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Memo

The Problem With Apple and Spotify’s ‘Pay Per Stream’ Calculations

Hey! I’ve been thinking about something since Coinbase went public last week. A bunch of VCs shared “pass emails” from when they turned down Coinbase. I would love to hear more of these stories with hip-hop artists and record labels.

We hear them once in a while. Tons of record labels turned down Jay Z before Roc-a-Fella Records started. Fat Joe turned down Eminem six times. Dame Ritter turned down an investment opportunity from Russ. Every hip-hop artist has stories like this! Let’s hear more of them.

This week’s memo covers reports that Apple Music pays artists more than Spotify, Warner and Spotify’s podcast partnership, and hip-hop’s push for a union.

new podcast: BrandMan Sean

Music marketer Sean Taylor (BrandMan Sean) came on the Trapital Podcast to talk about building BrandMan Network, which now was 100K+ YouTube subscribers. His insights have helped artists beat those with 2-3x the budget. He’s also worked with 24KGoldn and many more.

Tap in on Apple Podcasts, Spotify, or watch on YouTube.

The problems with Apple Music’s “penny per stream” letter

Last week, Apple Music published Apple Music Insights: Royalties, a letter on its artist dashboard about royalty payments. The biggest takeaway is that Apple Music says, “our average pay per play rate is $0.01” which has led to dozens of misleading headlines that say “Apple pays artists twice what Spotify does.”

There are several issues with pay per stream calculations and what they imply:

1. Apple Music and Spotify pay rights holders the same 50-53% of revenue. This was cited in the Wall Street Journal’s coverage of the letter. Digital streaming providers don’t pay artists. They pay rights holders such as record labels and publishing companies. The amount artists get paid depends on each artist’s agreements with rights holders. Any “pay per stream” differences between Apple and Spotify are dependent on both revenue and consumption, which leads to the next two issues.

2. Apple Music has less market share than Spotify in regions with lower average revenue per user (ARPU). Two years ago, Apple Music said it has more U.S. paid subscribers than Spotify. That may still be true, but Apple’s U.S. subscribers account for a much larger percentage of its overall business. Meanwhile, Spotify is now in over 80 markets. In many of those markets, the monthly subscription price is less than $2 per month. On both services, artists get “paid less per stream” in India than they would in the United Kingdom, but it’s a similar percentage of revenue. Let’s not conflate “paying artists more” with “having less market share than competitors in regions where subscriptions are priced lower.”

3. The companies have different business models. Apple CEO Tim Cook once said that Apple Music is “not in it for the money.” It’s a loss-leading business unit. It doesn’t live in a vacuum. Meanwhile, Spotify has a free tier, which pays less revenue per stream. But Spotify’s paid tier is still comparable to Apple Music.

Both streaming services are similarly priced all-you-can-eat buffets. But one company boasts that it’s better for artists because of a back-end calculation that’s irrelevant to how it runs its business and serves its customers.

It would be like Hometown Buffet saying it was “more profitable” than Golden Corral because customers eat less there. Sure, that’s one way to view it. But maybe the food at Hometown doesn’t hit like the food at Golden Corral. Who cares if you earn more profit per customer if no one’s eating that Salisbury steak??

Read more about Apple Music’s letter, which 9to5Mac posted.

Warner Music Group and Spotify partner on original podcasts

Last week, both companies announced a new partnership to develop podcasts built around WMG’s catalog of music.

The podcast – record label wave. Record labels big and small are on a quest to maximize content. Before long, all of them will have podcast studios or partnerships with existing ones.

Last year, Warner Music CEO Steve Cooper saw podcasts as an opportunity to drive more streams. He didn’t have any set deals in place at the time, but he saw Spotify as a lead generation opportunity. Here’s what he said on a 2020 analyst call. “There will be people that come to Spotify for a podcast and stay for music, and there will be people that come to Spotify for music and stay for a podcast. It does not impact our economics, either on the free side or subscription side. But hopefully, what it will do is create appeal to a broader audience.”

Spotify is expected to surpass Apple Podcasts in U.S. monthly podcast listeners by 2022, so it’s a timely move.

Harder than it looks. Music podcasts get tons of attention because they are cheap to produce. Podcasts like Song Exploder have taken off and gotten big-time Netflix deals. But podcast growth is hard. It takes a lot of time and a lot of reps, which record labels understand.

The best podcast networks have strong underlying brands, which record labels themselves don’t always have. It’s the artists who have strongest brands in music. But when it’s time for them biggest artists to leverage multimedia, they get the eight-figure checks from a video streaming service.

This puts music podcasts in a peculiar spot. It will be interesting to see which types of podcasts get the greenlight under Warner-Spotify’s deal. Maybe we’ll see more companion podcasts to the Netflix documentaries. Or Warner will signs podcast talent to be personalities that discuss a particular genre on a regular basis. There’s a wide range of opportunities.

The unionization of hip-hop

RIP Black Rob (via YouTube)

The deaths of DMX and Black Rob have resurfaced the push for a union to support hip-hop artists.

This topic has been brewing for two reasons. First, today’s superstars make a lot more money than the stars before them. Travis Scott grossed over $100 million in 2020. In a pandemic! Even in Lil’ Wayne’s prime, the most he made in a year is $20 million. The superstars before Wayne saw even less despite the fact that they paved the way.

Second, some of yesterday’s rap stars are now struggling. This is why Swizz Beatz wants to start that founder’s fund where artists donate 1% of earnings to a set fund, which is distributed back to the past generation. It’s also why Warner Chappell exec Ryan Press pledged $10,000 to the Rhythm & Blues Foundation which helps artists in financial need and medical assistance.

The SAG-AFTRA awareness problem. All major record label artists are eligible for SAG-AFTRA membership, a union that the major record labels all contribute 12.75% of gross earnings to cover healthcare and retirement for artists and employees.

According to a Rolling Stone article, the union has struggled with a lack of awareness among artists, even though all major record label artists are eligible.

But I wonder if the “lack of awareness” is a welcomed issue. Pensions and retirement benefits were major setbacks for Sears, Ford, and many other 20th century businesses. Their retired employees are living longer than ever with increasingly high healthcare costs. These companies weren’t built for this life.

