Renegade Music has been established as a new and exciting entry into the rapidly expanding $40 billion-per-year global market for the music recording and publishing business.
The music business is presently dominated by the following industry leaders that comprises 80% of the global market:
Universal Music Group (owned by Vivendi Seagram: MCA, Universal Records, Def Jam Records, Interscope Records…home to such recording artists Mary J. Blige, Shaggy, DMX, Dr. Dre)
Sony Music (parent company Sony Electronics: Columbia and Epic are the labels, and is home to Destiny's Child, Michael Jackson, and Sade)
Warner Music Group (subsidiary of Time Warner housing Warner Bros., Elektra, and Atlantic Records; home to Madonna, Eric Benet, Missy Elliott, and Brandy)
BMG (owned by German Bertlesman Music Group, distributing Jive, Arista, J, and RCA Records; home to Alicia Keys, Whitney Houston, Britney Spears, N Sync, and R. Kelley)
EMI (parent company is Britain's Thorn/EMI - Capitol, Virgin, and Priority Records; home to Mariah Carey, Janet Jackson, and Ice Cube)
Approximately 20% of the market is comprised of independent distributers/record companies. Many highly successful record companies started out as small independents, i.e. A&M Records, Elektra Asylum Records, Def Jam Records, Geffen Records, LaFace Records, Bad Boy Records, Virgin Records.
Renegade music will be positioned as an independent record label, competing in a market arena where many independent record labels have done exceptionally well. The company only needs to capture a fraction of this market to meet its investment objectives. Smaller record companies, because of size and economies of scale, have an excellent opportunity of earning substantial profits per unit of sale because of reduced overhead resulting in larger net profits in relations to gross sales.
The overall industry is poised for a big revenue explosion, and is fueled by the ever-increasing demand and growth of new technologies in communications and distribution. The introduction of small cassette players in the 1980s was a bonanza because it expanded the consumer base for music by letting people do more than just dance to music. This innovation allowed consumers to exercise, meditate, work, and commute while listening to music in the cassette format.
The compact disc format is a current preferred music configuration because of its virtual physical indestructibility and clean, crisp sound. As a result, packaging and manufacturing costs have decreased. The laser disc, CD Rom, videos, Internet, and DVD are formats that have been rapidly on the rise. The digital downloading of music is quickly becoming a favorite among consumers as it pertains to acquiring music. Listeners can go to the Internet and retrieve their favorite songs. The Industry is currently devising ways for recording artists to be compensated for this procedure in lieu of the free downloads that have caused recent controversy in the music industry, i.e. Napster. Renegade Music plans to be in the forefront of exposing its artists through the Internet by seizing the opportunities that are channeled on-line at nearly light speed.
Target Marketing
Renegade Music will initially focus on hip-hop, urban/R&B, and street-edge pop genres. The demographics will include ages 12-34, with a greater emphasis on the 18-34 markets. Some projects will be broken on a regional level.
International Territories
Renegade Music will also explore opportunities in foreign markets such as the U.K. and other European territories as well as parts of Asia (Japan).
Distribution
Distribution is the most important element in the selling process. Renegade Music has cultivated and developed personal and reliable relationships with all levels of the distribution channel and will utilize them to expand retail sales opportunities. The distribution of Renegade Music will be handled by either one of the major distribution companies (i.e. the aforementioned companies) or by an independent distribution company that can supply retailers on a regional and/or national level.
Depending on what type of deal is struck, a simple P&D [pressing and distribution] deal will allow the distribution company to press and distribute the project at retail. They will take a sales percentage, usually 15-25% (depending on the deal negotiated) to perform this critical duty. In order for distribution companies to take a smaller label on, the label must first prove that they have enough capital to sustain their business. Distribution companies, due to the over-saturation of product in the marketplace, don't usually provide marketing and promotion out of the gate, if ever. That is up to the actual record company. Their machinery is to provide and store placement.
Profit Centers
Record Sales: This is the primary and most immediate way that income will be generated. The benefit of remaining independent is the artificial costs closely associated with major labels are eliminated. You don't have to deal with the additional packaging costs, reserves, and cross-pollination of projects, the salaries of a large machinery, and the recoupable advances. Eventually, as Renegade Music sells product, a major label may come to the table, which will allow for Renegade Music to strike a more appealing deal. Such a deal could possibly accelerate repayment to the investor.
