226 Music Group, Inc.
14110 N. Dallas Pkwy
Ste. 365
Dallas, TX 75254
Phone: 214-276-0006
Fax: 214-292-9734
Email: info@226musicgroup.com
http://www.226musicgroup.com/
Stock Exchange: Pink Sheets
Stock Symbol: TTMG
Outstanding Shares: 100,000,000
Float: 20,000,000
http://www.226musicgroup.com/investor-relations.htm
About 226 Music Group, Inc.
226 Music Group, Inc. is a multi-faceted entertainment company encompassing a traditional independent record label, artist management company and on-line division providing music and entertainment over the Internet. 226 Records
http://www.226records.com is an independent record label that produces, licenses, acquires, promotes and distributes high quality recorded music for a variety of formats. 226 Music Group specializes in developing, utilizing and marketing technology systems to deliver music in a digital format to the end consumer in an expeditious and cost effective manner. These two divisions of 226 will be integrated to accommodate the rapidly changing methods of promoting and delivering music for the consumer market.
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226 Music Group, Inc. Signs a 3 Year North American Distribution and Marketing Deal With Sony Corporation's RED Distribution and RED Ink
DALLAS
226 Music Group, Inc., Dallas
Paul Bassman, 214-276-0006
DALLAS--(BUSINESS WIRE)--June 10, 2005--226 Music Group, Inc. (Pink Sheets:TTMG) is pleased to announce that the company signed a distribution and marketing agreement with Sony owned RED for North American retail distribution and RED Ink for North American marketing services.
The initial three year contract provides for distribution and marketing services in retail music stores including Tower Records
http://www.towerrecords.com/ , Virgin Megastores
http://www.virginmega.co.uk/ , FYE
http://www.fye.com/ , Musicland
http://www.musicland.com/ , Sam Goody
http://www.samgoody.com/ and mass merchandisers such as Target
http://www.target.com , Best Buy
http://www.bestbuy.com and Walmart
http://www.walmart.com/ . In addition to the traditional retail distribution afforded to 226 by RED, a large percentage of CDs will be sold online as well and RED's digital division will sell 226 music via electronic download.
About the record business in North America
According to the RIAA in 2003, the US record industry sold over $11 billion in CDs. Rock music accounts for over 25% of sales, far and away the largest segment of recorded music market. In 2004 Independent labels, according to Billboard Magazine, accounted for 15.8 percent of current CD sales up from 14.3 percent in 2003.
About 226 Music Group, Inc.
226 Music Group, Inc. is a multi-faceted entertainment company encompassing a traditional independent record label, artist management company and on-line division providing music and entertainment over the Internet. 226 Records is an independent record label that produces, licenses, acquires, promotes and distributes high quality recorded music for a variety of formats. 226 Music Group specializes in developing, utilizing and marketing technology systems to deliver music in a digital format to the end consumer in an expeditious and cost effective manner. These two divisions of 226 will be integrated to accommodate the rapidly changing methods of promoting and delivering music for the consumer market.
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward- looking statements are based on current expectations or beliefs, including, but not limited to, statements concerning the company's operations, financial performance and condition. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others, demand for sensors produced by the joint venture, the impact of competitive products, pricing and new technology; changes in consumer preferences and tastes; and effectiveness of marketing; changes in laws and regulations; fluctuations in costs of production, and other factors as those discussed in the Company's reports filed with the Securities and Exchange Commission from time to time.
http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20050610005....
Introduction
The music industry has experienced an unimaginable metamorphosis in recent years. New technology has created rapidly changing methods of content production, delivery, and distribution rendering the traditional major record label business model almost obsolete. Continued consolidation by major record labels and their increasing reliance on independent labels for discovering and breaking new artists has created an explosive niche for forward-thinking companies like the 226 Music Group, Inc.
Industry Overview
Independent labels (labels not owned by any of the major record companies) including Wind up Records (Creed, Evanescence, Drowning Pool), Drive Thru Records (New Found Glory, Something Corporate), Or Records (Los Lonely Boys) and others have spawned a myriad of successful artists utilizing the infrastructure of major labels primarily for distribution and marketing. These savvy independent labels enter into distribution and or up streaming joint ventures with the majors while retaining a respectable portion of the net revenues from their album sales. Many of these independents are "lifestyle'" labels that exploit a specific genre of music and develop a loyal grassroots fan base. The genre specific branding created by these labels is reminiscent of the mega brand created by Motown almost four decades ago. 226 Music Group, Inc through its Zero-Sum Recordings division specializes in the area of extreme heavy metal (metal core) that has a budding fanatical fan base and a global audience.
