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Company Highlights


  • Over 220,000 users as of October 2016, a 64% year-over-year increase from over 135,000 in October 2015
  • Had distributed over 348,000 tracks to YouTube and SoundCloud as of October 2016, a 113% year-over-year increase from over 164,000 in October 2015
  • Cumulative music sales totaled nearly $1.85 million in October 2016
  • Year-to-date, as of Q3 2016, BeatStars has generated over $677,000 in revenue and monthly revenue growth has averaged 15%
  • BeatStars has already reached profitability, generating over $176,000 of net income thus far in 2016

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Based on unaudited financials not subjected to financial review



Perks


**Participate in the first $100,000 raised and get a "Early Investor" badge on your BeatStars profile**

$100+ Investor badge on your BeatStars profile
$500+ BeatStars hat & t-shirt. Plus $100 level perks
$1,000+ 1 year membership. Plus $500 and below perks
$5,000+ 1 hour Skype consultation with BeatStars founder. Plus $1,000 and below perks
$10,000+ Trip to a BeatStars Seminar in the city of your choice for 1 day of studio sessions with some top selling members that will critique your music; flight and one night in hotel reimbursed up to $600. Plus $5,000 and below perks.


Company Summary


Opportunity
The digital music industry has created new and innovative ways for artists to engage with their fans. Music distribution is shifting from traditional digital stores (e.g. iTunes) to direct-to-fan platforms like YouTube, SoundCloud, and Facebook. Digital streaming services like Spotify, SoundCloud, and Apple Music have also enabled artists to circumvent traditional music distribution channels and reach large global audiences. Thanks to these digital streaming services, music is being consumed at record levels. In the U.S., the volume of total music streams rose 93%, to 317 billion in 2015 as compared to 2014.i Digital platforms that allows users to upload content (e.g. YouTube) have an estimated user base of more than 900 million. However, these types of platforms, which distribute advertising-supported revenues to recording artists and musicians, generated only $634 million in 2015, and accounted for only 4% of global music revenues.ii

BeatStars is a social music marketplace and distribution company that is reinventing the music collaboration industry. In addition to distributing finished songs, BeatStars’ platform enables music producers and recording artists to collaborate, share, sell, and distribute, any type of musical content (e.g. beats, lyrics, vocals) worldwide. BeatStars allows music creators of all levels to represent their content independently and generate multiple streams of revenue. The platform provides the tools to distribute, monetize, and protect content, allowing music producers, recording artists, songwriters, and beatmakers to collaboratively publish songs in the most efficient and affordable way possible. 

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Product
BeatStars’ Social Music Marketplace is a networking site for musicians to find and connect with other artists and producers. Recording artists can look for musical content to license and producers can look for artists to collaborate with. Musicians can sell songs, singles, albums, as well as production track licenses for beats, beats with choruses, vocals, and full song references.

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BeatStars’ Blaze Players help artists sell their tracks online. These embeddable HTML5 and Flash players act as a store, allowing customers to lease beats, download free beats, or make an offer for an exclusive license. The players provide instant delivery of MP3, WAV or Zip files, a free download option in exchange for a social follow, and instant payments through PayPal or Stripe. Artists can also create custom contracts, promo codes, deals, and voice tags. Paid members keep 100% of their sales.

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The BeatStars’ Collabos feature lets multiple artists, producers, and/or writers split music revenue distributions automatically. Music collaborators simply upload their music to BeatStars, assign the collaborators, and set the percentage splits.

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BeatStars helps artists get paid from other people’s YouTube videos that use their music without authorization. When artists upload their music to BeatStars.com, they can submit it for YouTube Content ID. BeatStars will then review the submission and deliver the approved files directly to YouTube. YouTube’s Content ID system then identifies third party videos that are utilizing music content without the artist’s permission and allows BeatStars to place advertisements on these videos to collect revenue on behalf of the artist every time the video is played.

BeatStars has also partnered with SoundCloud for their OnSoundCloud monetization program to help musicians earn revenue from their SoundCloud streams. Artists log in to BeatStars.com, connect their SoundCloud profile, and select tracks they want to monetize with advertisements. Artists get monthly revenue payouts directly to their PayPal account.

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BeatStars’ Pro Pages give musicians all the tools they need to create their own custom website and music player. Pro Pages can operate as a dedicated music website to sell singles, albums, or beats directly to fans, or simply as a place to host and stream music. With custom themes and domain names, Pro Pages help artists look and operate professionally. Pro Pages are responsive across all mobile, tablet, and desktop browsers and come with a fully integrated shopping cart. Paid members keep 100% of their sales.