Endorsements: The potential for corporate endorsements is great as Mimi's career advances. But having someone in place to spot and take advantage of such opportunities is key. It is the vision of Mimi to explore such opportunities and garner the financial rewards characteristic of corporate and/or product endorsements.
Publishing: Unlike the record side, it takes only a small capital investment to create and implement a publishing arm. Renegade's publishing arm will act as an administrator to many of the producers and songwriters (when possible) who wish to place copyrights with the label's acts. The publishing arm can also exploit its own catalog and obtain other copyrights for compilations, soundtracks, films, etc.
Creating an Artist Roster
Essential to Renegade's success and the investor's return is the creating of an artist roster where several projects can come through the label. Although the initial focus may be on Renegade's premier artist, Mimi, other acts, soundtracks, or compilations will come through the label's pipeline. This would grant the label more than one potential financial opportunity and broaden its equity, making it more appealing to additional investors or future label ventures.
Organization
Fabian Duvernay: C.E.O., Renegade Music
Mimi: Artist and President, Renegade Music
Singer, rapper, songwriter, model, actress, dancer, the ultimate in versatility, Mimi exudes an all-around persona that oozes with street sensibilities, glamour, independence, and sensuality. Mimi is what superstars are made of… a hard working professional coupled with that oh-so-important indescribable quality
Born and raised in San Diego and living much of her life in Los Angeles, Mimi, just like her parents, knew that performing was her birthright. She has been trained in the Arts since early childhood and has continued to hone in on her skills. While only in her pre-teens, Mimi landed the role of Maretha in the August Willson Pulitzer prize-winning play "The Piano Lesson", during its stint at the Old Globe Theater in San Diego. When the production moved to Hollywood she was invited to join along. Mimi graciously accepted and carried the play for the next two years at the Dolittle Theater. When her mother wouldn't allow her to follow the production to Broadway, Mimi settled in Hollywood to prepare for a recording career.
Mimi has worked with a number of prominent producers, artists, and songwriters, many of which are the hottest in the industry. In a quest to reach her goal, individuals such as Snoop Dogg, The Game, Scott Storch, Static, and Hi-Tech have lent their personal support. Due to the success of recent breakthrough collaboration with Dr. Dre and DJ Quik on the single "Put it on Me" from the 'Training Day' soundtrack, Mimi sparked national attention. As the "Put it on Me" single made its way into heavy rotation at many of the countries hottest radio stations such as KPWR Los Angeles, KSEQ Fresno, KTFM Santa Antonio, etc,. Mimi's definitive and catchy hook was booming in sound systems everywhere.
The first two years of her professional recording career began at Capitol Records, where she was signed by former president Roy Lott. The next five years she spent developing at Aftermath Records. Since many of the industry's top major record labels are consolidating, closing their urban divisions, and refusing to develop talent, Mimi foresees the opportunities that wait upon the release of her first independent project.
Armed, locked, and loaded with eight solid songs, with production
by California's finest hit-makers, such as Dr. Dre, Scott Storch, Focus, Hi-Tech, and guest appearances by Snoop Dogg and The Game, Mimi is more than ready to aggressively seek out her singles and claim her spot in mainstream music as the West Coast's First Lady, thus making history, as there has never before been a female in this genre of music to emerge from the west and dominate the marketplace.
Mike Lynn: Album Executive Producer
Mike Lynn brings to Mimi and Renegade Music sixteen years of success, knowledge, experience, and solid relationships in the music industry. Lynn was born with a passion and a golden ear for music, as he was known in his earlier years to 'keep the party alive" by disc jockeying at house parties and clubs. He developed his talent and started a group called "Po, Broke, and Lonely". The group landed a deal at Rutless Records where they released two albums and four singles. The experience he acquired impressed his long time friend Dr. Dre, who was in the development stages of launching his own record label, Aftermath Records, where Lynn was asked to jump on board to A&R for the company. Aftermath is now home to Eminem, 50 cent, Eve, Busta Rhymes, The Game, and The Chronic Compilations. Eve, a now well-known successful artist, was the first act that Lynn signed. Unable to fully convince Dr. Dre of her talent, Lynn sent her to Ruff Ryders Records (also a parent company of Interscope) where she took off to super stardom.
