Ministry of Sound RUSSIA “The Excellence in the Art of Sound”

Business Plan Presentaon Ministry of Sound RUSSIA “the excellence in the art of sound”

Sphere: music, entertainment Our products: sound material on diﬀerent kinds carriers and providing master and publishing rights for corporate customers

Author of the track Internet portals and sound trading systems

TV and Radio Record label Mobile and Final customer (obtaining and telecommunicang providing of the providers intellectual rights) WE ARE HERE Retail stores

Booking agencies

Ministry of Sound has a global network of internaonal labels including dedicated oﬃces in Australia, Germany and the United States. Its record label was ﬁrst established in 1995.

MoF holding includes: • Record Label • Night clubs • Booking agency • MoF TV • MoF Radio • Mobile content selling company

Copyright of the Ministry of sound Russia Tel: +7 (495) 123 45 67 Our team Managing Director – Denis Lelyavin Head of A&R Department – Dmitry Lelyavin Head of Markeng Department – Nina Dochviri Head of Radio Promoon Department – Elena Zabelina Head of Finance Department – Ksenia Neboga Head of Digital Sales Department – Filipp Cheglakov Head of Corporate Sales Department – Svetlana Orlova Corporate lawyer – Danila Kostromin

Managing director

A&R Markeng Finance Law department Sales Department department Department

Market Mass media Radio Digital sales Corporate sales research communicaon promoon

Corporate Lawyer Ministry of Sound Russia Danila Kostromin

119034 Ostozhenka st., 26/2, Moscow Phone: +7 (495) 123 45 67 Fax: +7 (495) 123 76 54 E‐mail: [email protected] Types of rights:

1. Publishing rights (original author of the music and arrangement) – 100%

2. Master rights (arst who sings the song and in some cases the studio) – 100%

Thus, track consists of 200% of rights

track sings Record 2 way: Author Arst (the song) company ‐ The most common way

3 way: Record company orders the track

Copyright of the Ministry of sound Russia Tel: +7 (495) 123 45 67 Types of contracts 1. Exclusive contract ‐ exclusive rights to the track ‐ third pares ‐ CDs, radio, movies, internet ‐ prepayment; proﬁt sharing

2. Non‐exclusive contract – only for limited edion collecons

3. Label Deal ‐ all the tracks that have been created or signed by one label automacally move to another

1. Track tle and album name 2. Term of rights (usually 3 or 5 years) 3. Territory of rights 4. Type of contract 5. Advance and royalty (for exclusive contracts) ﬂat fee (for non‐exclusive) 6. Opon

Head of A&R Department Ministry of Sound Russia Dmitry Lelyavin

119034 Ostozhenka st., 26/2, Moscow Phone: +7 (495) 123 45 67 Fax: +7 (495) 123 76 54 E‐mail: dima‐[email protected] Electronic music

Electronic music is music that employs electronic musical instruments and electronic music technology in its producon.

• In the late 1980s, dance music records made using only electronic instruments became increasingly popular. • The trend has connued to the present day with modern nightclubs worldwide regularly playing electronic dance music. Electronic music includes many variees and ranges from experimental art music to popular forms such as electronic dance music. • By the 2000, electronic music had penetrated every corner of musical life.

Nowadays, electronic/dance music is so popular, that dedicated genre radio staons (Europa Plus, NRJ) or TV Channels (NRJ Dance, MUSIC FORCE EUROPE) exist.

• New trend in culture • Very popular all over the world • Huge opportunies to organize fesval and raves • Electronic music is most downloaded • Commercial music • We love this music and we are interested in promong it

• Internaonal exhibions • European charts • Internet resources • Independent record labels • Internaonal music compeons

Copyright of the Ministry of sound Russia Tel: +7 (495) 123 45 67 Internaonal music exhibions MIDEM (short for Marché Internaonal du Disque et de l'Edion Musicale) is the world's largest music industry trade fair, which has been held annually at the Palais des Fesvals in Cannes, France, since 1967.

