Rap Coalition

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Friday, January 15, 2010

The Ever-Changing Rap Music Business
By, Industry Veteran Wendy Day (www.WendyDay.com)

2009 marked the end of a decade and there were many changes that occurred in the music business.

When Don Diva called and asked me to write about the changes I’ve seen over the last 10 years, I started writing this before I even got off the phone. It’s easy to write about something you live and are passionate about. In fact, it almost wrote itself. I’ve been in the music industry for almost 20 years now (March 2010 marks the beginning of my 19th year) and there are very few people left who started back when I did or who’ve been in it as long as I have. I chalk that up to the continual changes and to insanity—ya gotta be a little nuts to stay in this industry any length of time. Especially the folks like me who do this for the love, and not solely for the money!

Since The Dawn Of Hip Hop

Before I talk about the changes over the past decade, there are two changes that have occurred over the past two decades that I need to mention first: the music and the industry people. The music went from being an art form in the 80s and 90s, to being a business. When Hip Hop began in the late 70s and early 80s in the Bronx, it was art. Artists made music to express themselves, tell stories, and entertain fans. And although artists today also do the same thing, the motivation has changed drastically. Artists rarely make music today solely to entertain fans, express themselves, or tell stories. Almost all well-known artists try to make music that is marketable, fits a radio format, and will sell to the masses thereby bringing revenue and income to the artist. It went from being an artform to big business. Many years ago Chuck D said “Rap is the CNN of the Ghetto.” Today, it’s the new dope game—everyone is trying to hit a lick and make a quick buck in the music industry, it seems.

This change in the music (from art to commerce) also brought about a change in the people working in the music industry. The industry originally went from people outside of the artists’ community pimping them to people inside their community pimping them. At one time, the folks coming into the music industry to work were people who loved the musical art form, lived it, and wanted to be surrounded by it. Qualified workers were attracted into the fray. This changed in the 90s, bringing in people who saw the music industry as a “come up.” It became an industry with a low barrier to entry (meaning you didn’t need any special training or knowledge to work in the music industry) and where anyone could believably proclaim themselves a specialist or authority within any area of the industry (marketing, promotions, etc). Access replaced aptitude. It went from being fun to being the cut throat, over crowded, greed driven business that it is today.

Spreading The Wealth

In the 90s, I watched (and helped) the music industry shift from being centered in NY to giving access to many other areas of the country (L.A., the Bay Area, Chicago, Houston, New Orleans, Detroit, Atlanta, etc). The music went from being lyrically motivated (artists used to HAVE to have, and prove, their skills) to being motivated by sales (measurement of success was whether an artist could sell Platinum as opposed to lyrical skill). It became a multi-billion dollar business by its height in the early 2000s.

That geographic change also changed the discovery of artists and distribution of music from national through the Major Labels, to regional through independent labels. This is when Rap-A-Lot, Cash Money Records, No Limit Records, Swisha House, etc, sprung up and began to make money and gain fame. Even in NY and L.A., the major labels began to sign production companies like Bad Boy and Death Row to focus on urban music. As long as they brought in more money than they spent, and let the Majors continue to own all the masters, it was all good. Even when wars broke out.

Change Gon’ Come

And then things began to change in the past decade, and the change happened pretty quickly. The internet came along, increased in popularity, and by the height of rap music sales, the labels were complaining about all of the free downloading and swapping of the music through outside web based companies like Limewire, Kaaza, and Napster. This also affected software companies and the film industry, but not like it impacted the music industry since what was being “stolen” was only 3 or 4 minutes in length per song...by the millions. As bandwidth got wider in the internet world, the problem increased due to the ease of downloading. Instead of labels embracing downloading and figuring out how to monetize it, they fought it. Unsuccessfully. Fans were happy to take songs for free because it was common knowledge that their favorite artists weren’t being properly compensated for it anyway.

The internet also leveled the playing field. At one time, the only way to “get on” in the music industry was through a major label based in NY or Los Angeles. They were the gate keepers who allowed access to the industry because they controlled the distribution and the radio promotion, so either an artist had to make a connection with a label employee to get a deal or they had to sell a large amount of their own CDs regionally and attract a record deal from a Major label (or a successful middleman label or production company that already had access like Bad Boy, Death Row, DTP, Grand Hustle, etc).