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Notable Producers
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Notable producers using BeatStars include the following (pictured above from left to right):

  • Focus…: Multi-Grammy winning music producer who has worked with Dr. Dre, Eminem, Kendrick Lamar, Snoop Dogg, Beyonce, Christina Aguilera, Ice Cube, and Rick Ross
  • Krucial Keys: Multi-Grammy winning music producer who has worked with Alicia Keys, Drake, Mario, Nas, Keyshia Cole, and Goapele
  • Jahlil Beats: Platinum selling music producer who has worked with Jay-Z, Diddy, Lil Wayne, Chris Brown, Rick Ross, T.I., and 50 Cent
  • !llmind: Platinum selling music producer who has worked with Kanye West, Drake, J. Cole, Dr. Dre, Ariana Grande, 50 Cent, and Ludacris
  • Havoc: Multi-platinum music producer and recording artist who has worked with Eminem, Nas, Foxy Brown, The Notorious B.I.G., Diddy, 50 Cent, Jadakiss, and Method Man

Use of Proceeds and Product Roadmap
BeatStars plans to use the proceeds for the following purposes:

  • Business Development: The company will hire a sales staff to target content creators with a large online presence for distribution and marketplace inclusion.
  • Platform Development: BeatStars will hire additional web, mobile, and product developers to continue building and expanding the platform
  • Content: BeatStars plans to purchase the full rights to production catalogs for licensing and distribution. The company also plans to release exclusive production content from mainstream music producers.
  • Technology: BeatStars will build mobile apps for iOS, Android, and connected TV devices. It also plans to upgrade its cloud services in preparation for operating at a larger scale. The company will also launch version 2.0 of the Marketplace and Pro Pages. 
  • Office Space: The company will obtain a centralized office where all employees can operate.
  • Marketing: BeatStars will hire staff and allocate part of their marketing budget to drive growth and brand awareness.

Business Model
BeatStars generates revenue through advertisement revenue sharing, paid memberships, and music sales. The Unlimited membership costs $19.99 per month and includes an unlimited number of track uploads and unlimited SoundCloud uploads. The Pro membership costs $9.99 per month and includes up to 50 track uploads. With both the Pro and Unlimited memberships, musicians receive 100% of sales generated through the BeatStars marketplace and Pro Pages, as well as 80% of the advertising revenue from YouTube Content ID and SoundCloud. BeatStars also offers a free account that allows musicians to upload up to 10 tracks and receive 70% of their music sales.iii


User Traction

BeatStars has over 220,000 main application users, 200,0000 contest application users and has distributed over 348,000 tracks to YouTube and SoundCloud. As seen in the chart below, main application users grew from over 135,000 in October 2015 to over 220,000 in October 2016, a 64% year-over-year increase.

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BeatStars has over 220,000 main application users, 200,0000 contest application users and has distributed over 348,000 tracks to YouTube and SoundCloud. As seen in the chart below, main application users grew from over 135,000 in October 2015 to over 220,000 in October 2016, a 64% year-over-year increase.

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Music sales have grown from over $725,000 in October 2015 to nearly $1.85 million in October 2016, a 155% year-over-year increase.

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Historical and Projected Financials


The majority of BeatStars’ revenue (71%) comes from its YouTube and SoundCloud monetization services. The next biggest revenue contributor is memberships, which make up 23%. Year-to-date, as of Q3 2016, BeatStars has generated over $678,000 in revenue and more than $500,000 in expenses. Monthly revenue growth has averaged 15% in 2016.

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Based on unaudited financials not subjected to financial review

BeatStars has already reached profitability, and generated over $176,000 of net income thus far in 2016.

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Based on unaudited financials not subjected to financial review


Industry and Market Analysis

The emergence of digital music has created a major shift in the way artists engage with their fans, which has had significant impact on the global music production and distribution industry. Digital streaming services like Spotify, SoundCloud, and Apple Music have enabled audiences to listen to a virtually unlimited catalog of music for an affordable subscription fee, enabling artists to circumvent traditional music distributors. Globally, revenue from digital channels (subscriptions, ad-supported services, and digital downloads) was $6.7 billion in 2015, up 10.2% year-over-year, and accounted for 45% of total industry revenue. Revenue from streaming services, which includes subscriptions and ad-supported channels, grew 45.2% to $2.9 billion.iv

Thanks to digital streaming services, music is being consumed at record levels. In the U.S., the volume of total music streams rose 93%, to 317 billion.v Primary music distribution is shifting from traditional digital stores to direct-to-fan platforms like YouTube, SoundCloud, and Facebook. Digital platforms that allow users to upload content (e.g. YouTube) have an estimated user base of more than 900 million. However, these types of platforms, which distribute advertising-supported revenues to recording artists and musicians, generated only $634 million in 2015, and accounted for only 4% of global music revenues.vi

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YouTube has over 400 hours of new videos uploaded every minute of every day.vii That’s the equivalent of 16.5 days’ worth of video uploaded every 60 seconds. Many of these uploaded videos use music without the authorization of the artists that created the song. To detect unauthorized use, YouTube’s Content ID system scans uploaded videos against a database of files submitted by content owners. Owners then have the option of muting the audio, blocking the video, or monetizing the video by running ads against it. Since the launch of Content ID in 2007, YouTube has paid out $2 billion to content rights holders.viii

Competitors

AdRev: Founded in 2011, AdRev is digital rights management company. The company helps music owners find YouTube videos that use their content without authorization and monetize this usage through ad revenue. Users get 80% of the ad revenue off of YouTube videos that use their music.ix AdRev has monetized over 30 million videos to date and has paid out over $10 million to rights holders in 2016 alone.x Zealot Networks acquired AdRev’s parent company, AudioMicro, in 2014 for around $20 million.

