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Allen Kovac BeyondMusic.com 9255 Sunset Blvd., Second Floor, West Hollywood, phone: 310-385-4700 CA 90069
emaii: allenk@ibank.com
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Table of Contents
• Section I • • o [ What is BeyondMusic.com ............................................................. Why BeyondMusic.com ?................................................................. Why Now? The Opportunity .............................................................. Strategic Vision ............................................................................. Unique Assets, Value and Marketing Advantage .................................. Multiple Sources of Revenue ........................................................ Brand Name Entertainment Content Providers .................................... Cross-Media Marketing Strategy ................................................... Cross-Channel Distribution Strategy ................................................... Customer Acquisition Strategy .......................................................... Overview of Music Industry ......................................................... Internet Industry Trends............................................................... Competition ............................................................................. Board of Directors.......................................................................... Funding Requirements ..................................................................... ] • • • • • 1-3 4 5 6 7-19 20-21 22-27 28-29 30 31 32-34 35-42 43-51 52 53 . • •
Section II
Section HI
Section IV
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What is BeyondMusic.com?
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BeyondMusic.com is an online entertainment content company that optimizes cross-channel marketing and distribution initiatives to serve worldwide consumer demand for music, entertainment and talentbranded products BeyondMusic.com's content and programming come from exclusive online and digital licensing deals with the following entertainment content providers: • Brand name and breakthrough music artists • U.S. and international independent labels, including major independent music companies, the Beyond Record Label and The Left Bank Organization • Regional, national and international production and media companies
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What is BeyondMusic.com?
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BeyondMusic.com's initial entry into the digital space is via a Web-based 24/7 digital entertainment network that markets and distributes the following content and programming directly to consumers: • Music downloads, compilations and CDs, and music-related background material • Video footage of music videos, concert performances, music-related entertainment shows and comedy specials • Locally-generated information and entertainment from radio stations and city culture publications
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Alliances with entertainment content providers also include licensing provisions to market and distribute: • Fan-oriented merchandise and artist memorabilia • Co-created brand extensions of lifestyle products
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What is BeyondMusic.com? • Content, programming and products are also marketed, distributed and/or syndicated through alliances with a variety of offiine and online media partners including: • Cable, radio, television and broadband networks • Entertainment product distributors • ISPs • Other Web sites
• Print publications • BeyondMusic.com will leverage the value of its unique assets, together with the annual multi-million dollar marketing budget of offiine partner, The Beyond Record Label, and alliances with other key marketing partners as part of an aggressive marketing and publicity campaign to establish and develop its brand
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Why BeyondMusic.com?
• 4 Key Points of Differentiation • • • • The principals of BeyondMusic.com are innovators in using comprehensive consumer research to market and sell music and entertainment products BeyondMusic.com has exclusive licensing deals with entertainment content providers that have proven consumer value worth millions of dollars The principals of BeyondMusic.com were instrumental in launching successful prior initiatives in the digital space with RealNetworks, Apple and Pepsiworld The principals of the company have operated both a profitable major independent record label and a very successful talent management firm with brand name artists Advantage
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Strong Competitive •
BeyondMusic.com's success in the marketplace comes from combining expertise in direct to consumer marketing, which the major record labels lack, with control of brand name music artists, which the Internet labels and download sites lack
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Multiple Revenue Sources • BeyondMusic.com's hybrid business model of digital label, media and syndication models creates multiple revenue sources including fees from e-commerce, sponsorship, advertising, syndication, subscription, pay-per-view webcasts, and data mining ] , ° ° , , ° , °
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Why Now? - The Opportunity • "Labels must, for the first time, gather consumer data about their bands' audience in order to build new business models...and must adopt a direct marketing mind-set and understand exactly who their audience is in order to build these new business models." --- Jupiter Communications, 7/99 While the major labels play catch up in digital distribution and other Webbased initiatives, it is apparent that the incumbents lack experience in marketing directly to the consumer in addition to lacking the entrepreneurial flexibility of streamlined organizations The upstart digital labels and download sites have the nimbleness to move quickly, but lack the name brand artist cache, the ability to market their lesser known artists and the experience and contacts to "break" an artist at traditional outlets like radio stations and video channels BeyondMusic.com's consumer res¢arch background, marketing expertise and exclusive content gives it a head start in building the new business models as well as the momentum to position itself as the viable alternative to both the majors and the upstarts with its strong understanding of the consumer mind-set, its ability to recruit name brand artists and its expertise in entertainment marketing strategies.
