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Forte Business Plan


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Business plan written in Fall 09

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Forte Business Plan

  1. 1. Executive Summary Problem Within an industry of radical change, record labels are grappling at a solution for a consumer market that no longer feels they should pay for music. While physical record sales are declining by leaps and bounds each year, digital music sales are increasing exponentially. (See Figures 1.1 and 1.2.) Additionally, people are buying less music than they ever have, but utilizing and listening to more music online that ever before - this would suggest that the current models need tweaking. The modern consumer is looking for an easy, fast, & safe solution to all their music needs. Solution provides an easy, fast, and safe solution by aggregating many existing services into one comprehensive framework. These services include everything from music discovery tools, internet radio, social networking possibilities, and unique bundling options not available anywhere else. provides its customer with the simplest and most user-friendly music solution on the web. Funding amount required $35,894 for startup costs, or $695,468 to carry operations until breakeven Market will have a direct focus on one specific demographic of the music consumer market. The current market of internet radio listeners consist of over 42 million people. Inside this market we have located a specific segment that comprises the highest percentage of internet radio users. 35-55 year old music consumer’s makeup 42%, or, 17,460,000 users. Furthermore, this demographic of the market has the highest average disposable income. Based on this we hope to capitalize on this segment. Competitors We view as a solution for the average music consumer. We are differentiated in that our service interface will be the simplest and easiest to use compared to all of our competitors. We also believe that our market research and understanding of both the industry and target consumer will allow us to have a very strong initial growth. The direct competitors for compete on the basis of one forum, unique visitors. Our complete competitor analysis can be found later in the business plan. Entry Strategy We plan to launch a beta tester for 3 months to aggregate feedback and refine design. Thereafter, we will run a simulation to ensure that our website servers can withstand expected traffic. Upon establishing functionality we will launch our web service in accompaniment with our start up marketing campaign in efforts to create a significant “buzz” about our service and generate unique visitors. November 19, 2009 Page 2
  2. 2. Financial Plan Forte will use initial startup capital to facilitate the launch of the webpage, carrying the company all the way into year four when we breakeven. November 19, 2009 Page 3
  3. 3. Table of Contents 1. Business Concept 5 2. Industry/Market Analysis 6 3. Service Development Plan 9 4. Operations Plan 12 5. Organizational Plan 13 6. Marketing Plan 14 7. Financial Plan 16 8. Risk Analysis and Exit Strategy 16 9. References 20 November 19, 2009 Page 4
  4. 4. Business Description Forte is a social music discovery site unlike any other. Combining valuable features from many contemporary music media sites, Forte integrates everything the consumer values, into one smooth interface-that’s intuitive nature is unrivaled by the current market. It brings together on-demand music streaming through a social framework, as well as merchandise distribution in bundles which make the combined value significantly better for the consumer. Forte is the proposed solution to a crippled music industry—rethinking the current model in a way that monetizes music once again. With this in mind, for logistical reasons- our webpage must be phased in two segments. [Refer to Product/Service Development plan.] Figure 1.1 Figure 1.2 works with music distributors to bundle products together for lower prices much as the famed Concert tickets, t-shirts, pens, hats, hoodies, CD’s, and any other kind of product out there would be included in different levels of bundling, the level depending on the consumer’s preference. However, this is not just another online vendor. The pull is not purely the products available, but the social networking and internet radio system which makes up the user interface for Users, when first visiting our site, will be asked to create an account detailing their music preferences. Based upon this, and direct song or artist entry- the user will stream internet radio- which brings them through different users sites which recommend similar songs and artists, and also shows them what other users who like their music are listening to. Whenever a user hears a song they like, they simply thumbs up the song, which compiles it to a collective playlist. Users will be able to see playlists that feature similar artists and genres that other users have created and will have the option of buying that playlist in addition or in place of their own playlists. We would also list the top playlists of the day, top artist, top song, suggest bundles that seem to be the most popular…the networking possibilities of this site are endless. November 19, 2009 Page 5