Could SAG-AFTRA manage the costs if all eligible musicians used the service to its full potential?

I’m no union expert. Never been part of one. But I would love to see a model where signed artists are automatically covered, not just eligible.

Read more about the hip-hop founder’s fund effort in okayplayer.

The Quest for the Respected Mogul

Hey. It’s been bittersweet to think about DMX since he passed away. He gave us so much while he lived in pain. Hip-hop has never had anyone like Earl Simmons, and it may never again.

Unfortunately, the past week of reporting on DMX’s life status has been a mess. There were too many rumors and incorrect articles on his condition. It’s an unfortunate side effect of Twitter and the rush to go viral. I understand why Chadwick Boseman and MF DOOM’s loved ones waited to disclose their deaths on their terms. Hopefully, we see more of that moving forward.

If you get a chance, read this great article on X’s life by The Undefeated’s Justin Tinsley.

Last week’s Trapital essay on Will, Jada, and Westbrook Inc. has gotten tens of thousands of page views, open rate well over 50%, and plenty of praise. Thank you! If you haven’t checked it out, you can read or listen here.

Today’s Trapital memo covers UnitedMasters’ $50M investment, Diddy’s letter to corporate America, and Scooter Braun’s recent moves.

UnitedMasters Series B round led by Apple

via CNBC

On March 31, the music distribution platform raised $50 million in a funding round led by Apple, one of the company’s strategic partner. This funding will be used to grow globally through promotion, marketing, and technology.

UnitedMasters was started to give indie artists a record label in their pocket. It distributes the artist’s music on all the digital streaming providers and takes a 10% revenue cut or $60 per year.

The indie artist marketing stack. Music distribution has become a low-margin commodity. But UnitedMasters sets itself apart in two ways. First, the platform is a loss leader for Translation, the ad agency run by UnitedMasters CEO Steve Stoute. The most successful artists from UM are prime targets to get featured in a Translation project. Who wouldn’t want to be up there with Drake from State Farm? Or Chris Paul and Cliff Paul? State Farm is one of Translation’s longtime clients.

Second, UM gives artists exposure through its marketing-driven partnerships. Since 2018, it has partnered with the NBA, ESPN, NBA 2K, Apple, Twitch, Cash App, TikTok, and more. It’s building the indie artist marketing stack. These partnerships are both marketing for the artists that use its platform, and awareness building for potential artists looking for a distributor.

The model works best if UnitedMasters’ customer acquisition cost is low and it retains top talent through either UnitedMasters or Translation. Some top artists may leave, like NLE Choppa in 2019. It’s inevitable. It’s a long-tail business model. The homerun hitters will subsidize the rest. But the more heavy hitters, the better.

The DTC opportunity UM’s partnerships reflect the company’s core competency in marketing. Stoute’s a top advertising exec. But for the indie artists that the company supports, the 1-to-1 direct communication tools have become more important too.

UnitedMasters can partner with a company like SuperPhone to help its indie artists text fans directly. It can partner with an email marketing platform like ConvertKit, which just acquired FanBridge, an email fanbase building platform for musicians. Or it could partner with Substack, its fellow Andreessen Horowitz portfolio company with a similar business model to the music distribution service.

Listen to Trapital’s January 2020 interview with Steve Stoute here.

Diddy’s letter to Corporate America

via REVOLT

On April 8, Diddy wrote an open letter to highlight the low advertising revenue REVOLT gets from General Motors and how it reflects an inequity for Black-owned media companies. The message has gotten mixed reviews. It’s unfortunate, but not surprising.

The push for equity. Diddy has been vocal about inequity for Black folks. Here’s a timeline of recent public statements in the past year and a half:

-Nov 2019: called out Comcast for unequal treatment of Black-owned cable networks like REVOLT

-Jan 2020: called out the Grammys for not giving Black artists an even playing field.

-Oct 2020: launched the Black Political Party, charged to focus on the Black community’s need

-Apr 2021: called out GM for lack of advertising with REVOLT and Black-owned media

I believe Diddy’s heart is in a good place. Moguls like him should use their platforms like this. But Diddy’s messages don’t hit home as they should, and that’s for two reasons. The first is a public relations challenge, and the second is an audience challenge.

The PR challenge. First, whenever Diddy calls out the business practices of others, his own history gets put under the microscope. It takes energy away from his statements. In 2020, Mase claims he tried to buy back his publishing for $2M, but Diddy refused unless he can match the market value. Otherwise, Mase has to wait till he turns 50 in 2027.

Diddy may feel justified. He took risks on Mase and other artists and signed them when they were unproven. He made money on those who succeeded and lost on those that didn’t.

But who’s “wrong or right” misses the point. Diddy’s goal with his public statements is to gain leverage in the court of public opinion. This influences businesses to do better. But right now, the jury’s riding with Harlem’s boy Mason Betha. The public will almost always ride with the artist regardless of the details. It doesn’t help that Black Rob, a former Bad Boy artist, has suffered from multiple strokes and bouts of homelessness. In those situations, it’s hard for the public to feel for Diddy, a near billionaire who wants more ad dollars for his cable network.

The best solution is to sell Mase back his assets (even if it’s at a discount), settle any disputes with past artists or business partners, and publicly apologize for not doing better. Again, this is less about being wrong or right. It’s about the big picture and Puff’s underlying goal.

The customer challenge. REVOLT’s struggles with Comcast and GM are unfortunate, but not surprising. It launched as a cable network in 2013. 2013! It’s hard to build a cable audience in the age of cord-cutting. The media company has wisely expanded into digital content and big events like REVOLT Summit, but the cable network at its core is an expensive load to carry.

Diddy’s letter says that 1% of advertising in 2019 was spent with Black-owned media companies, even though Black people represent 14% of the population and 15% of Corporate America’s revenue. But ad dollars get distributed to media companies based on audience demographics, not owner demographics.

