The way we buy and listen to music has changed greatly over the years. We went from vinyl records, to 8 tracks, to cassettes, to compact discs, and now all of that has changed as music goes digital. During the past couple of years, this new method of distributing music has become very popular. Many music lovers – adults and teenagers alike – have turned to digital music downloads. At a click of the mouse, we can now transmit digital music files via the Internet, store and play them on our home computer, or take them with us via portable devices or our car stereo.
This form of music distribution and playback has become very popular with musicians, high school students, college students and music fanatics all around the world. This method is more convenient and sometimes it can even save the consumer a couple of dollars. Given the popularity, many companies are expanding their services to include digital formats. One such company is Fuego Entertainment, which engages in the production, acquisition, marketing, sales, and distribution of entertainment products.
Fuego Entertainment is more than a music company. It is also an entertainment company that produces feature and short films, documentaries, television shows and tour productions. More recently, it has begun tapping into the fast growing market of digital distribution through its music division, Fuego Entertainment Music International (FEMI), which produces, markets and distributes music content through traditional distribution channels and digital downloads. The company has also created a publishing division, Fuego Entertainment Publishing Group, to manage market, promote, and commercially exploit music compositions as well as provide limited management, marketing and public relations services to the entertainment industry.
Consumers can access any of Fuego services through the company’s website and have instant access to movies, music, computer wall papers, ringtones, online radio, an online forum and even a chat room where consumers can exchange information. The company’s intent is to offer entertainment products that appeal to both the huge Hispanic/Latin and English-speaking markets through its wide selection of hip-hop, rap, pop, and contemporary music, as well as a film library which encompasses everything from documentaries to reality television, thereby offering entertainment across all age groups, sexes, income levels, and races. Fuego is also hoping to market its services to musicians unable to obtain recording contracts with the major record companies. These up and coming artists can record their material in MP3 format and then make it available over the Internet.
According to market research, digital music accounted for some 12% of the $33 billion recorded music market in 2006 and is expected to take a commanding 40% share of the industry by 2010. Of that market, Fuego revenues were $202,292 for 2006 and $184,243 in 2007. The company is involved in several other revenue producing activities such as filming music videos, producing corporate videos and banner advertising on Fuego’s new web portal. The banner advertisement division has given the company an additional $425,000 in revenues since the beginning of this year. Fuego also plans to expand their distribution method by traveling to established shows and conventions related to music product distributions as well as capitalize on Founder and President Hugo Cancio’s contacts in Spain, France, Italy, Germany, England, Portugal, Japan, China and the U.S. Mr. Cancio is well-known in the Latin Market, both in Latin America and the U.S.
Since the start of the year, the company has also expanded its worldwide digital distribution with twelve separate new agreements and now provides realtones for AOL Mobile (a division of AOL, the Internet division of Time Warner, NYSE:TWX) in the UK, France, Georgia, Greece, Germany, Austria, Netherlands, Italy, Spain, Poland, Ireland and Sweden. In other distribution agreements, Fuego is providing content for Vivendi, parent company of Universal Music, which is launching a new service platform for PCs and mobile device across Europe and the UK. Fuego is also delivering services in the U.S. through CBS Mobile (a division of CBS Interactive Inc. which is a subsidiary of CBS Corporation, NYSE:CBS) via Coke/Sprite ‘My Coke Rewards’. In Canada they are delivering content through Bell HotZone for BollyVista, MTV Canada (a unit of Viacom NYSE:VIA.B), MuchMusic, Sympatico, Telus and Virgin Mobile Canada.
In more recent news, Fuego announced that Apple Corps Limited filed a legal complaint against the company and its majority owned joint venture, Echo-Fuego Music Group, LLC, regarding 15 never-before-released Beatles tapes that the company recently acquired. Although most would see this as negative news, it actually affirms the quality of these tapes and gives the company free publicity. Because Fuego never sold any copies of the tracks, little if any damages can actually be pursued. When Apple requested the music recordings, Fuego respectfully declined. Fuego’s CEO stated, “The fact is that we have it, they don’t and that is what’s bothering them.”
Fuego’s intention is to reach markets where Latin music is very popular, and also to cross over to the English market and further expand into the European markets. This should be relatively easy because – according to the International Federation of the Phonographic Industry – the trend for digital music is rapidly increasing and is expected to continue worldwide over the next few years. However, Fuego will face many challenges in this market as artists and companies alike struggle with illegal downloads and file sharing. Fuego will also have to compete with others in the digital music market, like iTunes, which has led the digital music industry for many years with millions of subscribers utilizing their service.
Also, the company has only been in operation for a little over three years, and during that period their efforts to generate cash flow has been limited largely to sales of common shares and operations which have been applied back towards production costs. Fuego also had a net loss of $234,604 during the fourth quarter of last year due to expenses relating to operations and a bonus paid to Hugo Cancio for services rendered. Therefore if Fuego can turn its cash flow around and market its services to the ever growing digital market, its intended goal may be within reach.
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