  5. 5. Once the user has compiled a certain number of songs onto a playlist (they can make as many as they want, as often as they want), their playlist will then be eligible to download as a digital CD, or a custom disc sent to them as a hard copy with personalized cover art and album title. Industry/Market Analysis Industry Definition competes under a broad umbrella of the promotion and distribution of sound recordings. This being said there are many different segments including record labels, publishers, producers, promoters, distributors, retailers, etc. As a music discovery tool Forte is most closely aligned as a promoter and retailer of music and related merchandise. Within the music industry, as related to the internet, the risk of entrants is fairly high as with many other web based services. Capital size for simply entering the market is relatively low, and viral marketing is very effective and very inexpensive. What is difficult for new entrants is differentiation and achieving a large enough market share to compete with major players. The risk is once a new entrant has caught the attention of major competitors- that those competitors with deeper pockets and a large customer base will do all they can to squash their new found competition in its tracks. Buyer power is relatively high. While buyers don’t buy in large volume, the product we’re offering- music and merchandise, is relatively undifferentiated making it easy to switch suppliers. For a website like ours- our ad revenue only covers operating costs- the purchasing of bundles is quite necessary. Supplier power in this market is extremely high as there are a few dominant companies (major record labels) that hold differentiated products with few substitutes. Furthermore they have the power to integrate forward, and internet radio and retailer exposure of one website only will make a small portion of the supplier’s revenue. The threat of substitutes in this industry is fairly high- as this is a somewhat saturated market in terms of general services. What we are offering has not truly hit the market yet—thus the threat of substitutes is unknown. Target Market November 19, 2009 Page 6
  6. 6. Our target market encompasses all online music listeners, but specifically focuses on one distinct segment of the market. This market segment is 30-50 year old adults who utilize internet radio on a daily basis. This demographic is a growth market, representing the age group that listens to internet radio the most. According to, in 2009, 42 million listened to internet radio in any given week, up 4% from last year. Out of these 42 million listeners, 42%, or 17,640,000 unique listeners comprise the 30-50 year old segment (See Figure 2.1). As the largest demographic with the most disposable income, we have chosen this as our target market. Figure 2.1: % of Internet Radio Listeners as of January 2009. After analyzing the four segments above, we found that 35 to 55 year olds needs matched our competencies, and we’re a good fit for our service based on utility, simplicity, and security. Utility to cater to all their music needs, simplicity through intuitive controls, and security through host based downloads. This growth segment allows us to capture the most market share in the shortest period of time- with our services ideal for meeting their internet music needs. Competitors After analyzing all competitors in our industry, we found that for the purposes of this business plan and start up, it was only pertinent to identify our closest rivals- as indicated by our research. While we understand that these companies are large in size and market share- the sole purpose of this identification is to allow assessment of the current market and structure our conception accordingly. Pandora The largest and fastest growing internet radio, Pandora poses huge threats to our business. They are an established name that nearly every internet radio is compared to as the established brand. A very simple November 19, 2009 Page 7
  7. 7. strategy can be employed to undercut Pandora…on-demand music. Our customizable playlists that feature music specifically selected by the user would be a huge advantage. iTunes A huge music distributor with a big chunk of market share thanks to the iPod, iHome, and iPhone, iTunes poses significant threat. Our potential customers see iTunes as THE source of digital music minus ad- supported sites and illegal downloading(, otherwise known as peer-to-peer). In other words, iTunes has become a household brand name as common place as Kleenex or Tide. You can create personal playlists using Genius in the iTunes store as well, but we could fight this in two ways. One, our pricing would be far more competitive (less than 99 cents per song and in lieu of the hike up to 1.39 for certain popular songs on iTunes, it would be easy to undercut). Two, our bundling options offer products that the iTunes store has no interest in carrying. You can’t put a T-shirt on an iPod. Myspace Music One of the biggest music social networking sites on the web, Myspace Music has become the number one resource for most record labels to get their artists to go viral. Because of our desire to become both music distributor and social networker, Myspace Music poses a huge threat. In terms of differentiating ourselves from this competitor our interface is in a different league- in terms of ease of use and intuitive design. We also will offer music retailing and bundling services that Myspace does not currently offer. Well Myspace does have a substantial