Bringing together musicians, businesspeople, cultural policy makers, and journalists from many countries, it provides a forum for business talks, discussing polical and legal issues, and showcasing new arsts, musical trends and music‐related products.

A conference for electronic music and a large‐scale club event fesval based in the city of Amsterdam, in the Netherlands.

The fesval is held annually in mid‐October and takes place in 40 clubs spread all over the city. At dayme the fesval is a plaorm for business and knowledge exchange for internaonal electronic music industry professionals and at nighme it is a club event hosng concerts and DJ acts in night clubs, night Copyright of the Ministry of sound Russia cafes and bars all over the city of Amsterdam. Tel: +7 (495) 123 45 67 Most competent charts

As is well known, some countries set trends in electronic music. That is why we primarily focus on them.

• Ringtones Sales Chart • World Dance / Trance Top 30 Singles • Europe Oﬃcial Top 100 • German Top 40 • France Top 40 • Netherlands Top 40 • UK Top 20

• First of all, I listen to the music and decide whether it suits the market or not. • Then I involve in the process of decision making other departments, such as: – Markeng department – Sales department – Managing director • Aer final decision, we start preparaon to negoaons with our music supplier (Arst, Record Label, Composer etc) • And the final stage. We do everything possible to sign contract on the most profitable condions.

Head of Markeng Department Ministry of Sound Russia Nina Dochviri

119034 Ostozhenka st., 26/2, Moscow Phone: +7 (495) 123 45 67 Fax: +7 (495) 123 76 54 E‐mail: [email protected] Synopsis

• Global record label market compared to Russian market – Cung edge trends – Market size • Target audience • Market segmentaon • Adversing & Promoon • Competors • SWOT analysis

Source: Internaonal Federaon of the Phonographic Industry, 2009 Copyright of the Ministry of sound Russia Tel: +7 (495) 123 45 67 World music market sales shares

Global record label market

Universal Music Group (USA) 26% 29% Sony Music Entertainment (USA) 14% EMI Group (UK) 20% 11% Warner Music Group (USA) Independent labels (Indies)

Source: Internaonal Federaon of the Phonographic Industry, 2009 Copyright of the Ministry of sound Russia Tel: +7 (495) 123 45 67 Market size Global market Russian market

Shadow market $1.5 bln. $40 bln. Legal sales $0.8 bln.

Source: The Recording Industry Associaon of America (RIAA) Copyright of the Ministry of sound Russia Tel: +7 (495) 123 45 67 Cung edge industry trends

• $5 billion a year invested in arsts by record companies worldwide • Around 30% of revenues spent on arst development and markeng • $1 million to break a new arst in major markets • Key obstacle: PIRACY  Soluon: creang secure legal environment

iTunes Amazon Download stores muz.ru Emusic OD2 freeetv.com Streaming sites music.yahoo.com deezer.com Digital Sales Mog Subscripon Napster services Rhapsody freeplaymusic.com Free‐to‐user sites zaycev.net royaltyfreemusic.com vkontakte.ru Mobile phone mobilemusic.com handset

• Age groups: 16‐25, 26‐30 • Potenal customers:  Fans of high quality electronic music  Clubbers  People keen on dancing

Key factors of success

Tradional tangible  Customizaon products (CDs, DVDs)  Quality

 Quick access Internet downloads  Ease of use  Price

 Ease of use  Customizaon Mobile content  Fast product innovaon Digital Sales  Low cost delivery services

• S ubmit the site to several search engines The Internet • Digital Sales • promo DJ, dj.ru, indarnb.ru, nightparty.ru

Radio New album release

Ringtones, Ringback tones TV commercial on MTV, Muz‐TV, A1, VH1

Adversement in Billboard Print media magazine, Bravo magazine etc.