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BeyondMusic.com's
Entertainment Traditionan
Distribution
Strategic Vision
Providers • _ Content Distribution & c-'-'_:'_"+;"n P'+r*ners
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WebPorials - Broadband Networks • Web S_tes
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Record Label, Research Marketing Company
BeyondMuslc.com
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Syndicators
-Radio - Int'l Radio r,, - BeyondMusic - TV Magazine
Strategic Partnership
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BeyondMusic.com's Unique Asset No. 1: Consumer Database • Consumer Database • BeyondMusic.com has exclusive and unrestricted access to a consumer research database, developed over the last 4 years by its strategic partners, The Beyond Record Label and Strategic Record Research, that documents opinions and attitudes about music, entertainment and lifestyle issues ° The principals of BeyondMusic.com have extensive experience in obtaining, analyzing and operationalizing this consumer demographic and psychographic information
• Audience opinions and attitudes are identified through both traditional methods, such as interviews and questionnaires, and through electronic means, including online polling and click stream history • New and archival research is used to inform marketing strategies and help position artists, entertainment properties, and consumer products in the marketplace • Past examples include creating and implementing the research, advertising and media buying components of marketing plans for the Beatles' Anthology Box Set, a special Garth Brooks project & a Frank Sinatra retrospective release [7 ] . . . ° ° ° . °
BeyondMusic.com's Unique Asset No. 2: Entertainment Content . Entertainment Content • BeyondMusic.com controls the online and digital licenses, through its strategic partnership with the Beyond Record Label, to music recordings and video programming from brand name artists with worldwide fan bases as well as new, breaking artists on the verge of success • The established artists are commercial powerhouses having collectively sold over 200 million copies during their musical careers • BeyondMusic.com guides and assists these artists in leveraging their cache with consumers by overseeing brand extensions in other areas of entertainment and in relevant lifestyle segments • BeyondMusic.com has strong relationships with other popular content providers from around the world, including The Left Bank Organization, who are interested in creating marketing and distribution joint ventures with BeyondMusic.com
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Q
Sampling
• ... ............. . ......
of Beyond Record Label and The Left Bank Organization
Artists
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BLONOIE
The Bee Gees
The Cranberries
Lucy Pearl
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CROE
Veruca Salt
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Sampling of Beyond Record Label and The Left Bank Organization Artists
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Sampling of Beyond Record Label Artists & Special Projects
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Where MusicMeets Film:
Tracy Lawrence
Violent Femmes
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BeyondMusic.com's o
Competitive
Advantage
The combination of BeyondMusicoCOm'S skill and track record in marketing entertainment content based on direct consumer feedback and its partnership with brand name artists forms the basis of a sound competitive advantage:
Consumer
Marketfi_g Expertise
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Control ofBrana Name Artist_
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BeyondMusic.com's •
Unique Value: Exemplary
Management
The value of BeyondMusic.com is personified by its management team, which is comprised of innovative and pioneering executives from the music and hi-tech industries. Skills and accomplishments include: Assisting with the development and/or launch of groundbreaking digital media initiatives for technology and consumer brand leaders, including RealNetworks, Apple and PepsiWorld Launching and growing the Beyond Record Label into a profitable independent music company in only its first year of operation, a feat unheard of in the music industry, and touting a roster of multiple brand name artists with worldwide, major label distribution Operating one of the largest and most successful talent management companies, Left Bank Organization, whose clients' records in 1994 generated $350 million in sales revenue, a number greater than some major label annual billings
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Manageme_t's
Traditional
and Digital Media Milestones
The Left Bank Management
Artist Representatives
The Left Bank _\ Organization __,\
Arlist Management Operaling ( 7om pany __ /, //
The Left Bank Organization
The Research & Marketing Corn pany
Assisted with launch of RealNetworks sales on Marx 2nd release Adds 4 million worldwide sales ofDuranDuran i i j_ i -
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Profitable label in 1st year of operation with BIondie, Motley Crue & others Consultant to Apple [ [ for webcasting initiative II Deana Carter ]l_'_ Imusic client-selling country 1st million
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Consultant to PepsiWorld "
6 milli°n staff for]I lin-house I w°rldwide
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sales and promotion,] marketing9 a&r duties [ [ of Cranberries' 2nd release 14 million worldwide sales
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record revenues-$3S0M, Management clients _
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Richard Marx 1st million selling act -Ii [
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sales o9" Meat Loafs Bat _[ 14 million worldwide II] ]
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Research for w/Strategic & advertising Joint ventures major labels Radio Research campaigns Needham and DDB for Garth
o o o o Brooks_ the_ Beatles Anthology _ and Frank Sinatra o
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BeyondMusic.com
o Allen Kovac - Chairman and CEO
Management Team
o Founded and runs leading artist management company, The Left Bank Organization, and highly regarded independent record label, Beyond o 20 year track record in building artistic careers of such successful artists as Richard Marx, Meat Loaf, Duran Duran, Luther Vandross, the Bee Gees, John Mellencamp, Motley Crue, Deana Carter and The Cranberries Created successful businesses or co-ventures, including partnerships with Strategic Media Research and DDB-Needham Worldwide, aimed at helping artists in the entertainment community target and reach their audiences Consulted or worked with a diverse group of leading companies including MCA, RealNetworks, Pepsi and Apple
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Jeff Sydney - President o Grew and expanded The Left Bank Organization, along with Allen Kovac, from artist management company into worldwide marketing and operating company with management, record label, research, marketing and consulting businesses Over 15 years experience as a senior executive in the music, television and film industries including management positions at Polygram Records, Universal Pictures and Universal Television
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BeyondMusic.com
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Management Team (cont.)
