Executive Summary

Despite the vast possibilities made available to consumers by the new digital landscape of the Internet, most traditional corporate paradigms remain when it comes to making money from selling music. 101 Distribution, LLC is an established Phoenix, Arizona-based independent music distributor and online platform. The Company operates as the first and only conventional distributor to offer musicians and filmmakers a 100% payout of all net sales royalties.

Starting in 1998 as an artist consulting group, 101 Distribution, through its site www.101d.com, has grown into a full-service solution, now used to manage the digital, mobile, retail, and mail order sales for more than 2,600 actively selling titles. Its innovative platform, where artists simply pay a flat fee to centralize and manage all aspects of their digital and physical sales, is aimed to become a primary alternative to the imploding old-world system. Wtih the Professional option, artists receive 100% of all retail, mail order, download, mobile and merchandise sales. The Company estimates that within the first 90 days of signing with 101 Distribution, 60% of all artists see a complete return of their investment.

101 Distribution is a blueprint for artists navigating a declining economy and fragmented marketplace. The Company's catalog of independent music and movie releases can be found in more than 5,500 brick-and-mortar retail stores, digital download services, and mobile networks across the U.S. and Canada, as well as in the UK, Germany, Japan, France, Australia, South Africa, Holland, and Armenia. 101 Distribution leverages its proprietary mobile platform to make selling and promoting ringtones, mobile downloads and video user friendly. The Company's all-encompassing artist services help to bolster its reputation as the first place serious musicians come to sell music. 101 Distribution is the only independently owned full-service music and video distributor in the nation and has maintained a perfect A+ rating with the BBB for the last six years.

STAY INDEPENDENT.

Major label recording contracts best illustrate how even the most well-known and commercially successful music artists lose complete control of music licensing, copyright ownership, and ultimately ALL the profit generated from the sale of the music they produce. The 'artist advance' and the other creative accounting practices that define the endless cycle of Recoupable Expenses allow The Big Four (SONY/BMG, Warner, EMI, and Universal) to pocket upwards of 90% of the royalties generated from their artist rosters. While production, marketing and promotion costs are understandably considered recoupable expenses, these functions are normally performed by salaried employees, retained consultants, or interns and are typically billed back against artist earnings at 100% above actual cost. Most breaking/new artists make less than $.75 per album sold in retail (major label artists are not paid for digital song or album downloads). This is also the rate at which artist advances, production, marketing and promotion costs are recouped. The Future of Music Coalition (www.futureofmusic.org) provides a more detailed overview of major-label artist agreements.

A Simple Explanation:

Let's say that major label X signs New Band Y to a three-album recording contract that includes a $300,000 advance for production and promotion on the first release.

1. -	Band Y signs away all ownership rights into perpetuity and agrees to receive $0.75 per unit sold in retail for the first release- the terms of releases 2 and 3 are contingent upon the success of the first album.
2. -	Before the first studio session is even booked, Band Y must sell 400,000 copies in order to recoup the initial $300,000 'label investment' (400,000 x $0.75 per unit=$300,000).
3. -	After recording, mixing and mastering is complete, 2,000 promotional copies are manufactured by Label X for handouts, PR and radio giveaways. This additional expense is also charged back to Band Y at wholesale cost (not production cost) which is the price retail stores pay for the product they sell to consumers. In this example, we'll value the promotional pieces at a wholesale cost of $8. Band Y must now sell an additional 21,333 units at the rate of $0.75 to recoup the $16,000 invested by Label X for promotional units. At this point, Band Y must now sell a total of 421,333 albums to repay Label X $316,000, or the cost to break even.
4. -	Let's now factor in the costs for management (also assigned by Label X) and legal counsel. Normally a manager will take a percentage of the initial advance and a standard 10% commission on all gross revenue generated from sales and performances. Though Band Y will make no tangible profit from the 421,333 units sold that will repay the investment from Label X, these sales will still be qualified as gross revenue. So, if 421,333 is breaking even for Label X, 10% of the $316,000 or $31,600 is owed to the manager. Not including legal fees (which could fall in the range of $15,000 to $30,000) an additional 42,133 units must now be sold just to cover the costs of management ($.75 x 42, 133= $31, 599.75). In total, Band Y must sell the equivalent of 463,466 to fulfill all of its contractual obligations.

What's the real irony in all of this? About the time Band Y breaks even and is in position to make a $.75 profit from each unit sold, Label X shifts its promotional focus on the next new artist. Band Y becomes a soon-to-be forgotten one hit wonder.

In Summary:

421,333 units sold= $3,370,664 for Label X

42,133 units sold= $31,600 for Management

Legal Fees= $15,000

463,466 total units sold= $0 for Band Y