market share we believe Forte will be able to steal customers on a basis of our innovative nature and appeal to an older market. GrooveShark Grooveshark is a music playlist compiler. You can search an artist, come up with several dozen songs by them and add them to playlists and listen to them on the web…for free. They have a sleek interface that is extremely user friendly and intuitive and the only price to use their site are putting up with ads which are placed in a unobtrusive way on the site. In terms of competition they are a very similar service to what we aspire to be during startup. We will be completely differentiated from them once we move onto Phase II. Imeem Imeem is another internet radio/social networking site that also features videos and blogs. Its user interface is as sleek and intuitive as Grooveshark’s and it has twice the content with music news stories and recommendations for music everywhere. Imeem is a competitor that we would rival to in terms of our features and interface. As with many other competitors our differentiating feature comes within our bundling- which is Phase II of the company. Entry Strategy November 19, 2009 Page 8
  8. 8. We plan to launch the initial service as a Beta tester- to a focus group of 100 individuals to gather feedback, identify glitches, and modify the website on a basis of what we find out. These individuals will be handpicked by our team so that we have some background on them as a person- and understand their ability to communicate valuable information back to us. This Beta testing will go on for 3 months—and we will aggregate and scale this data to establish our needs on a full scale, using statistically significant trends. After we conclude this Beta testing phase, we plan on using a tester program to create and utilize 100,000 user accounts simultaneously. This will give us a good grasp on whether or not our server will hold up to demand in the immediate future. Through this testing program we can establish different scenarios and test for the results under these ideas. For input on how to implement such tests and phase we may contract for consultation with the appropriate services. The terms of this contract will be determined when we have reached this phase. In terms of entry strategy- we plan on offering no music sales or bundling service, while we generate our initial customer base. We would like to sign strictly 360° deals (music &merchandise) with record labels, so that were able to get all the rights to retail their music and merchandise within one contract. We will launch marketing efforts based upon our initial music selection (see marketing plan). Through this phase we plan to introduce our ad revenue, and build this base up continually- and introduce the web-store in year 3 (Phase II), while breaking even (Year 4.) Service Development Plan Benefits of Service Phase I: An application based webpage that has a lower learning curve and higher utility than any other site on the web. Phase II:  The benefits of this service are two-fold. First, it is a more effective way for record labels and artists to sell their product in an industry that is rapidly declining in sales by the traditional methods. Second, the customer is also fortunate under this model, because they save money buying the music and merchandise that they want.  Forte offers a multitude of features, within a smooth intuitive interface, such that the user is not over inundated with information- but at the same time has a multitude of music discovery resources right there at their finger tips. Service Description November 19, 2009 Page 9
  9. 9. The basis of Forte’s website structure is an intuitive navigational framework that remains constant no matter what page is navigated to. The reasoning behind this is that the user remains in complete control no matter what type of content they would like to navigate to- and everything is always familiar and easy to use. When a user enters our website they’re brought to our homepage- which includes front and center a music search box that cues an on demand playlist displayed on the frame (@ the bottom of the page.) The homepage also includes some of our web features- but in a minimalist fashion as to not distract attention from the sites purpose/ utility. The user may navigate to any of our related content through using the side frame bar – simply changing what’s in the center of the page. As in other social music sites-when a song changes- the user will be automatically navigated to a individuals profile associated with that song so that they can see what type of music that individual likes and prefers. In essence, aside from related content- IE music blogs, artist pages, tour reviews, etc the site will revolve around the user profiles created by our customers. The customer has complete control over a customizable user homepage that looks similar to Figure 3.1 Some specific features we would offer within the user profiles are:  Social networking background information/wall posts (similar to Facebook)  Featured RSS Feeds that detail what artists that the particular user follows  Featured playlist, which automatically compiles the top songs that specific user listens to  Featured videos, which automatically compiles videos from the users favorite artist  Featured albums (similar to Itunes interface) which compiles the users’s favorite album  A now playing bar and navigation bar, that stay fixed through all web navigation Figure 3.1 November 19, 2009 Page 10