For the position of Chief Operating Officer/Chief Technology Officer, BeyondMusic.com has an executive in mind who has consistently been at the forefront of the marketing and consumer development of new technologies that have shaped the way people communicate and access entertainment and information ]Phil Sandh_us o - General Manager
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20 year expertise in marketing and developing influential and successful artists, including Aerosmith, Billy Joel, Miles Davis, David Bowie, Elvis Costello, Bob Seger, Garth Brooks, Frank $inatra and the Beach Boys, through both traditional and groundbreaking non-traditional initiatives
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Prior management positions include Head of Strategic Marketing and Product Development for the $250 million dollar a year EMI-Capitol Group Entertainment Property Division, overseeing projects such as The Beatles Anthology, as well as senior marketing and artist development positions at Capitol Records and Columbia Records
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For the position of Vfiee President programming
of Programming,
BeyondMusic.com
has an executive in
mind with extensive experience in the acquisition and promotion of music and video as well as in assembling partnerships to provide quality content to consumers
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BeyondMusic.com's Unique Marketing Advantage: Integrated Offline & Online Components o In partnership with the Beyond Record Label and Marketing Company, BeyondMusic°com leverages a proven and powerful arsenal of online and traditional marketing and research tools to break new artists and enhance the branding and selling power of artists, entertainment programs and products The services provided by the Record Label & Marketing Company include:
o o o o o Cross Medl_aNI.arlketing Consumer Research (in partnership
w/Strategic Record _esearch)
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Direct Marketing Event Programming
Promotional Programming
Radio Airplay Promotion Video Airplay Promotion Brand Development in Cross Media o o
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Publicity Promotions
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The services provided by the Record Label include:
o A&II_ o Creative Services US Sales International Sales and Promotion
o The Beyond Record Label and Marketing Company has a staff of 70 with offices in Los Angeles, Nashville and London
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Case Examples
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of Beyond Marketing
Services
Cross Media Marketing o Created exposure for Blondie prior to the release of its comeback CD by partnering with ABC Television to promote the band's appearance on the American Music Awards through promotional spots incorporating video music footage and a band invitation to tune in to the telecast Consumer Eesearch o Utilized sophisticated demographic research to help create the marketing plan for the Beatles' Anthology package, one of the most successful releases of all time Radio A_rp_ay l?ro_et_on o Delivered a multi-format No. 1 single for Meat Loaf via a strategy that initially relied on one radio format to target early adopter listeners, thereby creating sufficient momentum to help establish interest and support at other formats Video Airplay _romotion o An innovative promotion to offer MTV viewers three different endings to a Richard Marx video and an opportunity to vote on their favorite one resulted in a No. 1 most requested video Brand Development in C_'oss Media o Further developed the Motley Crue brand among the audience of the World Wrestling Federation (WWF) by creating a season long promotion that included a special concert for wrestling fans, which research showed were also fans of the band ] o o o o o o o
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Case Examples of Beyond Marketing Services (cont.)