But to Diddy’s point, even if the demographics are controlled for, I bet that companies like REVOLT get less than their non-Black-owned competitors when controlled for size, CPM, CPC, or any other advertising metric. A study that breaks this down would be valuable for all Black-owned media companies that rely on ad revenue. We’ve seen how diversity and inclusion data has helped address inequity issues in the tech sector. It’s far from perfect, but it helps push progress forward.

This challenge is bigger than Diddy though. When hip-hop’s top superstars have exclusive interviews and stories, they don’t necessarily go to outlets like REVOLT to break the story. They go where they believe they’ll get the most traffic. And because of that, their fans will follow, which drives the ad spend.

Read Diddy’s letter to Corporate America here.

Scooter Braun’s wheelin’ and dealin’

The 39-year-old music exec has been deep in the mergers and acquisitions game:

-Jun 2019: acquired Taylor Swift’s masters
-Nov 2020: sold Taylor Swift’s masters ($100M profit)
-Apr 2021: sold Ithaca Holdings for $1B+ to HYBE

Scooter has looked up to David Geffen, the longtime music mogul who is now worth north of $10 billion. Here’s Braun in a 2012 interview with The New Yorker:

“David Geffen was a Bruce Wayne to me. He was extraordinary, but at the same time his talents were something that I could dream of and could fathom. I’m a normal Joe. But, with a lot of effort, I’ve got a shot at being Bruce Wayne.”

Geffen, who co-founded DreamWorks, told Braun to get out of the music business. A decade later, Braun has been making moves in that direction. He flipped Taylor Swift’s masters at the peak of this shopping spree, and got out before the asset gets devalued by Taylor’s Version of her albums. The biggest artists he manages, Justin Bieber, Ariana Grande, and Demi Lovato, have all stayed on top and stuck by Scooter through all his public disputes.

Like Geffen, Braun has made his deals, angered the biggest stars of their era, and accepted the backlash. Michael Jackson blamed David Geffen for ruining his career and had him on his famed ‘enemies list.’ Taylor Swift has publicly called out Scooter Braun on more than one occasion.

The path to a B. There’s been a longstanding debate about whether someone can become a billionaire without doing wrong by others in some way. It’s a difficult question based on perception, which is subjective and influenced by those who publicly share their stories.

For every bad story about Diddy or Scooter Braun, there are good stories of those who ride by them. Even hip-hop’s beloved moguls, like Master P, have had public disputes with business partners. It’s not an excuse for their actions, but an understanding of how these narratives are built.

Read more about Scooter Braun’s latest deal in Variety.

Coming soon from Trapital

Podcast interview with music marketing expert BrandMan Sean.

Why Hollywood’s Overall Deals Are The New 360 Deals

Hey! Who’s excited about Peloton and Verzuz teaming up? At this point, Peloton has more in common with Spotify than it does with other fitness companies. Don’t be surprised when Peloton becomes part of the artist promo run. I can already hear Alex Toussaint: “Drake sent me an early copy of Certified Lover Boy. Let me play a song for y’all. Keep that cadence 90-100.”

Today’s Trapital Memo covers Issa Rae’s WarnerMedia overall deal, why these deals are the new 360 deals, and findings from IFPI’s Global Music Report.

new podcast: Dame Ritter, music exec and artist manager

Music Entrepreneur Club founder Dame Ritter came on the podcast to talk about four “myths” about artists in today’s music industry:

1. I need to own everything. Ownership!
2. I can’t make money on streaming
3. NFTs will save me
4. I’ll make all my money on tour

There’s nuance in all those statements, and there’s no better person to discuss with than Dame. His Funk Volume record label made millions of dollars, he’s partnered with major labels, and he’s managed indie artists. He’s seen it all and has a great perspective on this.

Tap in on Apple Music, Spotify, or watch on YouTube.


Issa Rae, WarnerMedia, and the rise of overall deals

Issa Rae and Donald Glover at Rihanna’s Diamond Ball (via Taylor Hill / Getty Images)

Last week, Issa Rae signed a five-year overall deal with WarnerMedia which covers her TV projects on HBO Max and a first-look deal for her film projects. In overall deals, TV/film studios pay talent to own all projects or ideas they create for the length of the deal. Even if the studio passes on an idea, it can’t be shopped elsewhere if the deal is still under contract. Meanwhile, a first-look deal gives first right of refusal on all projects, but the talent is free to shop it elsewhere if it’s passed on.

She’s one of many stars who have signed such deals. Her launch video explained the vision for her company, Hoorae. The synergy map I drew last year on Issa Rae’s businesses wasn’t too far off from that vision!

Loyalty, loyalty, loyalty. By the time this deal ends in 2026, it will be eleven years that Issa has been with HBO. Eleven! That’s a legit marriage. “They wifed me up,” Issa said to Variety. “When people believe in you and build with you, I tend to want to further that relationship.” HBO better hang Issa Rae’s jersey in the rafters after this.

It reminds me of what Charlamagne Tha God said after his latest five-year iHeartMedia deal and what Roy Wood Jr said on the Trapital Podcast after his Comedy Central deal. If companies do right by talent and have their back, they will be less likely to jump ship. It’s especially true for Black talent since Hollywood is notorious for the BS. Remember the unnamed ABC exec who told Shonda Rhimes “Don’t you have enough?” If that never happened, Shondaland may never have left ABC for Netflix.

The overall deal wave. Issa’s deal is similar to the deal that Donald Glover signed with Amazon, Keke Palmer signed with eOne, and others. These deals have had a resurgence in Hollywood for a few reasons:

More shows: the number of original scripted TV shows has more than doubled in the past decade. The streaming era has led to a boom in shows. Netflix, HBO Max, Disney+, and others want to lock up good talent—actors, writers, showrunners—to increase the likelihood of releasing shows that attract and retain subscribers.

shorter seasons: These streaming services are in the business of subscriber growth. Each additional season of a series—even a hit series—has diminishing returns on growth. This reduces the job security for everyone involved. Overall deals offer security for both streaming services and talent. Shows will come and go, but the talent stays.

Why Overall Deals are Hollywood’s 360 deals

It’s hard to say whether this trend is good or bad. It all depends on leverage.

