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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

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history
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
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
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
Production
  • “much attention from major labels eyeing Fat Beats as an A&R source in hopes of landing the next big artist”
distro
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
Distro Cont’d
  • “Decidedly not a one stop”…?
  • “distributing and marketing” artists
  • $4M in distro sales in 2003
retail
Retail
  • NYC
  • Los Angeles
  • Formerly
    • Amsterdam
    • Atlanta
  • Web
employees
Employees
  • “Fat Beats employees are likely to be top area DJs”
  • a “true representation” of the customer visiting the store
competition
Competition
  • Production
  • Distribution
  • Retail
    • “destined to corner the market in on-line hip hop sales”
the alliance
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
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
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
slide17
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
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
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
Other Subsidiaries…
  • KOCH Vision
    • Distributes for 400 film companies
  • KOCH Music Publishing
    • 2,500 song catalog
slide21
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”
slide22
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
slide23
London-based hedge fund
  • Specializes in…?
    • buyout
    • consolidation strategies
  • Incorporated in…?

Cayman Islands

  • $2B in acquisitions in 3 years
  • 79% is privately held
diversification
Diversification???
  • hazardous waste plants
  • alcohol and drug abuse laboratories
  • global laboratories
  • online betting services
  • construction training
  • environmental safety consulting
  • snack foods industry
slide25
Hedging???:
    • 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
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
some questions analysis
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
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?
slide29
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???