  10. 10. Competitive Advantage & Differentiation Strategy November 19, 2009 Page 11
  11. 11. Within the first phase, Forte has one point of differentiation from its immediate competitors. We use more flash utilities, open source content, and application based structure than our competitors- making it very similar to the cloud computing currently changing the internet as we know it. Within its second phase Forte has two major points of differentiation from all other competitors within the market: 1) We don’t direct any of our consumers to outside web pages for any of their music needs--NO OTHER websites do this. In all other related web services, when a consumer finds a song that they want to buy, they are directed to Itunes or other online distributor- where they must have another account, deal with different billing information, and familiarize themselves with another website format. With Forte, we have all services integrated into one forum, and with the ease of a click or two you have all your music needs taken care of in one consolidated fashion. 2) Our bundling feature- is currently not offered by any online music distributors. This makes a lot of sense for the music industry to begin doing, as the current model is not generating profit at its known potential. If the consumer is able to subsidize the cost of music with the cost of merchandise, than there is a much larger incentive for them to buy the music, because it feels like they’re only paying for merchandise. There are other examples of this being successful, such as a similar introduction into the cell phone industry. (Note: we subcontract all merchandise sales such that we carry no cost—we simply take a percentage of sale, and take care of all the billing), Service Development Timeline Detailed below are the initial steps that we will take to get up and running. We believe it will take about 6 months to complete these initial 13 steps. This assumption is based on the fact that it’s going to take time to acquire all the necessary contracts, and we’re unsure how long the web development will take, this will depend on the contracts we initially make. 1. Seek seed investment capital 2. Hire appropriate staff to build the webpage 3. Software and Web Development • Software Developer (Web/Technical) • Web Design (Artistic) 4. Information Technology • Network Engineering (US/Global?) • System Administrator (Servers) 5. Build the website to accommodate initial launch needs 6. Legally establish the business 7. Predict the number of simultaneous users who will stream data from/to our service • Predict/calculate Internet bandwidth capacity based on estimated usage • Calculate processor and storage capacities based on customer base and usage specs November 19, 2009 Page 12
  12. 12. 8. Design & build infrastructure and capacities, remembering to account for high availability and disaster recovery 9. Bidding and procuring equipment and telecom services 10. Acquire contracts with independent labels and advertisers 11. Enter Beta and testing phase 12. Attempt to secure contracts with major label catalogues 13. Launch startup phase of the webpage (startup phase does not include any of the webshop features— the main goal is to acquire customers and attract major labels to sign on) Operations Plans Facilities Because we are planning to rent server space and services- we don’t need a physical commercial location for all intensive purposes. During the first years of operations- we will run the business out of our residences, and utilize telecommunication and location meetings for all employee meetings and necessary interactions. This will keep our overhead costs at a minimum. Business Processes In terms of business processes, we plan to have the appropriate staff take care of their assigned roles, and we as a team, will oversee strategic alignment, growth, and quality assurance of our business. Outsourcing/Manufacturing/Distribution As a business, were effectively outsourcing all our merchandise and distribution channels- were simply the middle man between the consumer, and the record labels- channeling their music and merchandise in an effective and compelling way. We don’t deal with any physical shipping except for the mix cd’s which we outsource to a CD manufacturer who ships directly to the consumer. Contracted Work We will be using mostly contractors to get projects done for our business. We will contract a web designer to do the website. We estimate this to be about $5,000-$10,000 based on quotes from web designers. Any software we need to develop will be contracted to a software developer who we estimate will cost about the same as the web developer at $5,000-$10,000. The start-up team will be the webmasters who add updates and new products. We will outsource the customer service sector to a different company and we will have a lawyer who we will pay on a billed hour basis. We will estimate about $700 an hour for legal fees. Bandwidth /Server/Domain 1. All can be done with once service: a. We assume 2,000 simultaneous users at a time at startup. b. We need 128kbps of bandwidth per customer. c. 128*2000 = 256,000 kbps or 256mega bytes per second d. To fulfill our memory and bandwidth needs, we will use Paramount Fully Managed Servers from SingleHop.Com. e. The list of features for the preferred server plan is show here: f. This server allows for 3TB of bandwidth per month or 3 million mega bytes of bandwidth per month. And it also allows streaming of all content. November 19, 2009 Page 13