MyFlashStore: MyFlashStore is a platform for producers and artists to buy and sell beats and instrumentals online. Other offerings include custom voicetags, custom hooks, and professional mixing and mastering services. MyFlashStore offers three membership plans, a free plan that permits 10 beat uploads, a Gold plan that costs $9.99 per month that allows up to 50 beat uploads, and a Platinum plan that costs $19.99 per month for unlimited beat uploads.xi Since it was founded in 2009, producers have earned over $16 million using MyFlashStore.xii

BandCamp: Founded in 2008, Bandcamp is a publishing platform for musicians. The platform hosts homepages and provides a space for musicians with existing websites to stream full music tracks and albums. It also provides fan base management and statistics, digital distributions, search engine optimization, web programming, audio transcoding, and internet marketing. In 2015, BandCamp grew 35%xiii and has paid $182 million to artists to date, with $4.7 million paid in the last 30 days alone.xiv Bandcamp does not charge their artists for accounts, instead it makes money through revenue share on sales. The company takes 15% of digital sales, 10% of digital sales over $5,000, and 10% of merchandise sales.xv

Executive Team

Abe Batshon, Founder and CEO: Before founding BeatStars in 2008, Abe worked at INgrooves Music Group in artists and repertoire (A&R) and content development. In this role, he was responsible for promoting and managing portfolios in digital format including distribution of digital audio and video  to music and mobile retailers. Daily activities included acquiring new clients, generating marketing campaigns for new music projects, and servicing existing clients. Abe’s clients included Rostrum Records (Wiz Khalifa, Mac Miller), Strange Music, Slaughterhouse, Macklemore, Royce Da 5’9’, The Lox (Jadakiss, Styles P, Sheikh Louch), among many others. He studied Marketing at San Jose State University.

Joseph E. Shatara, COO: Joseph is an Operations and Technology executive with over 20 years of web technology, engineering, and financial systems experience. He has worked for BeatStars as an IT Consultant and Business and Financial Advisor since 2010. Previously, Joseph worked as COO of Mixberry Media, a global digital audio ad network that supports real-time targeted ads to streaming music and digital radio listeners. He holds a Bachelor’s of Science degree in Electronic Engineering from California Polytechnic State University - San Luis Obispo.

Investment Terms

Security Type: SAFE (Simplified Agreement for Future Equity) Securities
Round Size: Min:$50,000; Max: $1,000,000
Interest Rate: N/A
Length of Term: N/A
Conversion Provisions: In connection with an equity financing of at least $1,000,000, the Company has the option to convert the SAFE into shares of a series of non-voting preferred stock, at a discount of 20% of the price per share of the new preferred stock sold in the equity financing or a valuation cap of $12,500,000, whichever results in a lower conversion price. Please refer to the Form of SAFE for a complete description of the terms of the SAFE, including the conversion provisions.

Risk Factors

THE SECURITIES OFFERED INVOLVE A HIGH DEGREE OF RISK AND MAY RESULT IN THE LOSS OF YOUR ENTIRE INVESTMENT. ANY PERSON CONSIDERING THE PURCHASE OF THESE SECURITIES SHOULD BE AWARE OF THESE AND OTHER FACTORS SET FORTH IN THE COMPANY’S FORM C OFFERING STATEMENT AND SHOULD CONSULT WITH HIS OR HER LEGAL, TAX AND FINANCIAL ADVISORS PRIOR TO MAKING AN INVESTMENT IN THE SECURITIES. THE SECURITIES SHOULD ONLY BE PURCHASED BY PERSONS WHO CAN AFFORD TO LOSE ALL OF THEIR INVESTMENT.

The risks associated with our company include the following. Potential inability to attract, recruit and retain and develop necessary personnel, high level of competition, government regulation of use of individually identifiable data and issues relating to loss or theft of customer data, potential for security breaches and disruptions, the company’s success depends on board and executive officers who may leave the employ of the company, the capital being raised is not enough to sustain the company’s current business plan, lack of key man life insurance on executives and other key personnel, lack of audited financial statements, risks associated with properly calculating the company’s tax liability, the fact that the company is not subject to Sarbanes-Oxley regulations and related controls and safeguards required of public companies, changes in employment laws or regulation could harm the company’s performance, fluctuations in customer mix could impact financial performance, potential fluctuation of operating results, need to attract qualified customer service and technical support personnel, effect of cyclical, volatility or extended downturn in the United States or worldwide economy, ability to stay ahead of rapid technological change and dependence on new product development, failure to obtain new clients or renew existing clients on favorable terms, reliance on subcontractors, potential impact of military actions, global terrorism, natural disasters and potential political unrest.

The risks associated with the securities the company is offering include the following.  Restricted nature of the securities and lack of liquidity, the fact that the offering is not registered under federal or state securities laws, there is no guarantee of return on an  investor’s investment, the majority of the company owned by a small number of owners, the company’s ability to extend the offering deadline, potential dilution of your ownership interest in the company, the fact that the security is an equity security and not a debt security, and the potential that the warrants may expire worthless.