Variety reported that Issa Rae’s deal is worth $40 million, which Issa said is cap. Her deal likely includes a percentage of future profit from the movies she creates and stars in, and potentially an ownership stake in content produced since Issa has previously commented on the fact that she didn’t own any of Insecure, HBO owned it.

But for most stars, these overall deals will likely be an upfront lump-sum payment in exchange for any potential backend payouts or ownership.

It’s Hollywood’s version of the music industry’s 360 deals, where music companies get a cut of revenue from all of the artist’s entertainment-related business and merchandise.

Sure, 360s can be great if the deal is like Jay Z’s 2008 Live Nation deal—a landmark win-win $150 million deal for both parties. But most talent don’t have that kind of clout.

Future backlash. There are a few insiders who predict backlash for these overall deals. Here’s what talent attorney P.J. Shapiro told The Hollywood Reporter in a 2019 interview:

“The downside, of course, is if you create Friends and sell it to Netflix and never have the opportunity to sell it into syndication. Those few precious home runs have been replaced with a bevy of singles, doubles and triples.”

Shows like Friends, The Office, and Seinfeld are like unicorn exits for a venture capital firm. But those shows are products of a past era. The streaming service business model is so powerful that the likelihood of ten-season broadcast network phenomenons is rare. Even Game of Thrones, an eight-season series, is a product of the past era.

If most shows won’t last four seasons, actors won’t reach the point where the Friends actors salary can jump from $22,000 per episode in the first season to $1 million per episode in the last season. That’s how the streaming services maintain leverage.

Read more about overall deals in The Hollywood Reporter’s What If $100M Netflix Deals Actually Shortchange Creators?

Key finds from Music Report

From IFPI’s Global Music Report 2021

IFPI’s Global Music Report 2021 has gotten tons of coverage and headlines. The biggest headlines are that 2020 recorded music revenues hit $21.6 billion, a 7.4% increase from 2019. And 62% of the revenue came from streaming. No surprises there, but here are a few less discussed but interesting findings.

Vinyl’s continued rise. Sales grew 23.5% last year, up from 6.1% in 2019. Vinyl is pandemic proof, and it’s not going anywhere for a while. Smart artists have leaned in. Tobe Nwigwe gave his vinyl collector’s set top-shelf treatment in his merch store.

Vinyl are collectibles. It’s a callback to a time when fans valued owning art. It’s not too different from the physical trading card boom that’s happening right now. The trading card rise is driven by the underlying financial opportunity, but vinyl isn’t too far off. More artists will drop limited quantities of their vinyls, and scarcity always drives up value.

Sync revenue will bounce back. Synchronization (the use of music in media like games, TV, film, ads, podcasts, etc.) declined 9.4%, but that dip came from pandemic-related production delays. Now that vaccinations are up and production is back on, this will bounce back.

Plus, all of the recent music catalog sales mean that the new owners will go out of their way to maximize those assets. So get ready to hear even more Bob Dylan, Calvin Harris, and all the artists who have joined in on the music catalog shopping spree.

The BTS impact. South Korea’s music revenue grew 44.8% last year. It’s now the sixth-largest music market (behind the US, Japan, UK, Germany, and France). That’s impressive. It’s largely driven by K-Pop, which is largely driven by the world’s biggest musical act of 2020, BTS. The boy band gets credit for massive numbers, but it rarely gets mentioned as a driving force of the streaming era’s growth. BTS put a whole damn country on its back and shows no signs of slowing down.

Coming soon from Trapital

-Essay: Will and Jada Pinkett Smith – It’s coming! Finalizing a few things. Trust me, you’ll love this one.

-Podcast: Brian “Z” Zisook, EIC from DJBooth and VP at Audiomack.

Drake’s Longevity and Why His Run Continues

Hey! This week’s memo is a bit longer so let’s get right to it.

We have a guest post from Polina Marinova Pompliano (The Profile) on music exec Troy Carter, a breakdown on Drake’s longevity, and why Death Row Records is potentially switching hands…again!

5 Lessons from Troy Carter’s Relentless Determination

Hi everyone!

I’m Polina, and I’m the founder and author of The Profile, a media company that profiles the most successful people and companies in the world.

Every Wednesday, I publish The Profile Dossier, a weekly deep-dive on a prominent individual that takes you on a journey from their greatest triumphs to their most gut-wrenching failures. Each Dossier documents the lessons they’ve learned along the way, and how you can implement them in your own life.

One person whose path to success has been neither linear nor straightforward is talent manager, entrepreneur, and investor Troy Carter.

Troy Carter grew up in West Philadelphia with a single mom. His father went to prison for murder when Carter was just 7 years old. Carter dropped out of high school to pursue a failed rap career, and he ended up as a local concert promoter for then-upstarts like Notorious B.I.G.

Through sheer persistence and grit, Carter landed an internship at Bad Boy Records, and later went to work with Will Smith’s business partner James Lassiter in Los Angeles. He was fired and sent back to Philadelphia, where he discovered a 19-year-old female rapper named Eve who was in need of a manager.

He helped Eve become a commercial success, but he made some mistakes along the way. Eventually, Eve fired him in 2007. The loss put him close to bankruptcy. His house was foreclosed upon, cars were repossessed, and he barely had enough cash for gas.

And then he met Stefani Germanotta.

She was wearing fishnet stockings and big sunglasses, but she had even bigger ambitions. After performing several songs, she cut to the chase, telling Carter: “I want to be the biggest star in the world.”

Germanotta had been recently dropped by Def Jam Records only four months after she signed with the label. But Carter recognized something in her no one else did — pure talent. He took her to Spaghetti Warehouse where they spent three hours talking about life, career, and music. She became his newest client.

It took Carter a full year to help get Germanotta’s song played on the radio. That song was, “Just Dance.” And just like that, Stefani Germanotta transformed into Lady Gaga.

Carter became known for spotting talent early — and not just in the music industry. As a serial entrepreneur and investor, Carter has invested in some of Silicon Valley’s hottest startups, including Uber, Lyft, Dropbox, Warby Parker, Spotify, Gimlet, and Slack.