  13. 13. g. This service = $149/month. One year’s expenses for this service is $149 x 12 months = $1,788. Multiply this number by two so we account for having a back-up server. $1,788 x 2 = $3,576 Advertising We will estimate $1000 to design our online advertising, which we will display as banner ads on other websites and blogs. Referring to Figure 2, we will estimate an average of $0.50 per click for search advertising based on Google, Yahoo, and Bing (Microsoft Live). We will account for 6,000 clicks a month on our ads. Calculating the revenue: 6,000 x 12 months x $0.50 = $36,000 dollars per year for search advertising. Licensing Agreements We are using a licensing contract from BMI to estimate licensing costs. One of the payment options is Gross Revenue times 1.75% as fees. We’ll use this since we will not be making revenue off the music itself, we will have to use advertising dollars to pay the fees which would be part of our gross revenue. Since BMI controls roughly 1/8th of the music market, we will multiply this by four (4) to get our licensing fee costs. We do this because we are focusing on independents who have 50% marketshare of all recorded music. Estimated Revenue from advertising is $1,261,832. $1, 261,832 x .0175 x 4 = $63,091 licensing fees expense per year. Philosophy of Management and Company Culture Forte strives to have an extremely flat management structure to engender efficient and nimble operations. In terms of staff- were trying to pick quality individuals, with a broad array of skills- such that we have as small of a staff as possible. Each individual’s professional opinion and decisions will be respected and viewed respective to their job title- and management will encourage self initiative and autonomous work. We’re results driven firm, and we think that our management style should reflect such. Our company culture will engender an informal and streamlined organization who is not concerned with bureaucracy and formal authority, but innovation and exemplary results. Because we’re a small team of individuals, we hope to have a culture that is comfortable, friendly, and inviting. In order to facilitate this, leaders will show by example. Legal Structure of the Company Forte will be form as a general corporation, and thereafter seek classification by the IRS as an S corporation for tax purposes. Organizational Chart November 19, 2009 Page 14
  14. 14. Key Management/Duties & Responsibilities The company needs management in the following components: 1. Licensing: There needs to be a team of lawyers and a head attorney in charge to focus on licensing deals with the labels whose music we would be distributing. Licenses would be on a catalog basis, meaning that the company has access to all songs owned by a particular label with which we have a licensing deal. 2. Web Development: A team of web developers would be needed to build and design our website, which is our own one route to the customer. Web developers would be contracted on an as needed basis to make major infrastructural changes to the website, while the technicians would be used for the everyday wear and tear of the site. This method will keep costs down. 3. Web Technicians: A team of web technicians would be need to do any upkeep on the website, perform system updates, and perform as customer service technicians. 4. Hardware Technicians: A team of hardware technicians would be needed to update, repair, and monitor servers which would house our customer profiles, payment information, and also have the catalogues for our licensed music. (this will be outsourced to our web host) 5. Marketing: A team of marketing experts would be needed to organize ad campaigns, specials that our site would offer our customers, and any other branding and advertising that the company would need. 6. Accounting: A team of bookkeepers and a CPA would be needed to keep track of all sales and revenues, determine the health of the company, and keep owners and managers aware of the monetary changes to our company, whether they be the result of company actions or outside factors. Marketing Plan The idea behind our marketing plan is to create a social music discovery website that attracts widespread attention in a very short amount of time to the general public who utilizes internet services such as: social networking, internet radio, music downloads, and music related merchandise purchases. The services provided by are going to be implemented into the business model through a series of phases. Each phase adding significant value and intrigue into the current model. With that being said, the main premise behind this plan will be the marketing of the initial business model (Internet Radio) and will only briefly discuss the marketing plan of the complete business model. We believe has the ability to develop a significant following of users immediately. Currently over 42 million people are listening to internet radio in a given week. Along with this staggering number, the industry itself is growing at a rate of almost 4% per year, cementing the idea that internet radio is more than just a fad. Additionally, as our competitors have grown in size they have also grown in complexity and have begun to expand their overall services. This growth has created a level on confusion for the average internet viewer and in some cases has prompted them to look around for other similar services. From these developments is precisely where we view our marketing advantages. While our competitors hold advantages November 19, 2009 Page 15