Mike Lynn has been closely involved on every album that has been released on Aftermath. From the development of talent, to overseeing all aspects of the final project, to signing producers and writers, to brainstorming marketing strategies and concepts, Lynn has acquired a well-grounded, versatile base of expertise in all areas of the mainstream and independent record industry. Lynn has since signed The Game, Busta Rhymes, resigned Eve, and has respectively earned his current position of VP to Aftermath Records. Also the current VP of Urban Music at parent company Interscope, Lynn's success has yet to reach its peak.
Capitalization & Usage of Funds
The short-term goal of Renegade Music is to build a financially strong company that will pursue a policy of equity formation, debt constraints, aggressive sales, progressive earnings and liquidity. The primary long-term goal is to increase the company's market value along with its artist(s) by accelerating sales through aggressive product management, promotion and marketing.
Full implementation of this current business plan will establish Renegade Music in the domestic United States market, more specifically the Western region of the United States. This will eventually accelerate and diversify into the global market. Renegade Music anticipates a compact and efficient organization and will minimize costs by subcontracting many services during the first year.
The funding requirement of $1.5 million will accelerate sales for the launching of the first artist, which will expedite positive cash flow formation. The Company hopes to eventually diversify by creating a talent roster within the urban/R&B and hip-hop/rap market in the future. However, the initial funds will be used to finance the production, operations, and marketing efforts of Mimi's launch album.
Use of Funds at a Glance
Production Expense: This includes the cost of CD replication, (an initial 5,000 units) printing, vinyl, point of purchase (P.O.P.) expenses, as well as the price of recording, producing, mixing and mastering of songs.
Marketing and Promotion Expense: This includes the cost of retainers, implementing marketing, radio promotion, publicity strategies, advertising, and photographers.
Administrative Expense: This expenditure (outside of the retainers to hire the promotion and marketing team) for business administration expenses will include salaries for the artist/CEO, VP (who doubles as record company principals), legal, business management and administrative team, consultants and Renegade Music staff.
Operating Expense: These are the day-to-day expenses for doing business such as organizational costs, communications, postage, travel, subscriptions (Billboard, Sound Scan, BDS) and publications, entertainment, printing and stationary, and taxes and licenses.
Projections
Projections presume sales of 350,000 units to 3,000,000 units sold in year one through the Internet, and through brick and mortar retail channels.
Projections presume an average CD unit sales price of $16.98 for each unit.
Projections presume an average manufacturing and distribution expense of $3.10 per unit. That's 30% of the $10.35 wholesale fee. The manufacturing and distribution expense consist of manufacturing cost, freight and handling, returns, etc. Projections presume an average unit cost of $6.80, which include artist/producer royalties and mechanical royalties.
Projected Operating Costs
For most of these cost categories, the projections presume in the first half of year one the phase in of operating expenses six months following the beginning of artist production. The cost category line exceptions are a) office equipment, b) insurance, c) accounting, auditing and legal, d) taxes and license, and e) contract and consulting fees. These operating costs will be expended in concert with the beginning of artist production.
The office equipment cost category includes general office equipment necessary when starting a business. Planned office equipment purchases include but are not limited to computers, a fax machine, copier, calculators, desks, etc.
The accounting, auditing and legal costs category includes ordinary and necessary expenses to start a business. Initial planned accounting software with a service contract covering maintenance and on-line support, and a wide area network system.
The taxes and licenses category include ordinary and necessary expenses when starting a business. Primary planned expenditures include annual business and other industry specific licenses and property, federal and state taxes.
The contracting and consulting fees cost category include ordinary and necessary expenses when starting a business. Leading planned expenditures include but are not limited to preparing bi-monthly payrolls, as well as quarterly and year-end reporting. A part-time accounting clerk is needed to assist with initial set-up of the accounting and wide area network system. Other part-time staff and consultants will be hired on an as needed basis.