Club Promoon Addional incenves:  Copyright of the Ministry of sound Russia Art Direcon Tel: +7 (495) 123 45 67 Competors

• No direct competors! • Implied rivals:  Other Russian Indies  Majors who have label deals with local indies

Strengths Opportunies

1) Pioneers on Russian market Become trend‐seng record label in 2) Popularity of electronic music electronic music in Russia 3) Diversity of target audience 4) Large scale market niche 5) Business is not exposed to polical, technological and environmental risks Weaknesses Threats

1) High dependence on connecons 1) Imperfecons of Russian legal in show‐business market environment 2) Unpredictable proﬁts 2) Major labels break into Russian market

Head of Radio Promoon Department Ministry of Sound Russia Elena Zabelina

119034 Ostozhenka st., 26/2, Moscow Phone: +7 (495) 123 45 67 Fax: +7 (495) 123 76 54 E‐mail: [email protected] Radio airplay – priority for most record labels • Radio airplay – the best way for a reputable record label to expose recorded music product; • The only medium that gets songs to an audience on a REPEATED basis; • A proven markeng tacc – leads to billions of dollars in record sales annually; • The money from the sales of CDs – only real source of income; • The more a song is played – the more chance it has to become part of the public’s consciousness; • If a Promo Rep is successful in securing airplay for a record‐ the overall markeng plan conceived by the label will be given a signiﬁcant boost.

• Radio staons have an overabundance of records to choose from when they pick which songs to add to playlists; • A playlist – a list of songs a staon is airing; created every week by the staon’s Music Director and Program Director; • A recording with a passionate and creave sales pitch has a beer chance of being picked by the radio staon’s Music Director.

• Over the last 2 decades technology has radically changed the way radio conducts its business; • Emergence of a new soware to keep beer track of the number of mes a record got played on a staon; • Today’s music industry trade magazines, special websites (in Russia – tophit.ru) track the exact number of spins a song gets on all staons that report playing it; • These spins are called Plays Per Week (PPW) in the charts.

‐ Two major media groups – Russian media group (Russkoe Radio, Hit FM,DFM) and European media group (Evropa+, Retro FM, Keks FM); ‐ Some staons form holdings (Love Radio, Radio Dacha, X‐FM); ‐ Independent radio staons ( Auto Radio, Silver Rain, Best FM, Energy) • Russkoe Radio and Evropa+ air hits only, whereas DFM and Energy are considered to be hit‐makers

• Major responsibilies: - obtain radio airplay, deliver new tracks to radio staons; - detect a potenal hit; to adapt tracks in order to ﬁt staons formats (make remixes). - decide where a record should make its debut ( Keep in mind the format of staons, the target audience, regional coverage, audience share, belonging to a media group or a holding); - choose the right me of a tracks’ airplay – Most listed‐ to mes of day occur in the early morning and the late aernoon. These mes are called «drive me».

‐ if it is impossible to obtain radio airplay on the pernent staons, the best alternave are regional staons. To work with them you have to put the label’s singles in the tophit.ru list ‐ maintain relaonships with Music and Program directors; ‐ conduct campaigns –work with a large group of similar staons simultaneously. Hit has to be on all pernent staons at the same me! ‐ work with other departments (Merchandising department ‐ T‐shirts, bumper sckers; Publicity department – arrange interviews, TV, radio, public appearances, press conferences).

Digital Sales Strategy

Head of Digital Sales Department Ministry of Sound Russia Filipp Cheglakov

119034 Ostozhenka st., 26/2, Moscow Phone: +7 (495) 123 45 67 Fax: +7 (495) 123 76 54 E‐mail: [email protected] Digital sales – rapid music delivery

Download music via: Mobile phones Internet music stores

Selling content to many of the major mobile operators like MTS, Beeline, Megafon

Download music from mobile operators web sites using your mobile phone

Download music via free mobile phone applicaon with smart and easy interface

Low cost tariﬀs

Mul accounts to pay from

Ministry of Sound has it’s Ministry of Sound also has an extensive partners web sites like muz.ru, range of both oﬃcial and unoﬃcial fan zaycev.net where user can easy pages social networking sites: download music for low cost fee vkontakte.ru, facebook.ru

