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

Formerly– Amsterdam– Atlanta– NYC– Los Angeles

• Web

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

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%

• 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

January 22, 2009

• E1 Music=– KOCH Records

• E1 Entertainment= – KOCH Ent. Dist.

• E1 Music Publishing= – KOCH Music Pub

• E1 Entertainment U.S.– KOCH Vision

• E1 Music Publishing= – KOCH Music Publishing

• No mention of Ent. One

• 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

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???