Here’s what we can learn from Silicon Valley’s favorite talent manager:

1. Find your first 50 fans

Beyonce’s Beyhive. Taylor Swift’s Swifties. Lady Gaga’s Little Monsters.

These are all devoted cult-like fan communities. Carter and Lady Gaga were pioneers in that they developed a philosophy called “The First 50,” which referred to finding the first 50 most loyal fans.

Gaga first became popular in New York’s LGBTQ community, so she played four to five clubs a night to make sure that they felt connected to her on a personal level. The ties became stronger, and ultimately, her “superfan” base snowballed into hundreds of millions of fans around the world.

Even before she exploded in popularity, Gaga engaged with fans on social media, met them at her performances, and took their feedback. “For us, it’s about, ‘How do we build an authentic audience and grow it very, very organically?’ It’s slow bake versus the microwave,’” Carter says.

2. Create inflection points

The biggest myth about Lady Gaga’s career is that it was an overnight success.

Carter and Gaga spent a year convincing Canadian radio stations to play her song, “Just Dance” before he was able to convince a station in Buffalo, N.Y. to put it on air.

There was no single thing that put her on the map — it was just many small wins that led to her seemingly big breakthrough. “It was a series of inflection points,” he says. “It wasn’t one explosive thing that just happened. It was us planting seeds in every place.”

In the early days, momentum is critical.

3. Form a personal board of directors

You’re never too old or too successful to have a mentor. Carter has mentors across music, tech, and business. “My mentor will never ever tell me what I want to hear, even when I need it,” he says. “You know how sometimes you just need a bear hug? He won’t give me a bear hug. That’s why I could trust his advice because there’s no skin in the game.”

The key is finding people who aren’t intimately invested in your journey and can give rational, level-headed advice. “It’s always important to have a personal board of directors,” Carter says.

4. Remember that there is no shortcut to success

When Carter met Lady Gaga, he knew she would be successful because he saw her work ethic. He had seen that same work ethic in some of his favorite artists. Their capacity for work was unmatched.

Many people never even get close to their goals because they live in the theoretical — not the practical.

“If your job is to sweep floors, the only way those floors are going to get swept is if you put the broom on the ground. If your job is to code, you need fingers on the keys,” Carter says. “So whatever it is you do, you actually have to do the work. You can’t just talk about it. You can’t be philosophical about it. You have to get the physical work in.”

5. Use failure to propel yourself forward

Carter grew up in poverty with his mom often struggling to pay the electricity bill. But his grandmother always said: “You can’t fall off the floor.” When you start from nothing, there’s nowhere to go but up.

One of Carter’s mentors told him that you can use failure as a headwind or a tailwind. “Failure breeds fear, and fear paralyzes people, which makes you go into a downward spiral,” Carter says. “But how can you use that same exact energy to propel your forward?”

Even when you feel like you’re in a losing fight with life, Carter says, you’ve got to find the strength to throw that one last punch. Because that final punch may be your winning ticket.

When James Lassiter fired him, he found Eve. When Eve fired him, he found Gaga. When Gaga fired him, he found his love for tech investing. Remember, you can always bounce back.

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This guest post was written by Polina Marinova Pompliano from The Profile, a weekly newsletter that studies the world’s most successful people and companies. Sign up here to get it in your inbox this Sunday:

Drake’s Longevity and Why His Run Continues

Last week, Drake’s three-track release Scary Hours 2 EP held down the top three spots of the Billboard Hot 100. The Drake era is far from over.

It’s year 13 of Drake’s run. People have waited on Aubrey Graham to fall off. The Breakfast Club’s Charlamagne The God has an ongoing bit on Drake’s “decline.” Some of his takes have merit. For instance, when’s the last time anyone checked for Dark Lane Demo Tapes? But most of his takes sound like Fox Sports’ Skip Bayless reaching, reeeeeaching for ways to hate on LeBron James. The questions are always the same: Can Drake keep this up? Will he still be on top in five years?

In 2026 though, Drake has a better chance to dominate than most of the rappers out right now.

He took advantage of perfect timing. The 34-year-old rapper rose up at the perfect time: the height of the blog era, the start of streaming, and the tail end of monoculture in music.

Blog era: So Far Gone is one of the blog era’s most successful mixtapes. Drake gained a passionate base of influential rap fans who were early adopters. The OVO Sound blog also introduced millions to The Weeknd. It solidified Drake’s importance with millennial tastemakers, many of whom have even more influence in today’s culture.

Streaming: Drake had a strong presence on SoundCloud when the “SoundCloud rapper” era was at its peak. If You’re Reading This It’s Too Late, What a Time to Be Alive, and Views were all big factors in Apple Music’s early growth. And Scorpion got so much promotion on digital streaming providers that subscribers complained and got refunds. Drake and the DSPs have that Procter & Gamble – Walmart level dependency that is hard to come by.

Monoculture: Drake, much like Taylor Swift, rose to fame at the tail end of monoculture. Before social networks, media, and technology became what they are today. He was a household name before the landscape became more fragmented. It’s much harder for today’s rising stars today to reach the levels of fame that Drake has.

Adapt and attach. Drake hops on the latest trends and attaches himself to the hottest artist out. He toured with Future in 2016 when “March Madness” was still played everywhere. He toured with Migos when the group was at its peak popularity. He jumped on Travis Scott’s biggest song”Sicko Mode,” and now he has several songs with Lil’ Baby. The rising artists love to collab with Drake because they believe he gives them a stimulus package.

But how did that stimmy work out for BlocBoy JB? Or Majid Jordan? PartyNextDoor? When the “Hotling Bling” artist collabs with most other artists, Drake’s not stimulating their economies. It’s the other way around. Drake is the economy.

Drake’s seventh studio album, Certified Lover Boy, will drop later this year. It will be the biggest release of the year, by far. He can outsell any artist not named Taylor Swift, and it might stay that way for a while.

Death Row Records Getting Sold… Again?