Business Model
The business model for 226's Zero Sum Recordings division is predicated on producing quality recordings on a relatively minimal budget. These budgets are often a fraction of what a major label will spend to produce a full length album. Major labels spend anywhere from $50,000 to over $1,000,000. Utilizing the latest in hard-drive recording technology, Zero-Sum budgets will range from only $5,000-$25,000. 226 will not rely primarily on radio to break new artists, instead following in the footsteps of the new breed of independents utilizing intensive touring and grassroots marketing campaigns to expand the audience for their artists. Upon the release of a CD (both brick and mortar and digital), the Zero Sum artist will tour and promote the album with the intent of building a "lifestyle' fan base. These tour intensive artists target an underground niche, and as they gain popularity the label brand also becomes a recognized commodity. As the label brand becomes further established the fans are eager to consume the next new up and coming artists released by the label. At the same time new prospective artists are often eager to join the label. This label/artist branding and marketing method has launched labels like Victory Records, Vagrant, and Trustkill from little known underground labels to powerhouse merchandising machines selling not only their artists CD's and digital downloads but label related apparel and ancillary goods. According to an article in the Chicago Tribune on July 18th, 2004 industry sources projected Victory's sales to hit between $15 million and $20 million for 2004.
Retail Distribution:
226 entered into an agreement with Sony's wholly owned subsidiary RED for distribution and marketing of their artists including all artists signed to the Zero-Sum Recordings division. The initial three year contract provides for distribution in all US and Canadian retail music stores including Tower Records, Virgin Megastores, FYE, Musicland, Sam Goody and mass merchandisers such as Target, Best Buy, and Wal-Mart.
Internet Sales:
In addition to the traditional retail distribution afforded to 226/ Zero Sum by RED, a large percentage of CD's and merchandise will be sold online. Amazon.com, Best Buy, FYE, Tower, Walmart and over 80 other on-line retailers will carry titles from 226/Zero-Sum Recordings.
Digital Distribution:
226/Zero Sum will also utilize RED to reach the booming market segment of digital downloads. The IFPI, which represents more than 1,450 record companies across the globe, said music fans in the United States and Europe legally, downloaded more than 200 million tracks in 2004, up from about 20 million in 2003. That contributed to estimated digital music revenues of around $330 million in 2004, up six fold from the previous year.
"Digital music is the mainstream," said John Kennedy, the chairman and CEO of the IFPI. There was major growth in 2004, it has really taken off."
226 intends to focus on this lucrative and growing market to launch new artists in an expedient and cost effective manner by eliminating packaging and container cost as well as shipping expenses. Samsung expects global shipments of MP3 players to reach 35 million to 45 million units in 2005. Currently it is estimated that Apple has around two thirds of the global market for MP3 players selling around 15 million units (iPod's) to date. This coupled with the reports from Analysts Informa Media Group that predict sales of MP3-enabled phones will more than double to 25.3 million next year, and reach 116 million by 2008 exemplify the rapidly expanding market for digital music distribution.
Ring Tones:
On September 22, 2004 Consect, the leading provider of US mobile market analysis, including ringtones and other mobile entertainment metrics, charts and reports, announced the release of its 2004 Mobile Music Report. The report indicated that global mobile phone ringtone sales will total $4 billion in 2004. In the US market, total sales have doubled from $150MM in 2003 to more than $300MM for 2004, making the US one of the fastest growing -- and largely untapped markets for mobile music. In other regions, ringtone revenues reach $1.5 billion for Western Europe, $.5 billion for Korea, and $.7 billion for the rest of the world. Estimated at $300 million, the US ringtone market has surpassed that of digital downloads even at this early stage of the game. By selling their artists ring tones online through the Zero-Sum Recordings website as well as their artists websites, 226 and Zero-Sum will benefit from this growing phenomenon and utilize the growing market to create additional revenue streams for the company.