The Playing Field Is Leveled

The internet allowed any artist the opportunity to upload their music to a website or social networking site and reach their fanbase and consumers directly without going through a Major Label’s distribution system. This was especially attractive to many artists without any funding opportunities. With an influx of artists coming into the marketplace, there was an even larger absence of how the industry worked or how to market and promote music successfully. It seemed easy and was treated as such. In reaction, up cropped unsavory people ready to prey on that ignorance, and lack of proper funds—the “get a deal” websites, the marketing and promotion websites, the Ning social networking websites for “members only,” the A&R evaluation websites, the producer websites that help you sell your beats, the consultants, etc.

This past decade has allowed many artists to flex their entrepreneurial skills and become their own independent record label, uploading mixed CDs, EPs, and singles to the web and building a buzz. Hundreds of thousands of websites, MySpace pages, and eblast companies sprang up to give these new artists access to the fans. Ancillary companies sprang up everywhere to help market, promote, distribute, and educate artists about the new frontier—the internet. People with no experience and no track record were jumping into the fray because they had computer knowledge or ability to reach artists through the internet. Internet sites were hiring people on the fringes of the music business because they needed authorities on urban music but couldn’t tell who was who.

People who believe they have talent or who think it’s easy to succeed have come into the marketplace in droves. The mindset that music is free began to prevail—not only free to own through downloading, but free to market and promote. Poorly financed “record labels” began to spring up and sign artists to “deals” because they felt they could make money digitally without spending any money (or spend limited money). The focus became to look for one hit that could make them millionaires overnight. Artists signed to those companies in droves hearing affiliations with major labels like Universal and Asylum, for example. Some folks took songs to radio to land deals (for a fat fee whether the deal came or not). There was a rebirth of “one hit wonders,” especially coming out of Texas. The legitimate labels began avoiding Texas artists for fear that they’d only get one hit wonders, thereby hurting all artists in that region.

The Splintering Effect

The internet also leveled the playing field with the industry. No longer were the key players behind the scenes people with a track record of success, people with trained skills, or people that the industry chose to “let in.” Through the internet, anyone with a healthy email list or some blogging skills could post their ideas and opinions online and attract followers to their opinions. The music industry went from a gatekeeper basis (an inner circle of a few choosing who to let into their circle) to a popularity basis (whomever had the largest following on the internet became accepted in the industry). An entire blogging culture sprung up, and gossips like Sandra Rose, Nicole Bitchie, and Media Takeout, and urban news sites like AllHipHop, HipHopDX, and SOHH took the places of importance of XXL, Vibe, and Source magazines because they could spread information quickly. Sensationalism also found a place in Hip Hop with sites like World Starr Hip Hop and Vlad TV, and artists soon learned that if they do scandalous stuff on video, they will get millions of views within days. Fame began to rule the music industry as artists vyed for reality shows thinking it was the next get rich scheme, only sharing too much information with fans and pushing them away in disgust.

Until the blogging sites and websites popped up, fans had to wait til the next month to get news, new music, reviews, and gossip--and only in printed form. In today’s instant internet culture, we can almost find out that Keiysha Cole is pregnant the day she conceives the child, or we can hear the latest Young Buck/G-Unit dis the second Buck finishes recording. Also, the magazines were based in NY for the most part, as were the staffs, so the bulk of coverage seemed to center around NY artists and lifestyle. The internet opened the coverage up to the world, so now the artists and topics covered are more international and chosen by whomever controls the websites—so information is no longer based solely in NY. The sales now reflect that shift.

The downside of this easy access is that the bloggers are not trained in journalistic skills or ethics/integrity, nor are they backed by large corporations with legal departments that reel in the inaccurate content. These folks can pretty much say whatever comes to mind no matter who it affects. They also don’t have access to the bigger, more famous artists, so they write mostly about the newer and local artists, thereby splintering (and scattering) the coverage even further. They feed off of each other regurgitating the same information overloading viewers—the rush to be first outweighs the need to be accurate. The popularity of Blogs and Websites also changed the overall point of view in general from News to Opinion. So an industry that once had less than a hundred artists in circulation, now has thousands with everyone giving their own opinion about them. This is far too many for fans to absorb so they tend to tune out most of the superfluous information.