Death Row will celebrate its 30th anniversary on 4/20 (via Tapehead City/Death Row Records)

Since Death Row Records filed for bankruptcy in 2006, the famed record label and its catalog have had quite the journey:

2008 – bought in auction for $24M by Global Music Group, but the deal fell through

2009 – bought in auction for $18M by WIDEawake Entertainment

2012 – WIDEawake’s parent co goes bankrupt. Needs to sell

2013 – bought by eOne for $280M

2019 – Hasbro buys eOne

2021 – Hasbro plans to sell eOne Music

Death Row Records is out here getting traded like Trevor Ariza. Maybe if Suge Knight was all in the video… dancing, then Death Row wouldn’t be in this position!

The bigger news though is the potential sale of eOne Music—one of the largest independent record labels and music companies whose catalog includes The Lumineers, Game, Chuck Berry, Ghostface Killa, Lil’ Kim, and many more.

eOne’s parent company, Hasbro, likely sees this as an opportunity to cash in on the music catalog shopping spree. Since the pandemic, tons of music catalogs have been sold because of low-interest rates, better consumption data in the streaming, the attractiveness of non-correlated assets, absence of touring.

In 2019, Hasbro, the toy company that brought us Mr. Potato Head, bought all of eOne—including its film, TV, music, and more, for $3.8 billion. It’s unclear how much eOne Music specifically was valued at the time of the sale, but it was likely much less than the $600 million that Hasbro now asks for.

A bidding war? Executives at both Hasbro and eOne are likely entertaining offers from various suitors who would love these catalogs. Investment funds like Hipgnosis and Vine Alternative Investments have bought these catalogs up. Meanwhile, traditional rights holders like Universal Music Publishing Group are trying to block the investment funds and buy the catalogs as well.

2021 has continued the frantic pace of catalog sales that we saw in 2020. This deal won’t be the last one we see.

Read more about Hasbro’s potential sale on eOne Music in Billboard.

podcast rewind: Ibrahim “Ib” Hamad (2020)

Last week I ran the April 2020 podcast episode with Dreamville President, Ib Hamad. Ib and I talked about how he and J. Cole built Dreamville, the impact of the Dollar & a Dream Tour, planning a music festival in a pandemic, and separating the Dreamville brand from Cole himself.

Tap in on Apple Podcasts, Spotify, or anywhere else you get podcasts.

Coming soon from Trapital

  • Podcast with Dame Ritter. The Music Entrepreneur Club and Funk Volume record label founder came back on the pod to discuss four myths about the current music industry, his experience managing musicians vs comedians, and more.
  • Essay on Will and Jada Pinkett Smith. Next week! Get ready.

Told you today’s memo was longer. But it was still shorter than the Snyder Cut so I’m good.

Why Triller and Verzuz Teamed Up

Last week, the short-form video streaming platform acquired the music livestream series for an undisclosed amount. Founders Swizz Beatz, Timbaland, and all 43 Verzuz participants are now shareholders in Triller.

First, a shoutout. Before we break down the deal, let’s give Swizz and Timbaland their roses. Twelve months ago, Verzuz did not exist. When stay-at-home orders were in full effect, the hip-hop superproducers kicked it off, got their friends to follow up, and it grew from there. When we look back at the businesses born out of the pandemic, don’t forget Verzuz!

The best part of the deal is that all 43 Verzuz participants got equity in Triller. We are used to seeing Jay Z invest in startups, but did we ever think DMX would be on the cap table of a pre-IPO startup? The Yonkers rapper has been through hell and back. It’s great to see him have the same opportunity as the rappers who were once his peers. Swizz Beatz has talked about financially supporting hip-hop’s founders who never got the money that today’s artists now get. He wouldn’t have done this Triller deal unless all the Verzuz participants had a seat at the table, and that’s admirable.

The fight for attention. It’s clear why both companies wanted this deal.

Triller competes for attention, like most consumer tech platforms. It gets attention by featuring content that’s more engaging than other options. The last time it did that was November’s boxing match with Mike Tyson vs Roy Jones Jr, the infamous undercard fight between Nate Robinson and Jake Paul, and Snoop Dogg’s hilarious commentary.

That “versus” format has worked well. The audience overlap was strong between those Triller fights and the Verzuz matchups. If Triller can bring that audience in more often, it has the potential to dominate Twitter with each event and gain all the earned media that comes with it. That’s a win.

For Verzuz, this is an opportunity to bring the whole team along for the ride. Once the sponsorship money came and Apple Music’s partnership expanded its reach, Verzuz grew and its acquisition offers grew too. It entertained many deals, but Swizz told Billboard that Triller was the only company willing to bring everyone on board. The Verzuz participants have joined a group of shareholders that’s already deep with hip-hop artists.

Sure, Verzuz could have held out longer. But would it have had another timely opportunity to get everyone paid with a unicorn like Triller, and while Verzuz is still hot? There’s no guarantee. Timing is everything, and this was an opportunity to sell high.

Will Triller Verzuz succeed?

Both Triller and Verzuz have some challenges. Triller trails TikTok in active users, but Triller has been accused of inflating its numbers. Triller is also in an ongoing licensing dispute with Universal Music Group. In a recent statement, the company said “Triller has no use for a licensing deal with UMG.” Listen, I get the urge to push back on the major labels and their power. But Triller’s not some unsigned artist on their own tip. It’s a tech company that reminds the industry of an ongoing pattern of music tech startups asking for forgiveness, not permission, when streaming music.

Triller’s best-case scenario is to be “Lyft,” a formidable competitor to TikTok’s “Uber,” but even that’s a big task.

Verzuz peak? Meanwhile, Verzuz is in a precarious spot for two reasons. First, Verzuz demand will likely drop when we reach herd immunity from COVID-19 and outside is fully opened. Verzuz viewership will take a hit, especially in the first 12 months when its audience is out and making up for the quarantine. Triller better strike a deal with the nightclubs in Tulum to stream these matchups!

Second, even though Verzuz has a “brand,” viewership is matchup dependent. Gucci Mane vs Jeezy had 6x the concurrent viewers of E-40 vs Too Short. The Verzuz NFL Pro Bowl skills matchups came and went with no buzz.