o Direct Marketing o Implemented Campaign incorporating targeted email and Web partners on the local, regional and national level to make concert tickets for the Cranberries tour available for purchase only through the Internet Partnered with VH1 to create and air a viewer record-setting special around John Mellencamp hanging out with a group of fans at a Labor Day holiday barbecue I?rogra_ming Created Bee (3ees "One Night Only!' concert event and arranged for multiple televised airings, first as pay-per-view, then as HBO prime time fare and lastly as PBS programming
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Event Programming o
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Pro_otiona_ o
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Publicity Made available to news and entertainment programs, moments after they were inducted into the Rock and Roll Hall of Fame, a satellite video feed of Bee Gees footage from the induction ceremonies accompanied by other career highlights Promotions o Created radio-based "Flyaway" contest, in conjunction with MTV and Paramount Films, to award winners with travel packages to attend Blondie's first concert in 15 years and the world premiere of the film, "200 Cigarettes" o
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BeyondMusic.com's o
Multiple
Sources
of Revenue
Revenues fro_ CD9 DVD and music video sales & digital music downloads o CDs and videos are sold online and through bricks-and-mortar outlets o Downloads are priced per single track and per multiple track compilations
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Sponsorship
fees
o Areas within the site are sponsored by premiere lifestyle product manufacturers and retailers o Sponsorship selections are based on detailed consumer data, targeting those areas where individual marketers can create the most impact in terms of programming and product message fee_
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Advertising
o Rich media ads which command high CPM and click-through rates Ecommerce of non=music items o Fan-oriented merchandise and artist memorabilia such as branded t-shirts, sweatshirts, coffee mugs, etc. o Revenue shares from the sale of lifestyle products featured on site o Direct sales of talent-branded or co-branded apparel, accessories, etc.
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BeyondMusic.com's o ]?ayoperoview
Multiple Sources of Revenue (cont.)
o Webcasting fees for special event programming such as live concerts, special in-studio performances, artist retrospectives, etc. o Syndication fee_ o Share of ad revenues for supplying content to other sites, especially local outlets like radio station, magazine and newspaper companion, web sites o Licensing payments from cable, television, radio and satellite networks for syndicated programming o Subscription fees o Service for fans to get access to special artist events, select ticket purchases, backstage passes, etc. o Virtual management services for artists and independent labels wanting advice on recording, marketing and touring issues o Data I_ng fee_ o User demographic information sold to consumer brand and other nonmusic companies
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BeyondMusicecom's o o o
Brand Name Entertainment Music Artists
Content Providers:
BeyondMusic.com has aligned itself with three kinds of entertainment content providers: music artists, music-related entertainment programs and local media Music Arti_t_ BeyondMusic°com's artist partners include those artists signed directly to the Beyond Record Label, managed by The Left Bank Organization and others associated through licensing agreements. Artists are assisted by BeyondMusic.com and the Beyond Record Label with the creation of several types of content: o Music & music-related content includes studio, live and special recordings, bios, photos, production notes, reviews, etc. o Video programming includes music videos, concert performances, in-studio tapings and retrospective pieces o Lifestyle content includes material about an area of interest outside of music with appeal to an artist's fans° The products, which are artist-branded and/or co-branded merchandise, enable or complement this activity or pursuit.
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In this way BeyondMusic.com and its talent create multiple "channels" of offerings that leverage the fan base and celebrity of artists
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BeyondMusic.com Brand The Beyond Rock/Pop o o
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Name Entertainment Record Label Artist Urban o
Content Roster
Providers:
Blondie Meat Loaf
Ye_
Lucy Pearl- Featuring members of Tony Toni Ton6, En Vogue & A Tribe Called Quest Coolio_sCrowbar Won G
o Alternative/Rock o Face go F_ce o o o the ha_ _ovej_y c_rcuz Sponge Vieiene Femmes o
Hard Rock o o o o Anthrax Flash Bastard Laidlaw MOtley Cr_e
Alternative/Pop o Bgue Pga_e Spec_ag o James M_che_ o o Jilg Sob_e Mi_e Younger
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BeyondM_siCoCO_ Brand Name Entertainment Content Providers: The Beyend. Record' Label Special Projects & Compilations
o Where Music Meets Film: Live from Sundance F_gm FestivalIncluding the artists: o John Hiatt o Lyle Lovett o Lisa Loeb o Shawn Mullins o Coolio's Crowbar - New Rap and R&B artists hand picked by rap superstar, Coolio o Eagle-Eye Cherry o Swing T_s_ J_c_yoe - The definitive 90's swing music compilation featuring the artists: o Brian Setzer Orchestra o Big Bad Voodoo Daddy o Cherry Poppin' Daddies o Royal Crown Revue o Stone Country ° Rolling Stones songs