This same scattered approach also affected promotions and marketing. Gone were the days of people accessing music through one or two local radio stations, a handful of TV stations or video shows, and a few magazines. Now to advertise and promote, artists and labels have to reach potential consumers wherever they’re getting their news, information, and relaxation—and these fans could be playing video games, surfing any one of millions of sites on the internet, listening to terrestrial radio, satellite radio, or internet radio, etc. The ways to reach potential fans has become too fragmented, and therefore too expensive, to use for marketing and promotions purposes. Magazines began to shut down because they couldn’t afford the lost advertising dollars. TV shows switched to reality TV format because they were cheaper to film and had a “trainwreck” quality of viewership, as their viewer base (and therefore advertising income) reduced. The most scandalous and extreme seems to attract the most attention (see “Balloon Boy” for proof of this). The downside of this need for extreme measures to attract attention is that it often makes the urban music industry feel like the WWE.

Cash Rules

As recording equipment became cheaper and more widely available to the masses, the amount of rappers, singers, and producers increased. This over saturated the marketplace with music. Anyone could now make music inexpensively and upload it onto the internet. The quality of the music began to decline. The industry went from thousands of potential artists to hundreds of thousands of potential artists (as evidenced by the number of rap MySpace pages). As the necessity to be lyrically skilled disappeared, anyone could call themselves a rapper. The ability to develop a buzz switched from skill to funding. Anyone with an investor could promote themselves alongside successful artists. Where lyrical skill once made an artist stand out, now image and adlibs were the stand out features for many rappers.

Cash became king in the past decade—people began to buy their way into the industry both on the artist side and the label side. It became a joke amongst industry people how those without money had talent, and those with money had no talent. More and more unsavory people were coming into the music business with the intention of getting a share of that money, and the old adage “a fool and his money are soon parted” became the norm in this industry. With this new influx of people, it was hard to tell who was real and who wasn’t, so the instances of people getting jerked out of money soared and continue to soar today.

Anyone spending money at a club or spending money on wrapped vehicles and flyers became a target for folks trying to get a check from them. I watched D Boys give industry folks $125,000 in a duffle bag to guarantee record deals that never materialized. I watched a shady Atlanta radio promoter take $45,000 in cash and not secure one radio spin for an indie label. An indie label had a bunch of DJs on “payroll” for years to play records that never came out. A consultant set up a label and helped them spend over a million dollars to sell less than 1,000 CDs with no distributor in sight. A small distributor allegedly put mixed CDs by well known DJs into Best Buy and forgot to pay them til they got sued by the DJs and the Major Labels—and it appears Best Buy still sells those CDs despite the cease and desist letters while the indie retail stores selling legitimate mixed CDs got shut down by the Feds. Gotta love this past decade!!

Today, anyone can walk into any industry event and pass out business cards saying they are a manager, or a promoter, or even that they own a record label, and they will be treated almost the same as Chris Lighty (a real manager), Alex Gidewon (a real promoter), or Jason Geter (a real label owner)—three people with extremely long, proven track records of success. Anyone with good game can bullshit and get over easily in this industry, and most do. And rather than starting a business based on seeing a need and filling it, most people band wagon jump. When they see someone doing something, they take that same idea and run with it. Anyone with internet access can be a Blogger or own an Urban Website. Anyone with a $200 iFlip can run a website or DVD Magazine. Anyone with an email list can have an eBlast service, and anyone with access to a free Bridge line can offer conference calls. Anyone with access to a handful of DJs can start a DJ Crew. Anyone with access to a venue can set up an industry seminar or conference. Truth is, anyone who can see someone else doing anything can jack their idea and replicate it, and there seems to be no downside or consequence for this action. On a positive note, anyone with access to any of these things, who is willing to put in the time and hard work and build something real, can easily stand out in this industry. Whether or not they can make money from it is the question…

Greed Took Over

With major labels desperate for revenue, and desperate to have things go back to the way they were (an impossible dream), they cut expenses by firing key staff members or squeezing out staff with track records of success and experience, replacing them with new people who were willing to work for less money. As money became harder to find, and as the labels were downsizing (meaning salaries decreased while workload increased), many enterprising label employees began to make money on the side by signing artists willing to give them a kickback or a percentage of their careers. This changed the artists getting signed from a talent basis to a financial incentive basis. This meant that the artists coming into the labels’ pipelines were there only if they were willing to take less money, do a shady side deal, or sign a 360 Deal with the label. Talent no longer mattered. The attitude amongst labels was that artists are a dime a dozen and if one artist won’t agree to this, some other artist certainly will. And they did.