How many top-caliber matchups are left? The worst-case scenario is that Verzuz becomes hip-hop and R&B’s NBA dunk contest. Fans would love the superstars to participate, but they won’t because they have little to gain. And the remaining talent can only draw in audiences on rare occasions.

How to fix it. First, Triller and UMG should hug it out and settle this dispute. A long-term global licensing deal with major record labels and publishing companies would make Triller’s future in music a lot easier.

Second, Triller should brand itself as the platform owned by creatives. It has all the 43 Verzuz participants, plus The Weeknd, Kendrick Lamar, Lil’ Wayne, T.I, Young Thug, Snoop, and Tyga. There’s been so much discussion lately about how Black users and entertainers are growth engines for so many platforms, but rarely get any upside. From Twitter, Clubhouse, TikTok, the list goes on.

Triller should lean into these ownership debates and remind folks that it’s the only platform with 50+ Black artists on its cap table. If Triller can get The Weeknd and Kendrick Lamar to do exclusive livestreams or incorporate Triller in their future projects, that would be huge.

Third, Triller Verzuz should try to own the space for all nostalgic matchups in entertainment. For instance, last May’s golf matchup with Tiger Woods, Peyton Manning, Phil Mickelson, and Tom Brady was the most-watched golf telecast in cable history. Phil Mickelson is as off-brand as it gets for Verzuz, but there are other options.

Instead of these low-rating NFL Pro Bowl matchups, what about a skills competition between Randy Moss and Terrell Owens? Or a 1-on-1 basketball tournament with all the rappers who post their basketball highlights on Instagram and swear they could get a 10-day NBA contract: Quavo vs J. Cole. The Game vs Chris Brown. Or maybe they move into music video directors and do a matchup with legends like Hype Williams and Dave Meyers. The opportunities aren’t endless, but there are good ones out there.

Congrats again to Swizz Beatz and Timbaland for what they made happen in a year. It will be interesting to see where Triller Verzuz is a year from now.

new podcast: Micah Johnson

Micah is one of the leading artists who has seen success with his NFTs. Last month, he sold $2M worth of his NFT in just 28 hours. Pusha T is one of his many customers. The former MLB player talked about why he left baseball to pursue fine art, how his character Aku was born out of the question “can astronauts be Black?” and why we need more Black art collectors in the NFT space.

If you wanna level up on NFTs, this podcast was made just for you, trust me.

Tap in on Apple PodcastsSpotify, or watch on YouTube.

Coming soon from Trapital

– Collab with Polina Marinova Pompliano: in next week’s memo I am featuring a guest post from Polina who runs The Profile, a great publication that gives you lessons from the most successful people in business and entertainment. She has a great one coming for you on one of most successful people in the music industry. To get a sneak peak of her work, you should sign up for her newsletter here!

we do it for the artists

Hey! Thanks again for helping me celebrate Trapital’s third anniversary. It was a great week for growth, so thank you for spreading the word. If you know anyone else who would love to read Trapital, send them this link:

https://trapital.co/share

Today’s newsletter covers my latest interview with DJ MICK, SoundCloud’s new fan-powered royalties, Square-Tidal, and the quest to create “Shopify for music.”

new podcast: Mick Batyske (aka DJ MICK)

The multi-hyphenate entrepreneur Mick Batyske came on the pod to talk about how his successful DJing career —where he hosted parties for LeBron James and Jay Z—led to opportunities in marketing and investing. He’s now a brand consultant, startup advisor, and angel investor. His DJ gigs are his lead generation for other business opportunities and more with his newly launched The Xavier Co.

If you’re interested in how the mind of a DJ equates to the mind of a marketer, tap in on Apple Podcasts, Spotify, or wherever you get your podcasts.

The impact of SoundCloud fan-powered royalties

via SoundCloud

Last week, SoundCloud announced “fan-powered royalties,” where artists get paid based on each fan’s listening habits. It’s another step in an ongoing push for artist-friendly monetization options.

Pro rata vs user centric. Most digital streaming providers use the “pro rata” model, where payouts are pooled then distributed based on overall listenership. So whether you’re in the top 1% of Nicki Minaj listeners or have never heard her verse on Kanye West’s “Monster,” Nicki gets the same cut of your monthly payment. To keep it real, it’s the music industry’s version of the Electoral College.

Meanwhile, SoundCloud’s new program is music’s version of Medium’s Partner Program for writers. Medium members pay $5 to read unlimited articles per month. Each member’s money is distributed to the writers whose content they engaged with the most. But unlike Medium’s program, SoundCloud artists need a paid SoundCloud membership to benefit, or use SoundCloud as their music distributor. That’s roughly 20% of the indie artists who monetize directly on SoundCloud. Also, SoundCloud retains around a 25% cut of revenue from fan-powered royalties, which falls in line with the 30% that most digital streaming providers take in the pro rata model.

All these caveats are reminders of why this topic has been debated for years! User-centric royalties are expensive to administer. It takes more back-end work than Medium paying writers based on reader engagement. SoundCloud’s rollout is like a beta test for proven customers that can be expanded if successful. It’s a real-life case to support the studies that back the impact of user-centric royalties.

Make it personal. SoundCloud’s best marketing will be its artists who benefit most from the service. The announcement highlighted an artist named Vincent who increased revenue by 5x. The more of those stories, the better. If artists can earn $1,200 per month on other DSPs but $6,000 per month on SoundCloud, that’s the difference between artists getting some side cash and getting paid full-time to pursue their dreams.

Read more about SoundCloud’s fan-powered royalties here.


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Subscribe here for the freshest takes on the business of culture.


Square, Tidal, and the “artist-centric” future

The deal is done. After ten weeks of rumors and hot takes, Square acquired a majority stake in Tidal for $297 million. Jay Z will join the board of Square.

The Yacht Boys in the building. And the winner is… Hov. There’s been much debate on whether Tidal is a W or an L. Tidal had its missteps, from its tone-deaf launch event, over-reliance on streaming exclusives, and inflated streaming numbers. It was never a true challenge for Spotify and the biggest DSPs. Yet it’s still an asset that Jay Z acquired for $56 million in 2015 and just sold at a valuation potentially 10x higher. Sure, it lost some of its value from 2017 when Jay Z sold 33% to Sprint. But most private equity firms would make that same deal if they could.

