1. Fat Beats, Inc.

2. What is it?

3. 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

4. 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”

5. 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???

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

8. 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”

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

10. Labels Distributed

11. Retail
NYC
Los Angeles
Formerly
Amsterdam
Atlanta
Web

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

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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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%

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

21. 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”

22. 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

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

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

25. 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

26. 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

27. 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?

28. 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?

29. 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???