Rap Coalition

A HOW-TO RESOURCE FOR RAP ARTISTS, PRODUCERS, & DJs. Since knowledge is power, here is your best defense to succeed in the urban music industry...

Monday, March 20, 2006

The Financial Realities Of Rap

Rap music has hit a dull spot. It has lacked creativity for a couple of years now except for the random album here and there to break up the monotony. I'm more than just a fan of the music: I study the industry--under a microscope. One of the reasons it is so boring right now is because no one is taking any risks.

There is nothing new--just recycled formulas of what labels think will continue to sell. This is a justifiably sensible business decision, but a horrendous artistic decision. History shows us that boredom is what has killed musical art forms in the past. Remember disco? Remember the watered-down, commercial R&B of the late 70s? Rap emerged due to an outcry for an alternative form of popular music in the late 70s and early 80s, bringing a new and exciting answer to boring and redundant music of the day.

Independent labels sprang up overnight in reaction to the music. Many were based upstairs from the local club, in the local DJ's apartment, or at the fan's college dorm room pressing up the hottest club hits and selling them locally. Labels clamored to sign the hottest acts who performed the songs that packed the dance floors or who kept fans' attention the longest at the outdoor Park Jams, originally in The Bronx (NY). When the major labels saw the financial value of rap ten years later (proving once and for all it wasn't "just a fad"), the industry changed. Gone were the independent labels that scooped up the best talent on the streets who had invested their own limited dollars into the records. The majors were a step further away from the streets and played with other people's money. They relied on an employee's opinion of what was hot--an employee who collected a paycheck to make the record, not mortgaged his own house to make the record.

Since most label A&R staff were not connoisseurs of rap, or even people of color (remember it was a predominantly Black art form), they relied heavily on someone else's opinion--perhaps a friend of a friend, but someone else's opinion, nonetheless. And that someone usually had no accountability for failure. Perhaps the A&R person got lucky and had a cousin's uncle's best friend's neighbor's friend who knew somebody who went to the clubs in the Bronx where rap was born. Less lyrically gifted artists began to enter the marketplace while weak production emerged on wax. Employees at the Majors became the gatekeepers and trendsetters while the smaller labels run by fans (the Def Jams and Tommy Boys) and true opportunists (the SugarHill Records and Cold Chillins of the world who spotted a trend and capitalized on it) took back seats. The deep pockets were here. Records that once cost $15,000 to make began to cost $500,000 due to inflated costs. Some records that shouldn't have been made began to go into mass production to end up rejected by the final consumers as not authentic. For every one hit the majors had, ten failures followed; fickle consumers were blamed. People who didn't listen to it, but were profiting from it, were controlling rap.

In the 1980s, most of the rap acts had their own producers, most of which were often the DJ. In the 1990s, the DJ was made irrelevant and MCs became vehicles for great productions at the behest of the labels. This flipped the industry from an artist driven industry to a producer driven industry, while it also took control out of the hands of the artists and into the hands of the label who not only felt they understood the market better, but also had the access to the super producers. The value of the producer soared based on hits. Labels also outbid each other to give "production" deals to the Platinum producers-- not so much to have them bring talent to the label, but more so to guarantee access and fair pricing when they needed production work at a reduced rate. This increased the producers' prices and importance.

The cost to market a record began to climb as the majors raced to outspend each other. Radio costs soared sky high as labels realized the importance, and bought radio. Costs in the 1980s of $10,000 for minimal club and radio play, grew to $200,000 in the late 90s just to regionally test a song at radio, and upwards of a million dollars if it is to become a radio hit. Club and street team "maximum exposure" grew from a few thousand dollars per 12 inch in the mid-80s, to a multi-million dollar industry almost overnight in the 90s. A hot video, in 1990, guaranteed to air on Uncle Ralph's Video Music Box in NY or Yo MTV Raps, cost $25,000, compared to $500,000 today directed by a superstar director with no guarantee of showing on MTV or BET (and forget ANY M-TV or BET play if you have no BDS radio spins).

The rising costs didn't matter. It became a "Majors" game, meaning deep pockets. All the hot labels were backed by a major, with major distribution, with a full staff, with a real budget. It became a producer driven industry where at least two radio singles had to be name brand produced by one of the few platinum flavors of the moment. That's an extra $150,000 on the budget, even at the discounted "I know you" price. Add the requisite Platinum side artist to show the new artist in the light of other successful rappers: $80,000 each. If the label has a good relationship with the other major who owns the side artist, maybe they will allow the use of their artist. If not, they will charge a fee too. Sample clearance could add another $50,000 to $150,000. Tom Silverman said it best: "Back in the day, our variable marketing expense was 75 cents per record sold (net). In 2000, it costs us $4.50 per CD to market a record. A major label can't put out a record that isn't guaranteed to sell at least a million copies, or they don't make any money. Majors can't take a full shot for under $3 Million."

But what is the real price to pay? Artists aren't recouping--their share of the pie has become unreachable. Instead of giving away all their rights in a bad contract like ten or fifteen years ago, they are now spending away all of their possible profits to gain only illusive fame. There's more pressure to create hits--radio friendly hits. There's more pressure to sell records, and to sell records fast--first week sales are a key measuring stick of an artist's value at a label. There's more pressure on the artist to build his, or her, own buzz before the label will even commit to sinking the necessary competitive dollars into the project. The artist is forced to take less risk with creativity, and make a song that is proven to sell.

The heads of the fleeting "urban" or "Black music" departments started to get pressure from above. The employment door began to revolve. In order to protect one's job, the records had to sell. Since it is impossible to spend less in this incredibly competitive marketplace, the record has to sell more units to offset the higher costs to make and promote it. The quality of music goes down in direct proportion to the need to sell more records. The labels don't want to spend upwards of $3 million on a rap record to take a risk; they want a sure thing. The stockholders demand it. The value of a company is based on the price of that stock which fluctuates due to market demand for the stock, not demand for the music. The most recent risk reduction policy at the majors is to step in and scoop up projects that have been released on an independent level regionally, and that are showing promise at retail and at commercial radio. This has been in effect since the mid-90s. The majors still pick a loser every now and again because these variables can be bought or altered to appear better than they really are, and because the A&R employees are still a step away from the streets of these regions that are moving units. They don't know what's real and authentic. They can only guess.

So while the majors are outbidding each other to sign the safest records with the most leveraged risk, based on a formula for sales, what are we supposed to listen to? When will rap become again what it once was: exciting, passionate, and new?! Some changes will need to occur for rap music to take chances again:

-labels will have to stop spending huge amounts of money and start taking risks again
-labels need to hire A&R people who understand the streets and know what will sell and what consumers want to hear
-the industry will have to reign in the huge costs associated with selling a record (expensive radio promotion, exorbitant video costs, costly retail promotions, etc)
-artists will have to oversee budgets and make certain less money is spent so there is a chance of recouping
-artists will have to make records worthy of spending close to $20 to purchase
-artists and labels will have to embrace new technology and make it work in their favor

My biggest concern is that if some changes aren't made, rap is in danger of becoming extinct. At the very least, it will go back underground. If it does, once it loses its current place in modern culture, many opportunities for the artists will leave with it, such as endorsement deals, acting opportunities, television shows, concerts, commercials, etc. When it is no longer deemed financially feasible to be a rapper, many talented artists will seek job opportunities elsewhere. The world could miss out on something very special because it was more lucrative for an artist to get a job than to make an album.


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