Risk Management
The risk factors, which are pertinent to all business ventures, are particularly high in the music business. There are many unsuccessful independent record labels in the market and Renegade Music will face competition from other companies seeking to establish or increase their share of the market.
The success of Renegade Music will depend to a large degree on the judgment of principals and its consultants. The capital requirements will also be significant. Principals expect that its proposed plans and assumptions relating to its operations and financial requirements will be sufficient to fund operations for three to five years, however, there can be no assurance that Renegade Music will have sufficient financing to satisfy its financial obligations and there is no assurance that additional financing will not be required. The business objectives of Renegade Music should be considered speculative and there is no assurance that investors will not lose their investment.
Each prospective investor should read this Corporate Summary very careful and should consult with an attorney or business advisor prior to investing. The principals of Renegade Music are employed independently of the venture and may engage in other activities. Renegade Music does believe, however, that it will have sufficient staff, consultants, independent contractors and business managers to fulfill its obligations.
The financial forecast included herein is based upon assumptions made by the management regarding future events, however, there can be no assurance that actual events will correspond with these assumptions. Also, in order to raise additional capital, the Company may make further private offerings or borrow money from banks and other financial institutions and pay interest on such borrowings.
Exit Strategy
As presented throughout this business profile, the upside potential for Renegade Music is incredible. However, in order to have alternatives available to cash out this venture, other options have been analyzed.
Merger/Joint Venture/Sale to Existing Competitor
A joint venture or merging with a major record label can present additional financial rewards. Major labels have a machinery to promote and market records on both a domestic and international level. Once Renegade Music establishes itself as a formidable independent, a joint venture and/or imprint with a record label should be explored. Another option is to sell Renegade Music to related companies.
Sale to Foreign Firm
Many firms place a premium on American owned companies because they want to buy into the market rather than build from the ground level. In many instances, foreign firms will pay above the average market price for performing American Companies. Plus, we anticipate that Mimi will build a loyal following in the European and Asian markets. With her sound and image ideal for those countries, expect the Company to explore the international markets as well.
Sale of Strategic Assets
We have stressed the concept of liquidity and strategic asset accumulation because these assets can increase the book value and be used as contingency collateral, which can be sold to satisfy or lower obligations or increase dividend distribution.
Take Renegade Music Public
A fourth exit strategy, given the upside potential of Renegade Music, is to go public. Shares of the privately owned company stock would be converted into new Shares, which could be sold in the capital market.
Pay Out
Investors could buy out at a pre-determined date and rate.
DEVEL
PMENT & START UP
6 month start-up
PRODUCTION COST
| Recording Production
(studio time, producers, vocal producers,
Songwriters, engineer, sample clearances,
mixing and mastering) | $575,000.00
| Photography | $15,000.00
| Art | $10,000.00
| Video Production (2) | $300,000.00
| TOTAL COST | $900,000.00
| MARKETING & PROMOTION |
|
| Radio Promotions and Strategic Marketing | $200,000.00
| Publicity/Media/Advertising | $50,000.00
| Promotional Touring | $100,000.00
| TOTAL COST | $350,000.00
ADMINISTRATION
| Renegade C.E.O. | ???
