
                                                      
News Release
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Sitrick and Company Inc.
Los Angeles/New York

                                              Contact: Sandra Sternberg
                                                       Ann Julsen
                                                       Brenda Adrian
                                                       Sitrick and Company
                                                       310-788-2850

For Immediate Release
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    Alliance Entertainment Plan of Reorganization Confirmed; Company Set to
     Successfully Emerge from Chapter 11; Reports Operating Results for June

     
     Coral Springs, Fla. -- July 31, 1998 -- Alliance  Entertainment Corp. (OTC:
AETTQ),  the  nation's  largest  wholesaler  of  prerecorded  music and  related
products,  announced  today  that the U.S.  Bankruptcy  Court  for the  Southern
District of New York has  confirmed  the  Company's  Third Amended Joint Plan of
Reorganization.  The Court's  confirmation of Alliance's plan clears the way for
the  Company's  emergence  from its  voluntary  Chapter 11  proceeding  early in
August.

     "As the new, reorganized Alliance moves forward with a strengthened balance
sheet,  reduced debt, interest and operating costs, the Company can now focus on
the music  distribution  business and  opportunities for growth through emerging
distribution  channels with  significant  emphasis on the  Internet,"  said Eric
Weisman, Alliance's president and chief executive officer.

     "In just 12 months," Mr.  Weisman  continued,  "Alliance  has  successfully
restructured  not only its balance  sheet,  but  streamlined  and  improved  its
overall business, returning to its core markets and renewing its core strengths.

     "The Company  exited areas of the business that no longer fit its strategic
plan,  consolidated   operations  and  procedures,   and  increased  operational
efficiencies;  and  throughout  this  difficult  period,  we had the loyalty and
cooperation of our employees,  our customers and our vendors.  That has made all
the difference. We are gratified by the outcome of our restructing," Mr. Weisman
said,  "but  we  also  recognize  the  hardship  that  many   experienced  as  a
consequence, and we are truly appreciative of their continued support. I want to
recognize,  in particular,  Al Teller, who worked closely with me to develop the
business  plan  that  served  as  the   foundation  of  the  Company's  plan  of
reorganization and which,  ultimately enabled Alliance to successfully emerge as
a viable  competitor  and a dominant  force in the one-stop,  budget and special
products music distribution business.

     "I am confident that the hard times are now behind us and that the Company
will continue to grow stronger and more profitable in the months and years
ahead."

     Under the terms of the Plan, the newly reorganized  Alliance  Entertainment
will become a private company majority owned by a syndicate of banks. Holders of
secured bank claims  under the  Company's  pre-petition  credit  facilities  are
expected  to  receive  approximately  86% of the  shares in the new  reorganized
company.  Holders of general,  allowed unsecured claims,  including trade claims
and Senior  Subordinated Notes will receive  approximately 6.5% of the equity of
the reorganized  Company through warrants and shares of common stock, along with
certain  litigation rights. The remainder of the equity in the newly reorganized
Alliance Entertainment is reserved for management. The Company's existing common
stock will be canceled upon the effective date of the Plan and  shareholders  in
the old Alliance  Entertainment will receive no distribution,  either in cash or
common stock of the new Company.

     At the same time Alliance Entertainment Corp. announced that it has filed
its monthly operating report, in which it reported a consolidated net loss of
$3.4 million on net sales of $22.7 million.  The loss includes $2.4 million in
interest and reorganization expenses.  The June results compare favorably with
a consolidated net loss of $7.2 million on net sales of $22.9 million reported 
in May.

     Alliance Entertainment Corp. is the largest wholesaler of prerecorded music
and related products.  The Company currently employs approximately 700 people in
the United States and Canada. It maintains headquarters in Coral Springs,  Fla.
Alliance Entertainment Corp. and certain of its subsidiaries filed to reorganize
under Chapter 11 on July 14, 1997.

     Forward-looking  statements  herein are made  pursuant  to the safe  harbor
provisions  of the  Private  Securities  Litigation  Reform  Act of 1995.  These
forward-looking  statements  can  generally  be  identified  as such because the
context of the  statement  will  include  words such as the Company  "believes,"
"expects," "anticipates," or words of similar import. Similarly, statements that
describe  the  Company's  future  plans,  objectives,  estimates  or  goals  are
forward-looking statements. There are certain important factors that could cause
results  to  differ  materially  from  those   anticipated  by   forward-looking
statements  made  herein.  Investors  are  cautioned  that  all  forward-looking
statements involve risks and uncertainty. 

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