding technologies to convert BMG Distribution's audio CDs for streaming on the Internet through BMG Distribution's business-to-business Web site. Additionally, Sonic Foundry will digitize the CD cover art and provide a detailed searchable database archive for each project.

"Sonic Foundry is able to meet the challenging encoding needs to support our business-to-business Web site, BMGCentral, by providing the depth of expertise and offerings we are looking for," stated Wendy Schlesinger, vice president of marketing for BMG Distribution. "We are excited to forge ahead with this partnership and to continue our goal of providing high-quality online tools and information for our field staff, labels, accounts, and business partners."

"We are looking forward to providing BMG Distribution with our encoding expertise," stated Rimas Buinevicius, chief executive officer and chairman of Sonic Foundry. "BMG is a staple in the entertainment industry, and we are honored to meet their needs, moving them into this growing and exciting entertainment space."

About BMG Distribution

BMG Distribution is BMG Entertainment's U.S. distribution arm that moves more than 600,000 units daily to music, CD-ROM, and video retailers throughout the United States and stocks more than 12,000 units of products. Along with handling all aspects of positioning releases at retail, the company also is responsible to its labels for marketing, sales, fulfillment, and credit and collection.

About BMG Entertainment

BMG Entertainment is the $4.7 billion worldwide music and entertainment division of Bertelsmann AG, one of the world's leading media companies, with annual revenues of $16.4 billion. BMG owns more than 200 record labels in 53 countries, including Arista Records, RCA Records, Ariola, and Windham Hill. BMG has been a leader in using the Internet to bring fans closer to their favorite artists. In addition to establishing GetMusic, an online content and commerce joint venture, BMG's online presence includes more than 30 wholly owned music & lifestyle Web sites around the world and strategic marketing agreements with and key investments in leading online companies ARTISTdirect, Riffage.com, Egreetings Network, Listen.com, and Eritmo.com, among others. BMG also owns the world's largest music club, one of the world's largest music publishing companies, and one of the world's leading compact disc and cassette manufacturing companies. Bertelsmann's North America interests also include the Random House Inc. book publishing group and the Gruner + Jahr magazine publishing group, which includes McCall's, Parents, Family Circle, and YM magazines, among others.