as interpreted by major country artists: o Deana Carter o Travis Tritt o o George Jones The Tractors
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The Left Bank Organization Artist Management Roster
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Rodney Atkins Bee Gees Blondie Deana Carter The Cranberries
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Tracy Lawrence Meat Loaf Motley Crue Rocket From The Crypt Sponge Yes
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BeyondMusic.com
Brand Name Entertainment Content Providers: Artist "Channel" Overview
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& ArtistTracks• Music Info
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Programming
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I Lifesty 1
Content
I C°mmunity°commer 1 I 1
Generated
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BeyondMusic.com's Brand Name Entertainment Content Providers: Music-Related Entertainment Programs & Local Media o o o MusicoRelated Entertainment Programs Music-related entertainment programs feature appearances, performances, interviews, etc., by up-and-coming and successful artists and performers These shows are licensed from U.S. and European media and production companies for webcasting and, in some cases, for audio and/or video distribution in other media and channels BeyondMusic.com makes this developing archive of broadcast quality programming available to viewers on demand Local Media BeyondMusic.com leverages its longstanding relationships with individual radio stations and city culture magazines to harvest locally-generated content with wide reaching appeal This type of content can take the form of"Top 10 Local Artists," for instance, in a featured music-oriented U.S. city
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BeyondMusic.com's o
Cross-Media
Marketing
Strategy
BeyondMusicocom establishes and leverages exhaustive partnerships to expose an artist or program across all forms of media and distribution" o Web partnersinclude content, retail, portal., download and fan sites & ISPs o Cable partners include niche entertainment and music networks as well as local cable affiliates and emerging broadband networks o. Radio partners include networks, local stations and syndicated programmers o Television partnersinclude morning shows, entertainment shows, talk shows, news magazine shows and public television o Print media partnersinclude national news and entertainment magazines, and local magazines and newspapers o Retail partners include chain and independent music and book stores
o o
BeyondMusic.com works with each partner to amplify the demand for the artist or program by setting up promotions to excite or reward their audiences While each marketing plan is customized to a particular artist or program, typical promotions include complimentary tickets, free song downloads, digital audio postcards, personal appearances, online chats, autograph signings, contests, etc.
BeyondMusic.com's ,,
Cross-Media
Marketing
Strategy (cont.)
BeyondMusic.com leverages a deep understanding of digital and traditional media, marketing, consumer research and talent management to enable entertainment content providers to reach consumers through multiple platforms: Consumers[
_ _Radio,
Digital Media
(lnternet, Broadband Networks)
Traditional Media
Print, Cable, Broadcast)
_:3 B_and _
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Name Entertainme_ _° ntentf r°vld-_e-r---'J e
Marketing Consumer Research / Talent // Management //
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BeyondMusic.com's o
Cross-Channel
Distribution
Strategy
BeyondMusicocom serves all consumer purchasing channels by leveraging the efficiencies of online product sales, including digital delivery of music, and its strategic partner contacts within traditional entertainment distribution: o Online distribution for the sale of CDs, with inventory and fulfillment through a 3rd party distributor o Digital download of songs and compilations o E-commerce sales of merchandise, lifestyle products & branded goods
o Traditional distribution of music and entertainment products to "bricks-andmortar" outlets via a worldwide distribution network o BeyondMusic.com distributes selected artist and entertainment content through a variety of content and syndication partnerships with: o Web portals, ISPs & local media Web sites o Broadband networks o Cable, TV & radio networks o Print media, including its own co-branded music & lifestyle magazine
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BeyondMusic.com's
Customer
Acquisition
Strategy
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BeyondMusicocom drives traffic to its digital entertainment through a combination of: o Advertising on the Web and in traditional media
network
o Marketing partnerships with portal, entertainment and local media sites
o Word-of-mouth created by the viral interaction of enthusiastic fans o BeyondMusicocOm creates a sticky site with high user retention by using: o Its broad platform of quality, exclusive and on-demand entertainment offerings o Free features including musical greeting cards that incorporate the lyrics and music of the company's artists and downloads of live," b-side" or other artist-endorsed music o Community features including a system for fans to rate music and chats with artists and fellow users
o ® o
Overview o
of The Music
Industry:
Consolidation
of Market
Power
Mature record industry consolidates to 5 major music companies, collectively controlling nearly 85% market share (Source: Angeles Times, 7/99): Los o Universal - 27.1% o BMG17.5%
