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AudioRush – The Opportunity

The music industry is experiencing two major changes:

  • Music has been traditionally sold in a physical format that required manufacturing, including the record, the eight-track tape, the cassette, and the CD. Recently, with the advent of the Internet and increasing bandwidth, music has been reduced to a digital entity – as witnessed by the proliferation of MP3. This is the biggest change the recording industry has possibly ever seen.”As we look ahead, we anticipate that the convenience of digital delivery of phonorecords may soon make digital transmission services the music distribution method of choice for many consumers.”4
  • Music used to be classified into a narrow range of genres. These included classical, pop/rock, country, and jazz. Tastes have fragmented over the last decade, such that there are many more genres of music today – most likely due to the proliferation of low-cost technology that allows artists to “self-publish”. This phenomenon was virtually unheard of in the past due to the enormous costs involved.

“Once upon a time, people bought pop music. Then they bought rock music. Now, they buy grunge, ambient, illbient, acid house, acid jazz, drum ‘n’ bass, Eurodance, hip-hop, trip-hop, lounge, techno, glam, industrial metal, lo-fi, dream pop, psyche rock or riot grrrl. Digital technology encourages this fragmentation by giving each new splinter genre easier access to the means of producing and distributing its wares.”5

The technology mentioned above consists largely of software that performs the same functions as very expensive equipment. It is now possible to create music entirely with an average-priced PC and moderately-priced software. This has caused the proliferation of a genre known as electronic music. It is hallmarked partly by the fact that it has been created using computer software, but also by a consistency of style, which is identifiable to aficionados. In other words, music created on computer is not necessarily “electronic music”, but electronic music is all generated in this fashion. The term electronic music is a catch-all term for various sub-genres of music such as house, techno, drum ‘n’ bass and ambient, to name the majors.

Despite its growing popularity, electronic music has been practically ignored by mainstream record labels and radio stations, which are just beginning to catch on. Internet radio stations are discovering that the genre can be lucrative however. One of these is aminoRadio:

AminoRadio is a 24 hour station devoted completely to music including techno, drum ‘n’ bass, house, turntablism, and otherforms of electronic music. AminoRadio is The Eclectic Radio Company’s answer to the huge demand for techno electronic music that is not being provided by any other form of broadcast media.6

Launched in August 1998, aminoRadio now has over 15,500 listening sessions per month, and is growing at a rate of 300% each quarter.

The lack of electronic music’s traditional radio play is possibly due to the unusual format of the songs, which have erratic lengths. Some tracks are ten seconds long, while the majority are at least seven minutes long. This does not fit well with the traditional radio format of three and four minute songs. With virtually no radio play, record labels do not want to risk the investment of producing electronic artists’ music. The result? An “invisible” community of electronic music lovers who hear the music through Internet radio, at dance clubs, and buy it from specialized record stores at a premium. The record stores are supplied by small record labels, which have grown out of the success of certain artists.

ar.com plans to take advantage of the resulting opportunity by positioning itself as the premier online source for electronic music and culture.

The Offer

Offer and Use of Proceeds
ar.com seeks $350,000 in exchange for 10% of common shares. The estimated net proceeds to be received by ar.com from the sale of common shares, is $330,000 (including $30,000 of expected expenses associated with the offering). ar.com intends to allocate $50,000 of the net proceeds towards the purchase its web site design, and the balance, in the amount of $250,000, towards funding salaries and working capital.

The Music

History
Whether we are prepared to admit it or not, technology has always defined popular music. From the development of the microphone that allowed Bing Crosby and Frank Sinatra to croon softly on top of a big band to Keith Richards’ discovery of the pleasures of an overdriven guitar amplifier, the excitement generated by pop music is often the thrill of exploration and the sense of possibility provided by the use and misuse of new technology. Electronic music is about the era of the proliferation of digital technology; an age in which the boundaries between human and machine are becoming increasingly blurred.7

Possibly the most significant difference between electronica and other musical genres is the importance of the DJ in reinterpreting and re-mixing what artists produce. Indeed, there is a significant shift in recognition from the musicians themselves to the DJs who perform it live, and who also record their work. This began in Chicago with the advent of “House music”, which was pioneered at a local venue called the Warehouse. The tradition continued later in Detroit, the birthplace of “techno”. The importance of the DJ can be attributed to the fact that the music is disseminated by being played live, and by the fact that only a professional working full-time could possibly afford the time and cost involved to gather such rare music from various countries. In Germany, where electronica occupies a significant portion of the Top 40, it is bona fide pop music.8