Podcasting:
A podcast is an audio file in MP3 format delivered online via RSS feed (webfeed) subscriptions. The term podcasting plays upon the terms broadcasting and webcasting and is derived from of the iPod portable music player, the playback device of choice of many early podcast listeners (though podcasting is not directly associated with Apple’s iPod device or iTunes jukebox software.) Podcasting is similar to the use of digial video recorders (DVRs) such as TiVo, which let you record and store TV programs for later viewing.
226 intends use podcasting as a new and revolutionary way to promote releases of its artists by selling the initial release via a podcast subscription. Subscribers will receive the artist’s album prior to the scheduled release and also have access to information on an ongoing basis including interviews, tour updates, road diaries, and other bonus content. 226 believes this value added approach to music sales coupled with the current popularity of digital music players will allow them to aggressively carve out a new and innovated niche to launch their artist roster.
Expert Management:
CEO and President: Paul Bassman
Mr. Bassman has an extensive and distinguished career in music. After working for record labels such as Elektra Entertainment and Discovery Records and management companies including Robinsonwood Management (Vertical Horizon, Jackopierce, Sister Seven, Grand Street Cryers) Mr. Bassman founded Bassmanagement in 1999. Shortly thereafter he signed artists Flickerstick and Drowning Pool to management deals. The Flickerstick debut, "Welcoming Home the Astronauts" was released on his startup independent label 226 Records. The strength of that release landed them a starring role in the Emmy nominated VH-1 TV series "Bands on the Run" and they subsequently secured a record deal with Epic Records. Their debut CD was re-released by Epic debuting on the Billboard top 200 sales chart. Following the success of Flickerstick, Bassman discovered a then virtually unknown band from Dallas, Drowning Pool. Drowning Pool was the breakout artist for Bassmanagement. After releasing an EP on 226 Records, several major labels began pursuit of the band. Drowning Pool decided on a deal with independent label Wind-Up Records (home of Creed and Evanescence). Their debut CD, "Sinner" also debuted on the Billboard top 200 sales chart and went on to sell over 1.5 million records worldwide. The third major release for Bassmanagement was supergroup Damageplan. This group made up of founding Pantera members Dimebag Darrell and Vinnie Paul released their CD in 2004 also debuting on the Billboard top 200 sales chart.
Vice President: Chris Paluska
Mr. Paluska joined 226 Records in October of 2003 and serves as the Vice President of A&R. Mr. Paluska is in charge of scouting and acquiring talent as well as overseeing all aspects of the recordings at 226. Prior to joining 226, Mr. Paluska worked for Dallas based record label and recording studio Last Beat, Inc. During his nine year tenure at Last Beat Mr. Paluska worked as the in-house Art Director, A&R Representative, and General Studio Manager. Mr. Paluska also was involved with marketing, promotions, booking, and the general day to day management of some of Dallas’ most influential and respected rock bands. Last Beat’s label division worked with an array of artists including the Burden Brothers - ex-Toadies and Reverend Horton Heat (Trauma Records), Captain Audio – now the Secret Machines (Reprise). Last Beat had a co-release E.P. for Slowpoke with Geffen Records and for Tablet with Mercury Records. Last Beat’s nationally renowned recording studio was the choice of artists including Drowning Pool, Eagle Eye Cherry, Izzy Stradlin, Flickerstick, Jack Ingram, Edie Brickell and the New Bohemians, Polyphonic Spree, Reverend Horton Heat, Toadies, and Tripping Daisy. Mr. Paluska brings to 226 Records a wealth of knowledge and contacts in the music industry and the practical working knowledge to manage day to day operations at 226 Records.
Investment Considerations:
The continuing growth and success of independent record labels has established them as the norm rather than the exception in music industry. In addition to the success of these “Independent” labels the popularity of digital music delivery, cellular ring tones, and portable MP3 players create an environment of unparalleled opportunity for emerging music companies like 226. 226 combines expert management, a proven A&R track record and an innovative approach to content delivery and marketing. In addition to these critical factors 226 will utilize it’s newly formed alliance with Sony Music’s RED to further augment critical elements of its business plan as it enters the thirty three billion dollar plus global music market.
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