Eastie company a hip-hop hit

By Steve Holt

 

     You’d never know the two-story building at 2 Neptune Road houses anything at all, let alone a company whose founder believes it’s the future of the hip-hop recording industry.

     But from modest office space above a UPS store, Jay Andreozzi, founder of Amalgam Digital, is working to change the way hip-hop fans get their music and interact with each other and with artists.

     “I grew up listening to hip-hop,” says Andreozzi, 31. “We’d go into an independent record store, sit down on the couch, and talk to the workers about an album. Amalgam is re-creating that sense of community online.”

     Andreozzi says his company, a genre-specific digital retailer and recording label, was the first of its kind. Hip-hop fans can go to the company’s web site, (www.amalgamdigital.com) browse its collection of songs, albums and arti

sts, a few of which are also recorded on Amalgam’s own label, and buy songs for 89 cents each. Fans interact with each other on the site’s message boards and with artists through live Web casts.

     Andreozzi sees the addition of a few high-profile artists, like 2004 Grammy nominee and Def Jam rapper Joe Budden, to the label side of Amalgam as a lightning rod that will help draw other “hip-hop heads” on the Web.

     Earlier this year, Budden participated in a live, streaming Web cast during a recording session that drew 80,000 viewers. Budden also released a digital-only album available for download exclusively through Amalgam’s retail store, which sold over 20,000 units in the first month and reached No. 42 on the Billboard Top 200 albums list.

     East Boston and other urban neighborhoods are ground zero for the music revolution currently unfolding. Peek into the lives of Eastie teenagers, and you’ll see that music is a rite of passage of sorts. In bedrooms and after-school programs – as well as on their SideKicks, iPhones and Blackberries on playgrounds and on the T — the latest music is surfed and downloaded and traded and discussed. An argument about music is often the fiercest kind.

     The listening habits of this demographic, experts say, will determine the future of the industry, and Amalgam Digital is positioning itself to capture their attention. Peter Spellman, Director of Career Development at Berklee College of Music, who advised Andreozzi briefly when Amalgam was about to launch, said he believes the small company and others like it will ride the waves of change within the industry.

     Spellman says the industry’s major labels are struggling for survival as a result of the gradual drop in CD sales following the arrival of digital marketplaces like iTunes and illegal downloading.

     Independent labels, says Spellman, “have lower overheads and often have a lot more devout fan bases, so they’re able to keep their heads above water and break into that digital world more quickly and adapt to that phenomenon more effectively.”

     After working under former Def Jam CEO Jay-Z to produce his 2004 debut album that sold over 500,000 copies, Joe Budden says the decision to sign with the much smaller label was quite easy.

     “They’re innovative, they’re cutting-edge, and they’re trying new things. Whenever you have a label that is doing those things, it’s always going to benefit the artist,” says Budden, whose sophomore full-length album, “Padded Room,” is coming out in February.

     On a per album basis, Amalgam’s business model certainly appears to benefit artists more than the major record labels. Serving as both label and retailer, and cutting out expenses like distribution and packaging costs, Andreozzi says Amalgam is able to pass along a higher percentage of album sales revenue to its artists — $7 out of every $8.99 album downloaded goes to artists, he says. Compare that with the 10 percent that artists get when their music is sold at a retailer like Best Buy, or the 14 percent they get when it sells on iTunes, according to a report in Wired Magazine.

     But, of course, the artists get the money only if the albums sell. For 30-year hip-hop veteran Alonzo Williams, who helped to launch the careers of legends like Dr. Dre, N.W.A., and Ice Cube, the lack of a marketing and promotion budget is perhaps smaller labels’ biggest obstacle.

     “My concern is that most of these companies don’t provide any sort of marketing for their products, says Williams. “They go on the popularity of the artist to make sure they make their money.”
     Amalgam also offers all its downloads free of Digital Rights Management (DRM) software, allowing users to share the music with anyone and play it on any digital player. (iTunes recently began offering DRM-free music, but at a higher price than its protected music.)

     “I grew up dubbing cassettes for my friends or burning CDs for my friends. I might have bought it, they might have bought it, we might have traded,” Andreozzi says. “That’s how music spreads around. We’re not really concerned about losing sales because people are getting easier access to music.”

     Williams, on the other hand, like many in the music industry, says unregulated music sharing is a big concern.

     “Once [a song] gets out, there’s no way to protect it from being passed around digitally,” says Williams. “If there is a way to protect the file, it could be good for them. But if not, I don’t see the advantage.”

     Other challenges exist for Amalgam. In the wake of its launch, the company suddenly met its competition, a wave of similar hip-hop music sites such as Definitive Jux Records, UndergroundHipHop.com and HipHopSite.com. And there’s always iTunes to contend with.

     What’s more, Spellman says, CDs aren’t going anywhere anytime soon, so digital retailers will continue to compete against retailers selling a physical product. And without a huge marketing budget, the Amalgam brand is spread mostly through word-of-mouth.

Still, Andreozzi, a Fall River native who got his start as a turntable DJ in the mid-1990s, then worked for independent record labels, has something to show for his first three years in business.

     He has built Amalgam Digital from a two-person distribution company in his Revere attic to an organization with six full-time staff and six interns. He says over the last three years, Amalgam has doubled its total revenues each year, and that he now collects a six-figure salary. In addition to Budden, Amalgam has added former Def Jam artist Peedi Crakk, Max B, and Saigon — a regular on the HBO series “Entourage.”

     The company also recently began reaching out to rising talent with its “User Generated Content” module, a beta program that lets independent artists and labels sell their music in Amalgam’s store.

     And recently, says Andreozzi, former boxing champion Floyd Mayweather and his record label Philthy Rich Records formed an alliance with Amalgam.

     But why settle in East Boston in an industry so heavily centered in New York City, Atlanta and Los Angeles?

     “I’m a fan of the counter-intuitive, the road less-traveled,” says Andreozzi, who also points to Boston’s technology and new media culture as being vital to Amalgam’s success. “I can’t think of a better place to be.”