|
| Renegade President/Artist Advance
(living expenses, development, vocal training,
choreography, etc.) | $150,000.00
| Album Executive Producer | *SUBJECT TO BUDGET ALLOWANCE
| Legal | $10,000.00
| Business Manager | $10,000.00
| TOTAL COST | $170,000.00
OPERATING COST
| Office Equipment | $6,000.00
| BDS/Sound Scan | $3,000.00
| Travel and Entertainment | $30,000.00
| Miscellaneous | $35,000.00
| TOTAL COST | $74,000.00
| 6 MONTH GRAND TOTAL | $1,494,000.00
| | | | | | | | | | | | | | | | | | | | | |
SALES PROJECTIONS
| UNITS SOLD | PRICE/UNIT | TOTAL
| Mimi Internet | 100,000 | $8.99 | $ 899,000.00
| Mimi Retail/Direct | 150,000 | $6.80 | $1,020,000.00
| TOTAL | | | $1,919,000.00
(Gold/500,000 Units)
| Mimi Internet | 250,000 | $8.99 | $2,247,500.00
| Mimi Retail/Direct | 250,000 | $6.80 | $1,700,000.00
| TOTAL | | | $3,947,500.00
(Platinum/1,000,000 Units)
| Mimi Internet | 500,000 | $8.99 | $4,495,000.00
| Mimi Retail/Direct | 500,000 | $6.80 | $3,400,000.00
| TOTAL | | | $7,895,000.00
| Mimi Internet | 750,000 | $8.99 | $6,742,500.00
| Mimi Retail/Direct | 750,000 | $6.80 | $5,100,000.00
| TOTAL | | | $11,842,500.00
(Double Platinum/2,000,000 Units)
| Mimi Internet | 1,000,000 | $8.99 | $8,990,000.00
| Mimi Retail/Direct | 1,000,000 | $6.80 | $6,800,000.00
| TOTAL | | | $15,790,000.00
(Triple Platinum/3,000,000 Units)
| Mimi Internet | 1,500,000 | $8.99 | $13,485,000.00
| Mimi Retail/Direct | 1,500,000 | $6.80 | $10,200,000.00
| TOTAL | | | $23,685,000.00
| | | | | | | | | | | | | | | | | | | | | | |
Suitability Standards
As an investment in the Shares involves a high degree of risk and is suitable for those
investors who have substantial financial resources in relation to their investment, who
understand the particular risk factors of this investment.
The Company has not established any standard for determining suitability of investors in
this offering. However, prospective purchasers of the Shares should be aware that an
investment in the Company is highly speculative, that the future success of the Company
is dependent upon a number of factors in addition to those usually associated with
developmental companies in technical endeavors, and that an investment in the Shares
may be lost.
Although the Shares will not be "restricted securities" as that term is defined in
Regulation D., they will not be transferable by purchasers until 90 days following the
completion of the Offering. The certificates representing the Shares will be distributed to
purchasers following the ninetieth day after completion of the Offering.
Risk Factors
Before deciding whether to purchase the Shares of the Company, prospective investors
should read this Memorandum in its entirety and carefully consider, among others, the
following risk factors:
New Business: The Company proposes to engage in a new business with the risks and
uncertainties attendant thereto.
Limited Capitalization: Limited Funds Available for Operations: Even after the
completion of this offering, the Company's capital may not be sufficient to conduct
its operations on an ongoing basis. Management believes the net proceeds of this offering
will be sufficient to implement the Company's plan of operation. However, there can be
no assurance that the Company will have sufficient funds to engage in its proposed
operations.
Associated with other firms involved in a range of business activities, including companies engaged in activities similar to those of the Company. Due to these affiliations, there are potential inherent conflicts of interest and non-arms length transactions may arise in the future in the event the Company's officers and directors are involved in the management of any firm with which the Company transacts business. Proprietary material, processes, marketing and intellectual property will be protected through non-disclosure and non-circumvention agreements with Renegade officers and directors.
Additional Risk Factors
No Assurance of Public Market for the Company's Shares: There is currently no public market for the Company's Shares, and there can be no assurance a market will develop at any time after the conclusion of this offering, or, if developed that such a market will continue. Purchasers of the Company's Shares may, therefore, have difficulty in selling them should they desire to do so.
No Underwriter: The Shares are being offered by the Company through the efforts of its officers and directors and no underwriter has been retained to assist in offering the Shares. The officers of the Company who will assist in the selling effort have no experience in the offer and sale of Shares on behalf of any issuer, and, consequently, may be unable to effect the sale of the Shares. There is no assurance the Company is capable of selling all, or any, of the Shares offered.
Purchasers of the Share Will Bear Risk of Loss: The capital required by the Company to carry on its business is being sought principally from the proceed of this offering. Therefore, purchasers of the Shares will bear most of the risk if the Company's operations until such a time as it attains profitable operations.