o Sony- 16.1% o Warner - 14.7% o EMI- 9.2% o o Market power of majors is used to control traditional forms of distribution: radio, video and retail Similar consolidation among radio networks and music retailers concentrates more decision making in the hands of a few national players - e.g., Chancellor & CBS/Infinity in radio and Musicland & Transworld in retail THE RESULT: Lack of airplay and shelf space opportunities for independent labels, whose market share dwindles nearly 5% from a high of 21% in 1.995
(Source: Billboard Magazine, 1/18/97)
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Overview
of The Music Industry:
Rise of the Online Music Upstarts
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Market share atrophy, coinciding with industry consolidation, creates an opportunity for new and innovative companies to market and distribute independent labels and artists Channel conflicts and copyright/royalty concerns slow the majors' embrace of the Internet, giving the first wave of online players the space to establish themselves with consumers - e.g., UBL, Launch Media, Tunes.com, SonicNet Unsigned, independent and ex-major label artists adopt the Net as an alternative way of marketing and distributing their music o MP3 becomes the defacto digital distribution format, except among the majors, and other formats abound
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A second wave of Internet labels and download sites like MP3.com, Emusic and Atomic Pop arise to enable independent labels and unsigned artists to bypass the traditional distribution channels through digital delivery
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Overview
of The Music Industry:
Current Outlook
o
Via the industry consortium, SDMI, and other individual company efforts, the majors finally move to increase their Web presence with announcements of new retail sites, secure digital formatting, download initiatives, mergers and other partnerships As digital distribution, becomes more prevalent, incumbents and Intemet pure plays vie for dominance in the digital music arena Meanwhile, consumers must sift through an ever increasing clutter of both good and, more often than not, mediocre songs to find the music they like
o o
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Internet Industry Trends: Music Sales Continue to Migrate to the Web o By 2003, combined online CD and download sales are forecasted to account for $7.8 billion, or over 50% of all music sales
Percentage Growth of Online Music Sales 3/99) 1999-2003
(Forrester 100% 9O% 8O% 70% 60% 50% 40% 30% 2O% 10% 0% 1999 2000 2001 Year
Research,
m Omine Sales [] Online CD Sales I [] DownloadSales
2002
2003
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Internet Industry Trends: More People Turn to the Web for Music o Two-thirds of all active U.S. Internet users are going online in search of entertainment content, of which music is a top selection (CyberDialogue, 1999) The percentage of Americans listening to the radio on the Internet has more than doubled over the six month period July 1998-January 1999, from 6% to
13% (Arbitron & Edison Media Research)
o
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Recording Industry Association of America (RIAA) postulates the rise of the Intemet as an entertainment medium and the availability of MP3 files as reasons for a decline in 1998 bricks-and-mortar music purchases by 15-24 year
olds (Source: RIAA, 3/99)
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Internet Industry Trends: Internet Usage Continues to Grow
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-1.
1998
1999
2000
2001
2002
2003
Source:
Forrester
Research
(October
1998),
"Media's
Global
Future".
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lnternet Industry Trends: U.S. Online Retail Spending Grows Dramatically
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o According to Forrester Research., more than 40 million. U.S. households will shop online, growing , Business-to-Consumer Web revenues to $108 billion in 2003.
1999 2000 2001 2002 2003
e-)" $8o.ooo_ _ $60,ooo]_ l $4o,ooo
$0 1998
Source:
Forrester Research (November 1998), "Retail's Growth Spiral".
[38
]
o
o
o
o
_
o
®
Internet Industry Trends: Web Advertising Skyrockets
o Online advertising spending in the US will increase from $2.8 billion in $25,ooo]_ $2o,ooo-_ I [_ $1s,ooo_ ] == IA < $s,ooo
$10,000-_
1999 to $22 billion by 2004 o The compound annual growth rate for Web advertising will be 51% over the next five years, roughly tracking the growth of online retail o The 2004 forecast represents 8.1% of projected expenditures for
2000 2001 2002 2003 2004 traditional
$o_
It_j_ 1999
advertising, exceeding
magazine, yellow pages and radio spending
Source: ForresterResearch, 8/99 39
o o o
Internet Industry Trends: Webcasts Leads to Consumer Activity
o
In a June 1999 survey of people who tune in to audio and video broadcasts on the Web, more than two thirds said they are doing more than just listening and watching: o Nearly 50% report buying products they saw advertised during webcasts or on related sites o Close to 70% said they clicked on links for information related to the webcasts o 59% said they clicked on nearby advertisements
o (Source: Arbitron New Media, June 1999)
40
]
o
o
o
o
o
o
o
•
•
•
•
0 0 0
Broadband
Internet Industry Trends: Connections Becoming More Commonplace
3025.
0
o
By 2003, 26 million Internet users will be accessing the Web via broadband connections such as cable modems, DSL and satellite
20
_q
I.,.
_q
4-1
15.
