Fat Beats, Inc.

What is it?

History Retail basement store open in 1994 Owned by Joseph Abajian (DJ, B-Boy, and producer DJ Jab) Fat Beats, Inc. Headquarters in Brooklyn “The Last Stop for Hip Hop” Niche DJ market

Vertical Integration Production: Fat Beats Records Distribution: Fat Beats Distribution “premier international independent distribution company specializing in vinyl” Retail: Fat Beats and Fatbeats.com “destined to corner the market in on-line hip hop sales”

So, Fat Beats Can??? Produce content Distribute its content to retailers Sells its content at its retail locations Promote its artists through in-store signings/performances Creates…??? Synergy!!! Of its commodities by selling albums, CDs, tee shirts, DVDs Who does this sound like???

Production “much attention from major labels eyeing Fat Beats as an A&R source in hopes of landing the next big artist”

Distro Opened in 1996 worldwide clientele for wholesale and mail- order selections of various independent releases Clients= “crucial mom & pop retailer or dj store” “Independent record stores are vital to keeping this music we all love alive”

Distro Cont’d “Decidedly not a one stop”…? “distributing and marketing” artists $4M in distro sales in 2003

Labels Distributed

Retail NYC Los Angeles Formerly Amsterdam Atlanta Web

Employees “Fat Beats employees are likely to be top area DJs” a “true representation” of the customer visiting the store

Competition Production Distribution Retail “destined to corner the market in on-line hip hop sales”

The Alliance Newly formed alliances with companies such as Loud, Tommy Boy, Interscope, Caroline, and Koch October 30, 2007 KOCH Entertainment Dist. signed an exclusive physical and digital distribution deal

The Deal, YO! “Fat Beats’ successful brand of true underground hip hop will further strengthen our status as the No. 1 physical and digital supplier of urban music”~Michael Rosenberg, President KED “Over the years both companies have grown and come back full circle to work together again. Whereas Fat Beats once lent a hand in showing KOCH the hip hop scene, KOCH can now reciprocate and help Fat Beats artists…get into more markets”~DJ Eclipse, NYC Store Mgr/artist

So, What’s Up??? Matt, Fat Beats A&R: “Unfortunately, we cannot release any confidential information about our company…” “Sorry man, I can’t really help out” Private Company!!! Maybe, now major corporate interest= shhhhhhhhh

KOCH Entertainment LP “is vertically integrated and distributes its own content” Music Distribution Record labels/affiliated labels Video distribution Music Publishing Michael KOCH/1987/ One of 6 “Indie” reps on RIAA

KOCH Records Rap and Children’s music America’s largest independently distributed record company. 1999, got its start distributing Death Row Records Jim Jones A&R WWE (F), Terror Squad, DJ Unk $40-50M in revenues 240 titles #5 Rap Label, 5% market share for rap .65% market shart

KOCH Entertainment Dist. Most $$$ “arm” $175M in revenues (33%=digital sales) 25,000 titles/280 labels Ship, market, process music: “gives us a higher degree of control” M.K. May 2007, $6.5: 2.7% market share 3.3% 2.6%

Other Subsidiaries… KOCH Vision KOCH Music Publishing Distributes for 400 film companies KOCH Music Publishing 2,500 song catalog

2005, Row Entertainment (Entertainment One), buys KOCH for $80M Canada’s largest video/music distributor $700M Revenues in 2008 Ships 30K-60K pieces a day Publicly Traded on London AIM market “expanding content exploitation”; “exploit cost synergies”; “capitalise on cost synergies”; and “consolidate geographic position”

Publicly Traded on London AIM market 1.3M public shares, 67.31% of stock is private March 2007, Marwyn LLP buys Ent. One for $160M Through Marwyn’s capital, Ent. One made many international film/music distro purchases

London-based hedge fund Specializes in…? buyout consolidation strategies Incorporated in…? Cayman Islands $2B in acquisitions in 3 years 79% is privately held

Diversification??? hazardous waste plants alcohol and drug abuse laboratories global laboratories online betting services construction training environmental safety consulting snack foods industry

Hedging???: Derivatives?: reducing the risk of loss through short-term investment in derivatives; that is, buy today and sell tomorrow for a profit. Corporations and banks invest in derivatives to “hedge their position, essentially buying a kind of insurance” Derivatives?: offset “the risk involved in other securities position…” and “mitigate those losses by selling short” ~Marwyn

January 22, 2009 E1 Music= E1 Entertainment= E1 Music Publishing= KOCH Records E1 Entertainment= KOCH Ent. Dist. E1 Music Publishing= KOCH Music Pub E1 Entertainment U.S. KOCH Vision KOCH Music Publishing No mention of Ent. One

Some Questions/Analysis… 1) Since the majority of KOCH Records’s sales are hip-hop or rap music, what does this mean for companies like Fat Beats? 2) What does KOCH Entertainment really mean by independent? 3) What does “independent” really even mean anymore?

Cont’d 4) Is there truly any competition in the recording industry? Especially in terms of distribution? 5) Can independent music/underground hip-hop and hedge funds coexist? 6) What does this relationship w/ hedges and off-shore trading mean in terms of the artists’ messages? 7) If “indies” supposedly subvert the dominant system (music and in general), are they, in fact, just reinforcing that system/status quo?

If 80% of the music sold in America comes from the “Big Four” and 10% from the independents (ADA, RED, KOCH/E1) what “choices” do we have? Does this really even matter in the age of digital capitalism/music???