The main sub-genres

  • Ambient: Has subdued rhythm, often uses rich, extended sounds, and tends to be quite experimental.
  • House: House typically involves a steady 4-4 beat, a melodic bassline, occasionally pianos & female vocals, with heavy sampling of 70s songs. Possibly the most successful of all electronic or dance music genres.
  • Techno: Typified by a 4-4 beat and a pure electronic sound (i.e. not electronics attempting to sound like ‘real’ instruments). Tends to be more experimental than house.
  • Drum ‘n’ bass: Typified by its incredibly sped-up looped reggae and hip hop drum riffs reinforced with drum machine kicks and rumbling bass, it is the latest of electronica sub-genres.
’64 first Moog synthesizer hits the market
’75 Brian Eno coins the term Ambient and releases “Another Green World”
’78 Throbbing Gristle create Industrial Music
’82 Roland introduces the TR-808 drum machine
’84 Frankie Knuckles mixes R&B records and beats at the Warehouse, which becomes known as House music
’85 House music is introduced to the UK causing a musical revolution
’86 Techno is founded in Detroit by Juan Atkins, Derrick May & Kevin Saunderson
’93 Jungle is created and evolves into Drum ‘n’ Bass

Music production process

The following explains how electronic music is created using current technology:

  • The minimum equipment needed is a computer with at least a 150MHz processor, 32 Megs of RAM, a MIDI-compatible sound card (e.g. Soundblaster), 1 gig of hard disk space, and music composition software (MIDI), e.g. Cubase – already affordable.
  • The sound card is capable of generating sounds which fall into 2 categories: synthesized, and sampled
  • Synthesized sounds are generated from simple tones, whereas sampled sounds are recorded from various sources, often using a microphone
  • Using MIDI software, the musician creates a score which plays these sounds, which effectively act as instruments (think of the MIDI score as sheet music, the sound card as the instruments, and the computer as the musicians)
  • The result of the MIDI file playing these sounds is a WAV file. This file can then be uploaded to ar.com.

The Products and Services

A comprehensive electronic music web site has been designed for maximum user-friendliness, unlike any other music site today. The unique design allows users to browse ar.com’s musical repertoire effortlessly, while being able to automatically hear excerpts from each virtual CD. The site uses Flash technology, the new generation in web site design that allows users to view complex graphics and animations, and hear high-quality audio by streaming the content to them as they browse the site.

Music fans can:

  • Listen to various tracks/clips of their favorite artists and/or DJs
  • Download a complete “CD” in 10 minutes through use of a high bandwidth connection for $8.00 (this includes downloading the cover art as well). They then have the choice of burning the file to a CD, or playing it through their computer.
  • Have a custom CD burned by ar.com’s staff, and have it shipped for an additional fee ($3.00)
  • Find out about electronic music events in their area, or elsewhere
  • Read/listen to interviews with their favorite artists/DJs

Electronic artists can:

  • enter into a distribution agreement with the site whereby their music is available for purchase
  • download (and post) musical samples which are used to create their music at no charge
  • agree to be interviewed to increase awareness of their work

DJs can:

  • sample songs/clips of various artists before buying
  • have access to the latest tracks from even the most obscure artist from anywhere in the world virtually instantaneously
  • enter into a distribution agreement with the site whereby their music is available for purchase
  • agree to be interviewed to increase their recognition
  • post tour information

Labels can:

  • use ar.com as an additional distribution vehicle for their talent, at no marginal cost
  • use ar.com to run promotions for new releases (e.g. “sneak previews”, etc.)

By making sure the site offers not only music to consumers, ar.com is ensuring authenticity. Web sites that only aspire to be “stores”, forget why people surf the Internet in the first place: for information. Ar.com intends to provide high-quality information on the topics that interest the target market to ensure frequent visits to the site, and a positive brand image. The intent is to be the premiere resource for electronic music and related information on the Internet. A site of this caliber does not presently exist.

Industry Alliances

  • ar.com is partnering with aminoRadio to provide live electronic radio to listeners directly through a branch of the web site. On aminoRadio’s site listeners will be able to click on the playlist for a link that brings the user directly to the matching page on ar.com where the album/track is featured.
  • ar.com is in discussions with Canada’s Tribe Magazine for exclusive partnership on their web site. The Tribe site also promotes mixed tapes of DJ compilations sold in authorized stores in Canada. Ar.com is also discussing the sale of this material via ar.com
  • ar.com is searching for members of an associate program whereby music fans post links to ar.com’s site, and receive a commission on sales generated. The first associate member’s address can be found at: http://www3.sympatico.ca/paul.mcqueen

4 National Music Publishers Association, http://www.nmpa.or2/nmpa.html
5 “The Music Industry. A Note of Fear”, The Economist, Oct. 31, 1998.
6 AminoRadio press kit. http://www. Aminoradio.com
7 Modulations treatment (Caipirinha productions), Peter Shapiro, available at: http://www.modulations.com/
8 ibid


 

AudioRush.com
Table of Contents Appendices
1. Executive Summary
2. The Opportunity
3. Operations
4. Marketing Plan
5. Industry Analysis
6. Management Team
7. Financials
Technology Dissemination
Industry Information
Curriculum Vitaes
Financials
Media Calendar
audiorush.com web site
Sample Advertisement
Internet Banner
Positioning Map
Sample CD
All information herein is confidential and belongs to AudioRush.com
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