O
As broadband access becomes more of a reality, Web users will be searching for more interactive and compelling rich media programming
._10-_ 05 D 50 1999 2000 2001 2002 2003
E
0 0 0
Internet Industry Trends: Blending Online and Offiine Strategies o Leading online companies, through acquisitions and partnerships, are creating alliances with bricks-and-mortar companies in order to accomplish a number of strategic objectives: o Establish their brand by associating with other recognized brands o Gain fulfillment expertise by leveraging the distribution experience of their offiine counterparts o Provide comprehensive customer service through multiple sales and service channels o Participate in the larger market that includes offiine sales o Recent examples of these types of alliances include: o Internet auction site Ebay acquiring Butterfield & Butterfield, third largest auction house o Web pet supply retailer, PetJungle.com, and bricks-and-mortar pet supply retailer, Petsmart, forming Petsmart.com co-venture o Amazon.corn making strategic investment in the world's largest auction company, $otheby's
E_
I o
o
o
o
o
o
.
o
Q
Q
•
•
0 o o
Competition:
Competitive
Assessment
o
The Major Labels o Moving at varying degrees of speed and aggression, the majors are nevertheless all headed in. the same direction: using their deep pockets to create their own online retail sites, incorporating downloading, content and community
o
MP3ocon_ o Flush with cash from recent IPO, the company with the most "share of mind" in the Intemet music space now has the resources to beef up their operations through both online and offline acquisitions
o
MTV Online o The only player in the space with strong consumer marketing expertise, the cable music network is a force to reckon with as it executes an Intemet strategy to create an online music "hub" and expand on its MTV.com site
43
[
_
o
o
o
o
o
e
e
•
•
•
•
Q 0 0
Competition: o Artist Direct/UBL
Competitive
Assessment
o While currently pursuing a pure e-commerce play with music and musicrelated merchandise, the company's partnerships with big name music artists and record industry experience conceivably enable it to broaden its offerings o EMusic o The recent partnership with Yahoo! Digital creates a significant opportunity for the online label and distribution site to expose its microniche independent and alternative music selections to a more mainstream Web audience o Launch Media o The online music magazine has highly visible content distribution partnerships_ but lacks exclusive relationships with artists and validation of its advertising-based business model
44
0
0
0
O
0
0
_
0 0 0
Competition:
Major Record Labels
o
Universal Group and BMG Entertainment o Universal and BMG are partners in Getmusic.com, a new online retail site which is made of five genre-specific channels - R&B, Modem Rock, Country, Rock and Adult Contemporary - covering music from all companies o Channels are used to create communities of music fans and promote Universal and BMG artists through artist-related content, promotions and contests. The two companies' artists include U2, Janet Jackson and Hanson. o The site, which recorded over 350,000 unique visitors in May 1999 according to Media Metrix, is planning to test digital music downloads in the fall with technical cooperation from Intertrust, AT&T and Panasonic
o
Sony Music o Sony Music's recently announced music site, Uville.com, launches in the fall with music downloads, content and commerce from a variety of music labels o The company is already experimenting with digital delivery, using the MS Audio 4.0 format as part of its technological and marketing partnership with Microsoft
l o
o
o
o
o
o
o
o
•
•
•
•
0 0 0
Competition: o Sony Music (cont.)
Major Record Labels (cont.)
o The company also plans to reach consumers with digital music through record store-based kiosks and a proprietary high-speed network owned by partner, Digital on Demand o Along with partner Warner Music, Sony recently merged its stake in the Columbia House direct marketing outfit and its companion web site, TotalE.com, with top online music retailer CDNow. o Some of Sony's artists include Pearl Jam, Celine Dion, Korn and Mariah Carey o Warner Music o Warner Music, along with Sony_ are strong proponents of an IBM-run digital delivery experiment code-named "The Madison Project," which is offering high speed downloads to San Diego consumers o The parent company has recently begun to overhaul its Internet strategy under the direction of the newly formed Time Warner Digital Media group_ which will oversee the launch of a new entertainment and music "hubs" Entertaindom o Warner Music's roster includes Madonna_Jewel and Third Eye Blind
•
•
•
•
o o o
Competition:
Major Record
Labels
(cont.)