  15. 15. (established loyal customer base and proven growth) we believe in both our business model and marketing plan to yield success. As stated earlier, our market comprises all internet radio listeners. Within this market we will focus all our direct marketing on the listeners within the 35-55 year old age demographic. Due to the strange nature of trying to both gather data and market to internet radio listeners it was difficult to find many differentiators within the demographics of our market. Nonetheless, the age demographic showed that this specific age group comprised 42%, or 17,640,000 unique listeners (refer to Figure 2.1) of the entire market, more than double any other age segment. Additionally, we found that this specific segment spends more disposable income on the internet than any other group which we desire in our target market. Finally, the aspect of simplicity with regards to using both the internet and computer is very important to this specific market. The easier it is for them to understand, the more inclined they are to keep using it. These two factors, combined with the fact that our main differentiator is the user-friendly nature of our website’s service, we believe this segment is a perfect target market. Since our entire market is internet users, it only makes sense to utilize the internet as our main source of marketing. Internet marketing tools such as banner ads on popular websites, and the purchase of “adwords” for internet search websites will comprise most of the costs associated with our marketing. The greatest advantage from using these techniques is that we can tailor our ads specifically to our target market. For example, we plan on advertising through banner ads on Facebook. Since Facebook has a catalog of all their users, and can sort them through almost any demographic, we can choose which age range our ads will be shown to. This will allow us to focus directly on the 35-55 year old segment that we have identified as our target market. Free internet marketing will cover the rest of our marketing strategy. A beta tester of the website will be sent out 3 months in advance of the launch of the website. We will pick and choose all age groups and genders to assure that we don’t miss any relevant feedback. Furthermore, we will send this invitation to music and social networking bloggers across the country. The invitation will be sent in a way that will make the blogger feel like he/she is exclusive members for the tester. With over 1,500 music blogs currently being read there are several chances to garner free publicity. Another incentive the blogger will be presented is in the form of bartering. We will inform each blogger that any form of publicity they provide us, in turn, we will provide them with the same form by posting articles and blog posts relevant to music on our site. We believe this incentive will entice enough bloggers into writing reviews for our website. Finally, we have identified a source of indirect marketing that we can utilize to gather publicity. Embedded ads will be featured in all major social networking websites, meaning, anytime someone types our domain name on those websites, our logo and a link to our webpage will immediately pop-up. This is especially useful for independent music artists who will have the ability to upload their music into our database of music (provided it meets our standards). These artists will also have the option of creating a personal fan page for their band on our site. This will provide them the option of creating a link for their fans to click on that will direct them straight to our site. A ranking system will be implemented that ranks these artists on how many referrals they get from their fans. The top 10 artists for the month will get a front page feature and the ability to add more music to their personal page. November 19, 2009 Page 16
  16. 16. Financial Plan Funding amount required: $35,894 for startup costs, or $695,468 to carry operations until breakeven Capital Structure: • Startup Costs: o Website Design: $5,000-$10,000 o Software Developer: $5,000-10,000 o Server Rental: $894 (3 months of beta testing before public launch) o Advertising: $1,000 o Projected Legal Fees: 14,000 Sources of Funding: Seed Funding in exchange for 15% equity and ROI to be determined upon negotiation. Use of capital: Forte will use capital requested for the purpose of building our web service, & executing beta testing leading to our public launch. Exit Strategy: Forte only intends on exiting if we fail to secure enough unique users to get to Phase II (bundling) of our company. This failure could result from a number of risks. If any one of these risks occur we will be forced to seek more capital or liquidate as quickly as possible. Risk Analysis: Risk 1: Failing to generate and maintain enough Unique Users to maintain profitability: If Forte does not generate enough users in the first two years the company will carry a loss of $533,391 with minimal staff and long term investments. This will leave us unable to continue operations without more investment capital. Risk 2: Failing to generate enough unique users initially to attract Major Labels and large