This greed spread into every area. Producers became a dime a dozen and were asked to give up a share of their ownership in the publishing in exchange for placements. Some management companies, like Roc Nation, made it a prerequisite to be placed on one of their artist’s albums that the producer has to give up a percentage of their publishing for the placement—even producers with Platinum hits under their belts. The albums have become about who benefits financially instead of making the best music possible.

Many of the labels only use producers that they have on staff to produce albums because they want a bigger ownership financially. For example, Young Jeezy albums (my favorite artist) have a plethora of CTE owned producers on each album so that CTE can collect the lion’s share of the publishing and income. The radio singles seem to be well known established independent producers, but the album filler seems to be mostly CTE staff producers. This is the new music business model and neither CTE nor Roc Nation are the only companies taking a bigger share of the pie as the price for doing business with them—they are actually the norm. Could this possibly be why sales are so low in the rap music industry? Is the music suffering from this need for ownership instead of using the best music possible? After all, it’s a business today, not an artform. The industry is run on a need for ownership and money (greed) instead of displaying the best talent. Capitalism at its finest….

In the middle of this decade, the Major labels changed the recording contracts that it offered artists. The standard deals went from artists getting a 12% to 15% share of the pie after they paid everything back out of their small share, to “360 Deals.” These oppressive deals take a percentage of everything that the artist earns while signed to the label. In 2005, I stopped doing deals with labels because the deals became so oppressive for artists. I’ve even seen Atlantic Records refuse to work an already signed artist until he agreed to convert his contract to a 360 Deal—a worse deal for him, even though his leverage and popularity had increased in the marketplace. His lawyer advised him to do so, as well.

Once used to a healthy profit margin that afforded grand lifestyles for those at the top of the food chain, the major labels became disgruntled as sales dropped while they missed the boat on less profitable digital sales. Taking on the role of dinosaurs fighting for survival, they tried everything from stopping the new digital revolution, to fighting it, to suing it, to band wagon jumping too late. Nothing worked for them. And they still haven’t learned from their mistakes—they still continue to fight the ways the consumers want to receive their music, even though they are willing to pay for it.

So to justify their continuing existence, the labels decided to take an even larger share of the pie from the ONLY aspect of the equation that they controlled—the artist (or the “content” provided for digital download). Back in the day, labels took roughly 88% of the pie while giving the artists 12% of the money AFTER the artist paid back everything spent on them from that 12% share. In exchange for giving up the lion’s share of the sales, the labels always told the artists that they’d make 100% of the touring. Any show money, was the artist’s to keep! Not today!!!

When the shit hit the fan financially for the labels, they decided to tap into the show money, and all other streams of income for the artists, as well. After all, if your profit margin is made smaller, you need to eat more of everyone’s income to keep the fat cats at the top, and the stock holders, happy. Most 360 Deals share in endorsement income (15% to 30% depending on the artist), performance income (10% to 30% depending on the artist), merchandising income (20% to 50%) and Film/TV money (15% to 40%), and as has always been the norm: 50% of the publishing income (ownership in the actual music and lyrics).

How do labels justify taking an even BIGGER share of the pie from artists? They complain that they are doing all of the developing, investing, marketing, and promoting. Their argument is that they believe in the artist when the artist has nothing, and they feel that assuming the lion’s share of the risk should result in sharing in a lion’s share of the profit. If the label is developing and building the artist to a level of super stardom, they feel they have the right to share in a percentage of everything that super stardom affords the artist. So if they drive the artist platinum, they feel they should get a piece of the tour that came from the fame the label helped the artist build, and a piece of the endorsement deal or film income that came from the fame that the label helped build. I guess I could see this argument better, if I actually agreed that the labels did their jobs well of building artists. No 360 Deal to date, has resulted in an artist becoming a SuperStar.

