Navarre Corporation and Walter Yetnikoff Announce Unprecedented Co-Venture; VelVel Records: A New Independent Music Company

Business Wire, Sept 3, 1996

MINNEAPOLIS--(BUSINESS WIRE)--Sept. 3, 1996--Eric Paulson, chairman and chief executive officer of Navarre Corporation (Nasdaq:NAVR), and Walter Yetnikoff, industry leader and former CBS Records CEO, announce the formation of VelVel Records, an independent music company. Under terms of the agreement, Navarre is a non-controlling equity partner in VelVel and will be the exclusive distributor of all VelVel products in North America.

VelVel will serve as an active, full-service umbrella company for a diverse group of both new and established independent music labels, providing funding, marketing, promotional and creative support. The company has already signed a deal with Bottom Line Records and has acquired a non-controlling interest in Razor & Tie Records. VelVel is engaged in discussions with a number of both new and existing labels.

Paulson states, "Walter Yetnikoff is among the most successful executives in the history of the music business, which makes him the perfect partner for Navarre's first co-venture in content. This new endeavor illustrates Navarre's continued commitment to future design as a content provider. It is just the beginning of our strategic diversification in which Navarre will own the music content."

Walter Yetnikoff is widely considered an entertainment industry visionary and leader. After serving as an executive of CBS Records for many years, by the time he exited the company in 1990, he had consolidated it into the largest record conglomerate in the world. During his tenure, he helped sign and/or develop the careers of many superstars including Michael Jackson, Bruce Springsteen, George Michael, and Billy Joel.

Yetnikoff states, "The joint venture with Navarre was a key ingredient to the formation of VelVel. Navarre's national presence and distribution capabilities, combined with its visionary leadership in the areas of new consumer home entertainment technology, make for a natural partnership."

"VelVel is intent on bringing a wide array of music by today's rising stars and established talent to as many consumers as possible," said Yetnikoff. "We are going to break many of the traditional rules of the industry, competing on a level playing field with the major labels, with a reach only previously enjoyed by those major labels. Not beholden to those companies, nor to their policies or politics, we will show, very dramatically, that independent labels are the future of this business. Our doors are open to the best talent in music, whether known or unknown."

According to industry market research company Soundscan, independent labels' U.S. sales grew by 37 percent over the last two years, while the total market grew by just under five percent during that same period. Independents sold 137 million records in the U.S. in 1995, accounting for 19.2 percent of the market.

VelVel's president Bob Frank, former general manager and senior vice president of Mercury Nashville, indicates that the company has signed recording deals. Agreements have been made with the artists Five-Eight, a popular regional alternative music band from Atlanta; Band de Soleil with the gritty singer/songwriter Michelle Malone; Babyfat, an alternative rock band currently recording its album; and Prairie Oyster Band, a Juno Award-winning Canadian country group. New releases from Five-Eight and Band de Soleil are due in January, 1997. Artists on the Razor & Tie label include Dar Williams, Marshall Crenshaw, Graham Parker, and the popular country parody act Cledus T. Judd. Allan Pepper's and Stanley Snadowsky's Bottom Line Records, headed by Hank Medress, is on the roster as well. Frank indicates that VelVel anticipates signing at least eight new artists by the end of 1997.

Deals have also been signed for soundtrack albums for the soon-to-be-released independent motion picture "Somewhere in the City," starring Sandra Bernhardt, and also for "Sam," which features music from the downtown New York music scene.

VelVel will also be launching a music publishing venture. The company also plans to actively search for opportunities in new media and technology, from on-line communications to enhanced compact discs, as well as opportunities in the film industry.

"We expect to have an immediate impact on the industry," said Frank. "We'll have great freedom to provide creative, operational and financial support to our labels, marketing and promoting some of today's best artists without the traditional roadblocks we often see in this business." Frank indicated the VelVel will have 15 employees by year end and is now in discussion with candidates for executive positions in marketing, media, promotions, finance and A&R.

Earlier this year, Navarre acquired Honolulu-based Record Service, Inc. and its wholly-owned subsidiary, Surfside Distribution, Inc., Hawaii's leading distributor of prerecorded music. These corporations were subsequently merged into Navarre. The acquisition gave Navarre complete U.S. distribution, as well as a base to operate from in its planned expansion into Pacific Rim markets.