Independent Labels. Without merchandise and artist catalogues from major labels the website will not hold the attention of unique users to successfully move into Phase II of Forte(bundling)- again leaving the company unprofitable. Risk 3: Being Copycatted by larger companies with more capital as soon as we introduce our strongest differentiator: bundling. If our services are copycatted by a company with more money- they will be able to mitigate our competitive advantage and directly compete with us until we’re totally out of funds. Risk 4: Forward Integration by major labels. The easiest way for this service to launch would be for a label to run a similar service by themselves- as they already have access to the rights for all artist related content and the funds to make it happen. If this were to occur the intensity of competition may be far too great for Forte to survive. Revenue Projections November 19, 2009 Page 17
  17. 17. Forte Incorporated will generate revenue through the following avenues: A) Ad revenue: 1) Every certain # of songs the user must listen to an ad and or video advertisement 2) The webpage will feature ads based upon user preference that are featured in the banner and margins of the webpage Page Views Per User Last Three Month AVERAGE RPM FOR 2009 Of US ONLINE Per Day Average ADVERTISING: Sept,Oct, Nov 2009 (Revenue Per 1,000 page views) $1.44 7.11 13.92 Myspace's RPM= $.02 1.32 6.04 SO we will project our RPM at roughly $.02 3.8 4.96 Which means: Per User 1.88 0.044238 Per Year 16.56 For EVERY 100 USERS WE GENERATE WE MAKE $4.423 per 1.34 year 3.68 AVERAGE: 6.061 6.06 PER DAY X 365 DAYS= 2211.9 Views Per User Per Year In order to calculate a growth model we took four similar competitors (,,, and and averaged their rate of growth based upon available data. We based our royalty payments off of Pandora’s model of 70% of revenue towards royalties (, 2009) Operational We could feasibly project a Profit after growth of Ad Revenue Royalties 1043572 Customers in year 1 46165 13849 2087144 Customers in Year 2 92331 27699 3130715 Customers in Year 3 138496 41548 Probably max out somewhere near 3,750,000 customers in year 4 165892 49767 B) Percentage of Sales: In year three of operations we will have acquired enough unique users to attain 360 deals with major labels, and start offering our bundling services. All bundling items will be direct shipped from their distributer; thereby we will have no COGS, simply a cut of the sale. November 19, 2009 Page 18
  18. 18. For Every Unique User we project an average of .15 purchases per user per year at an average bundle of $17.50 taking a 10% transaction fee. Operational Ad Profit Without Bundle With Revenue Bundles Revenue Bundles Customers in year 1 46165.53 13849.65812 Customers in Year 2 92331.05 27699.31625 Customers in Year 3 138496.6 41548.97437 821,812.75 863,361.73 Max Customers in Year 4 165892.5 49767.75 984,375.00 1,034,142.75 C) If the user would like to bypass all the ads on the website altogether they can pay a monthly subscription fee which will subsidize the revenue generated by advertisements Financial Projections (Year 1 – 4) Revenue Expenses Profit/Loss P/L Cumulative YR 1 $13,849 $349,667 $(335,818) $(335,818) YR 2 $27,699 $351,455 $(323,756) $(659,574) YR 3 $863,361 $354,137 $509,224 $(150,350) YR 4 $1,034,142 $358,160 $675,982 $ 525,632 November 19, 2009 Page 19
  19. 19. Expenses YEAR1 Research and Development 10,000 Marketing and Promotion 37,000 5 Software Developer 8,000 Web Designer 48,000 Attorney 70,000 Our Salaries Combined 60,000 Web Server/Space/Services $3,576 Licensing Fees $63,091 SUM TOTAL $349,667 Year 2 Research and Development 10,000 Marketing and Promotion 37,000 5 Software Developer 8,000 Web Designer 48,000 Attorney 70,000 Our Salaries Combined 60,000 Web Server/Space/Services $5,364 Licensing Fees $63,091 SUM TOTAL $351,455 Year 3 Research and Development 10,000 Marketing and Promotion 37,000 5 Software Developer 8,000 Web Designer 48,000 Attorney 70,000 Our Salaries Combined 60,000 Web Server/Space/Services $8,046 Licensing Fees $63,091 SUM TOTAL $354,137 Year 4 Research and Development 10,000 Marketing and Promotion 37,000 5 Software Developer 8,000 Web Designer 48,000 Attorney 70,000 Salary Costs 60,000 Web Server/Space/Services $12,069 Licensing Fees $63,091 SUM TOTAL $358,160 November 19, 2009 Page 20
  20. 20. REFERENCES  Anderson Analytics. (2009). Products/Services Purchased Online by US Social Network Users, by Network. eMarketer  Andrew B. Hargadon, Y. D. (2001). When innovations meet Institutions. Administrative Science Quarterly  eMarketer. (2008). Music Site Masters Labels and New Media (Imeem). eMarketer  eMarketer. (2009). Tuning up MySpace Music. eMarketer  IBIS . (2009). Independent Label Music Production in the US:51221. IBIS World  IBIS World. (2009). Major Label Music Production in the US: 51222. IBIS  IBIS World. (2009). Off the record: Digital downloads and other new media cause industry players to struggle for sales. IBIS World Industry Report  IFPI. (2009). IFPI Digital Music Report 2009. IFPI  Michael, N. J. (2006). The Impact of Digital File Sharing on the. The Berkeley Electronic Press  Nielsen Mobile. (2009, July). eMarketer. Retrieved from Demographic Profile of US Mobile Music Users  Paul Verna, S. A. (2009). Digital Entertainment Meets Social Media. eMarketer November 19, 2009 Page 21
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