Easy to register Here user can listen to the music, join the Easy to top‐up group, ﬁnd friends Easy to download

• Music lovers can create accounts and make top up fast and easy • Fancy can pay from credit card, electronic money… • Easy to ﬁnd latest music hits • Easy to ﬁnd the relave music • Easy to download high‐quality music

Head of Corporate Sales Department Ministry of Sound Russia Sveltana Orlova

119034 Ostozhenka st., 26/2, Moscow Phone: +7 (495) 123 45 67 Fax: +7 (495) 123 76 54 E‐mail: [email protected] Global sales in music industry

Copyright of the Ministry of sound Russia Tel: +7 (495) 123 45 67 Copyright of the Ministry of sound Russia Tel: +7 (495) 123 45 67 Ministry key objecves in Russia

• To manage team of naonal account managers and support staff tasked with maximizing profits via achieving opmum sales volumes and profitability through Russian retail channels. • Negoate trading terms agreements with all major music accounts. • Responsibilies for idenfying and implemenng commercial deals with emerging digital music stores. • Development of ground breaking CRM and arst website creaon tools to empower markeng managers with ability to market direct to fans.

• promoonal merchandise, adversing CD, in store displays, publicity, CD cover • to make sure quotas are met • to be in charge of creang sales campaigns for Russian region • for interviewing, hiring, and training salespeople • visits accounts, makes phone calls, and mails out leers and other collateral

Copyright of the Ministry of sound Russia Tel: +7 (495) 123 45 67 Business dimensions of corporate sales in Russia Blue chip companies

Periodicals, magazines

Restaurants, cafés

Sport gyms

Sales to cinemas and adversement

Sport teams

Head of Finance Department Ministry of Sound Russia Ksenia Neboga

119034 Ostozhenka st., 26/2, Moscow Phone: +7 (495) 123 45 67 Fax: +7 (495) 123 76 54 E‐mail: [email protected] Start up capital

London‐based Ministry of sound $100 000‐150 000

• rent corporate oﬃce, • maintain overhead expenses, • acquire and secure new arsts, • fund markeng and promoon budgets, • to develop website

Digital music formats 5% 10% 5% CDs and DVDs 20% 50% Broadcast income Secondary licensing Others

• 1 CD, DVD ‐ 55 rubles • 1 CD single ‐ 150‐300 rubles • Broadcast Income ‐ $20 000 – 40 000 per year • Secondary Licensing – terms of contracts are negoable

Accounts Receivable: • 45% of A/R collecons 1‐29 day period • 55% 90‐120 day period Accounts Payable: • Manufacturing A/P • Arst Royalty A/P Inventory ‐ The majority of the pre‐Recorded music product will be stored with the manufacturer Cost of Goods Sold is comprised of: • Arst and producer royalty percentage are 8% and 3% respecvely • Manufacturing of CDs – $1.10 per unit • Distribuon costs – 1% per CD

7000000 Year 2011 2012 2013 6000000

Sales 4 604 516 5 142 660 5 885 500 5000000

Operating 2 652 756 2 916 660 3 247 680 costs 4000000 Sales EBIDA EBIDA 1 951 760 2 226 000 2 637 820 3000000 Net profit

Taxes, 2000000 Interest and 700 202 889 010 996 910 Depreciation 1000000

Net profit 1 251 558 1 336 990 1 640 910 0 2011 2012 2013 Copyright of the Ministry of sound Russia Tel: +7 (495) 123 45 67 Our headliners

Above & Beyond Eric Prydz Utah Saints

Alex Gaudino Tim Berg William Orbit

Fedde Le Grand Sidney Samson Yasmin

Ministry of Sound RUSSIA “the excellence in the art of sound”

119034 Ostozhenka st., 26/2, Moscow Phone: +7 (495) 123 45 67 Fax: +7 (495) 123 76 54 E‐mail: [email protected]