40 Is NOT The New 30

A major shift this past decade has been in demographics. The age of the fans has changed. They’ve grown up into other types of music than rap. Urban music is no longer the mainstream center that it once was. It got old and uncool. Hell, the bulk of our rap stars are older than 30 years old!! Jay Z and Puffy turned 40 this year. And even though their lyrics say that 40 is the new 30 (LOL), that’s the age of the average rap fan’s Dad! Who wants to follow a star that looks like somebody’s Dad!? We don’t have new younger Rap Stars replacing the older Rappers yet other than Soulja Boy. While sales have proven there still is a market for Jay Z, it’s not what it once was. We need a new crop of rap stars that are able to deliver what the mass audience wants….whatever that is. The folks controlling the music industry are all as old as the rappers. When I came into this industry at 30 years old, I was often the oldest person in sight. Today, the industry is made up of folks 30+. How can someone so far away from teenagers in age know what a teenager wants to buy? They are still the bulk of the music buying public. And the folks running most of the labels are my age or older! No wonder the music industry is so out of sync with the youth.

So, while sales have declined in urban music, the artists have been treated worse than ever. They’ve been asked to give up a larger share of their already limited income, and the labels rationalize this by the fact that there are more artists than ever to choose from. Talent doesn’t enter into the business decisions as it once did, or as it should. The music has suffered because it has been created to fit established radio formats (which are bought and paid for through payola) rather than made to be creative and artistic. Artists are controlled through money and financial incentives, and are quickly replaced when they don’t conform. Greed has taken over the industry and artists’ mindsets (most, not all), and drives the current urban music industry. The barrier for entry has been lowered and allows anyone with access and a business card a way in to make his or her share of the pie—usually without delivering what was promised. This industry is very shady and the majority of people can not, or do not, deliver what they promise. And it’s aging quickly.

Yet all in all, it is a fame based industry where glamour seems to reign supreme. People continue to want in and are willing to do anything to get in. It’s an industry that is built on smoke and mirrors and hype and sells dreams for profit. And the truth is, I can’t imagine doing anything else in the world than being right here in the middle of it all, trying to do what’s right and make sense of it.

In the past decade, overall, I’ve seen things grow exponentially worse even though the access has opened and the playing field has been leveled with the internet. I believe the key to on-going success in this music business economy is two-fold: 1) We need to get rid of the old guard—fire everyone who has played a part in getting us to this point, and start over. Everyone! We need to set the standard of doing good and fair business with a consequence for those who get excessively greedy or who jerk people. Those of us in positions of power for years are too set in our ways and remember the days of huge income too readily and we need to be replaced by folks with no expectations and who are willing to embrace the future no matter what it brings. And 2) we need to bring it back to the music and deliver what the fans want, how they want to access it, and what they are willing to pay for. With the internet it’s even easier to tap into research and development of the music and deliver what is needed and wanted. If it’s a customer based business, we need to treat it as such. The artists need to be talented and compensated fairly for what they bring to the table. Lil Wayne, Taylor Swift, and Susan Boyle have proven in 2009 that people will buy what they want to buy—by the millions. In the next decade, let’s give them what they want, shall we? Before the music completely dies.

3 Comments:

Blogger Wesley Verhoeve said...

great post Wendy. thank you for sharing your insights. and I agree wholeheartedly with you conclusion. I shy away from most all conventional industry people and choose peers in more sane industries to be inspired by to change this business in my own small way.

8:19 AM  
Blogger Trackstar the DJ said...

Excellent as always.

11:41 AM  
Blogger Unknown said...

Thats really educating it was weird today i was working an some lady came in an asked me if i heard of her son Jdiggz an i said yeah an told her i rapped an was into doing music an we talked for a little an she told me about you an too check you out online an i found this an it inspired me a lot
i hav some freestyles on youtube my friend put up so if you want check them out an give me some feedback that would be cool its under Young Faded but but my rap name is just "FADED" its been my nickname forever but anyways thanks again for the education on hip hop it makes me wanna make music right now:)

5:46 PM  

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