Proceeds of Offering May Be Inadequate: There is no minimum number of Shares required to be sold in this offering, nor is there an escrow of funds. The net proceeds of this offering (assuming all Shares offered are sold) are budgeted for a one-year period and are therefore sufficient to conduct only a limited amount of activity. Continued operation of the company thereafter will be dependent on its ability to generate operating revenue or to procure additional financing. There will be no assurance that any number of Shares will be sold, that any revenue will be generated from operations or that any additional financing can be obtained on terms favorable to the Company.
Use of Proceeds Not Specific: The proceeds of this offering have been allocated only generally. Accordingly, management will have broad discretion regarding the allocation of proceeds and Company operations.
First Right of Refusal: Management will be granted the initial opportunity to buy back any purchased Shares from any of the Company's shareholders.
No Dividends: No dividends have been paid on the Common Stock since inception and none are contemplated at any time in the foreseeable future.
Offering Price Arbitrarily Determined: The offering price of the Shares are established arbitrarily by the Company. There is no direct relationship between the offering price and the assets or shareholders equity of the Company or any other recognized criterion of value.
No Commitment to Purchase Shares: No entity, including the Company, ahs any obligation to purchase any of the Shares offered. Consequently, no assurance can be given that any Shares will be sold. There is no minimum number of Shares required to be sold in the offering and if only a small number of Shares are sold, the purchasers will have invested in a company without sufficient capital to conduct its operations. Subscribers will not be entitled to any refund of their subscription in such an event.
Share Eligible For Future Sale: All of the presenting outstanding Shares of the Company are "restricted securities" and under certain circumstances may in the future be sold in compliance with Rule 144 adopted under the Securities Act of 1933 as amended. Assuming a market for the Shares develops (as to which there can be no assurance), future sales of these Shares could severely depress the market price of the Shares being offered hereby. Rule 144 provides, among other things, that persons holding restricted securities for a period of two years may each sell in brokerage transactions every three months an amount equal to 1% of the Company's outstanding Shares of the average weekly reported volume of trading during the four calendar weekly preceding the filling of a notice of proposed sales, whichever is greater.
Common Stock
The shareholders of the common stock have equal pro-ratable rights to dividends from funds legally available therefore, when, as and if declared by the Board of Directors of the Company; are entitled to share pro-ratability in all of the assets of the Company available for the distribution upon liquidation, dissolution or winding up of the affairs of the Company; do not have preemptive, subscription, or conversation rights (although the Board of Directors may create such subscription rights) and there are no redemption or sinking fund provisions applicable thereto; and are entitled to one non-cumulative vote per share on all matters which shareholders may vote on at all meetings of shareholders. All Shares of common stock outstanding are fully paid and non-accessible and all Shares of common stock, which are the subject of this offering, when issued, will be fully paid and non-accessible.
The Board of Directors of the Company may, at its discretion, determine that any non-issued securities of the Company shall be offered for subscription solely to the holders of Common Stock of the Company or solely to the holders of any class of classes of such stock, in such proportions based on stock ownership as the Board may determine.
Non-Cumulative Voting
The shareholders of Common Stock of the Company do not have cumulative voting rights, which means that the holders of more than 50% of such outstanding Shares voting for the election of directors can elect all of the directors to be elected, if they so choose, and in such event, the holders of he remaining Shares will not be able to elect any of the Company's directors.
Dividends
The payment by the Company of dividends, if any, in the future rests within the discretion of its Board of Directors and will depend, among other things, upon the Company's earnings, its capital requirements and its financial condition, as well as other relevant factors. The Company has not paid or declared any dividends.
Plan of Distribution
The offering is being conducted by the Company through its officers and directors who will not be paid in excess of their regular compensation of such services. No broker0dealers of other persons shall be employed by the Company in connection with this offering. No sales commissions or other compensations will be paid by the Company, subscriptions are non-cancelable by the subscribers and funds paid for the Shares are not refundable.
The subscription price was arbitrarily determined by the Company and does not bear any relationship to the assets, book value of other recognized criteria or value.
Litigation
The Company is not a party to any material pending legal proceedings.
LLC
enegade Music is a bold new movement in the entertainment industry. It is motivated to create a fair music channel for hot talent. Renegade will give its artist a higher record royalty rate and a large portion of their masters, thereby raising the standard in the music industry.