o
EMI o EMI has only recently begun to implement digital initiatives through a partnership for retail-based downloading with Digital on Demand and a 50% stake in the Web download site, Musicmaker.com o Equity deal with Musicmaker.com is in return for online rights to tracks from the EMI vault, which, along with Musicmaker's other catalog titles, are being made available for download as part of a combined $10 million marketing alliance and stock swap with Internet music network, Tunes.corn o EMI's artists include Smashing Pumpkins, Lenny Kravitz and The Foo Fighters
47
]
o
e
o
o
o
e
e
o
0 0 0
Competition: o MP3ocorn
Online Upstarts
o MP3.com is the leading download site with a library of 100,000 songs from 18,000 artists, 330,000 downloads per day and 6 million visitors per month (Source:CompanyReports, 7/99) o The company sponsored the summer touring bill of Alanis Morissette and Toris Amos_ in exchange for pre-IPO stock, as a way to attract bigger acts to the site, which is filled with mostly unknown and unsigned artists o MP3.com does not charge for music posting and has a 50% revenue share for CD sales, but is not equipped to promote or market individual artists o 1.999 2nd Q Rev: $1.9M; Net Inc: ($6.3M); Market Cap: $2.6B (Source:
Company Reports & Hoover's Inc., 7/99)
o
ArtistDirect/UBL o ArtistDirect recently signed long-term partnerships with 44 leading artists including Metallica, Aerosmith, Beastie Boys, Red Hot Chili Peppers, to be their e-commerce partner for music and music-related merchandise o Individual artist stores are featured on the Ultimate Band List site
] o
o
o
o
o
o
,
,
Competition: o ArtistDirect/UBL o (conto)
Online Upstarts
(cont.)
(UBL.com), which contains information and music on some 85,000 other bands, along with its iMusic community features o ArtistDirect and UBL had over 1.75 million unique visitors in May 1999
(Source: Media Metrix)
o
EMusic o EMusic_s digital label and distribution company business model is based on charging for MP3 tracks, of which it has about 22,000 priced at $.99 per song and $8.99 for a full album o Inked a deal in August 1999 to provide song library to Yahoo! Digital, Yahoo!_s new multimedia digital site that offers music previews and downloads, among other audio and video options o The company's digital distribution licenses with over 85 independent record labels has given their users access to the music catalogs of Frank Zappa, top independent Rykodisc_ punk rock label Epitaph, and alternative artists, Frank Black and They Might Be Giants
0 0 o
Competition: o EMa_ie (coat°)
Online Upstarts (cont.)
o A private placement infusion of $31 million has enabled EMusic to begin aggressively staking its claim recently, particularly with the purchase of o Web music pioneer, IUMA, the UK's leading MP3 site, Crunch Music o and the Jewel-Paula-Ronn catalog, in addition to a recently announced $6-10 million consumer advertising campaign o 1999 1st Q Rev: $21K; Net Inc: ($2.3M); Market Cap: $253M (Source:
Company Reports and Hoovers Inc., 7/99)
o
Launch Media o Launch.com uses an online magazine format to offer a variety of content, such as music news, streaming music videos and downloadable music tracks o Has signed content deals with Yahoo! to put co-branded content on the portal's music site and with Road Runner for its high speed online service o Over 1 million unique visitors came to the site in May 1999, according to Media Metrix; 1999 2nd Q Rev: $3.5M; Net Inc: ($8.6M); Market Cap:
I
$185M
(Source: Company Reports and Hoovers Inc., 9/99)
1 o
o
o
o
o
o
o
o
0 o o
Competition:
Cable Music Network/Web
Site
o
MTV Online o MTVocom has recently begun to expand its Web operations through the acquisition of music content sites, SonicNet and Addicted to Noise, Net radio site, Imagine Radio, and a partnership deal with download site, RioPort, which will provide music content and online players to MTV.com's visitors o MTV Online is also planning to launch a new music and entertainment "hub," called Qwert.com, which will aggregate content from the MTV, VH-1 and Imagine Radio sites o MTV.com had 2.25 million unique visitors and SonicNet had 506,000 unique visitors in May 1999 according to Media Metrix o Based on the value of John Malone's Liberty Media-sourced equity investment, MTV's entire online operations are potentially valued at $4 billion
0 o o
BeyondMusic.com's
Board of Directors
o o o
Keith Reinhart- Chairman of DDB-Needham Worldwide, Inc. Marilyn Laurie - Former Executive Vice President Brand Strategy for AT&T BeyondMusic is close to finalizing directorships with the following individuals: o Former chief executive officer who has led two of the world's most successful and prestigious major record labels o Chairman level international telecommunications executive with a successful entrepreneurial, background in the Internet infrastructure industry
52
]
e
_
_
_
_
_
e
e
O,
•
•
•
Funding Requirements o BeyondMusic.com is seeking $5 million in financing to: o Design, develop, test and launch the site o Build infrastructure necessary to support future growth o Round out its management team
53
]
e
o
o
e
o
o
e
o