It’s another example of Jay Z finding underdog assets and helping them level up. Jay Z still has a voice in Tidal’s future with his new board seat at Square. And many of the original artist investors each had a 3% stake in Tidal.

Jay Z recently sold 50% of Ace of Spades, which likely helped him buy back Tidal’s shares from Sprint to close the Square deal. And he’s about to have another investment cash out when Oatly goes public. It’s been quite the start to 2021 for the 51-year-old businessman.

The case for Square. I’ve written previously about why Square wants to buy Tidal. Tidal’s far from profitable, but most streaming services aren’t. This is an opportunity to do three things: double down on Cash App’s rapid growth, use content to acquire customers, and leverage Square’s resources to enable commerce for sellers.

Cash App. The mobile services platform has grown for two reasons, hip-hop and Bitcoin. Hip-hop artists have used their influence to attract their fans to Cash App through free giveaways, and Cash App made it easier to purchase Bitcoin, which Square just bought $170 million of itself. So when Meg Thee Stallion tells her followers to buy Bitcoin on Cash App, that flywheel is moving on all cylinders.

– Customer acquisition. There’s also a great opportunity to use Tidal’s content to acquire customers. Tidal’s platform hosts movies, livestreams, interviews, and more. Audio or video content can be lead generation for more Cash App and Square customers, and Bitcoin investors.

– Commerce tools for artists. And with Square’s seller resources, artists can have a home to sell merch and music, similar to what Bandcamp and other platforms offer. This is what Square CEO Jack Dorsey alluded to in his tweets to announce the acquisition.

Read more about Square – Tidal in the Wall Street Journal.

The quest to create “the Shopify for music”

Lately, every digital streaming provider is positioning itself as more artist-first. Whether it’s Spotify in its Stream On event, or now SoundCloud and Tidal.

Recently, Nathan Hubbard (Rival CEO and former Ticketmaster CEO) posed the idea of Tidal shifting to a Shopify-type model for musicians. For merchants, Shopify offers the back-end infrastructure that allows a company’s brand to shine. It’s a stark difference from Amazon, where “brand” is diminished and more emphasis is placed on product.

Today’s music streaming landscape is dominated by Amazons. Artists don’t have “brands” on most digital streaming platforms (unless we count when Drake dropped Scorpion. He took over Spotify like a startup that just closed a funding round and dropped half its budget on Instagram ads). Some indie distributors position themselves as “Shopifys,” but they are alternatives to record labels—not streaming services. Most of them still rely on Spotify and Apple Music to distribute their artist’s music.

Patreon and Bandcamp are the closest things to that Shopify model, but those are more marketplaces for creators to sell content and merchandise. They aren’t services that pay artists royalties for music streaming. SoundCloud is a step in that direction. But again, SoundCloud’s new program is more like Medium where customers pay the platform, and less like Patreon or Substack where customers pay artists and the platform gets a cut.

Outside the major label system. The challenge with “Shopify for music” is that the major record labels own most of the mainstream content, and most of today’s mainstream artists are vested in that system. But the Shopify model has legs if it’s independent of the major label system. New artists could choose whether to use the new service as their infrastructure for fans to pay them directly to stream their music. The platform could take either a cut of revenue or charge a monthly service fee.

It’s a newer concept, but it’s not impossible. It can also succeed without threatening artists who rely on Spotify and Apple Music. Sure, they may have worldwide distribution, but so does Amazon for retail businesses. Both options can coexist.

Coming soon from Trapital

Podcast interview with Micah Johnson, the artist who recently sold $1 million of his NFT in 1 minute! We talked about why he left his career as a MLB player to create art, his thoughts on NFTs, and where he sees this space in five years. Drops later this week!

Essay on Will and Jada Pinkett Smith. Drops soon! Get ready for this one.


Corrections 3/15:

-An earlier version of this memo said that SoundCloud took a 45% cut. SoundCloud does not keep 45% of the revenue cut from fan-powered royalties. It pays mechanical royalties and performance publishing royalties, which vary by country, as well as cost to payment providers, and other costs. According to VICE, SoundCloud retains around 25%.

– The artists who currently have paid Soundcloud memberships or use SoundCloud as their music distributor do not make up 20% of the musician base on SoundCloud. Instead, it’s the payout share made to indie artists monetizing directly on SoundCloud.

memo 30: don’t call it a comeback

Hey! It’s March 1, which means it’s Trapital’s third birthday!

Three years ago today, I published this essay Timberland Showed Up Late to the Cookout and sent it to around 125 people. This started as an ambitious side project. It has now become a platform to elevate the business of hip-hop. Trapital is for the people like you who make the culture what it is.

This is the 316th piece of content I’ve published, which includes Trapital memos, essays, podcasts, and updates. Wild right? It takes consistency, but it also takes dedicated readers and listeners who make it even better. Thank you for being part of this dope journey. Can’t wait for what’s ahead.

Can you help me celebrate? Ask your colleagues to sign up for the Trapital newsletter! You can copy and paste the link below to share:

https://trapital.co/share

Today’s memo covers Nas’ tech investments, Motown Records’ success, and why movie soundtracks are coming back.

Nas’ tech investment game

Nas got that’s that Bevel cut right there, shoutout Walker & Co!

The legendary MC invested early in Coinbase, the cryptocurrency exchange that’s now valued over $100 billion and is about to go public. This investment is another big-time exit for the 47-year-old investor.

Set for life. Nas’ QueensBridge Venture Partners got in Coinbase’s 2013 Series B funding round when the company was valued at $143 million. Let’s assume Nas invested $500,000 in the $25 million round. Even if his investment has been diluted 50%, it would be worth $175 million today.

Nas’ other notable investments include Casper, Dropbox, Genius, Lyft, Pillpack, Pluto, and Ring. In the last decade, he tops the list of celebrity investors who have participated in the most funding rounds with 188. He’s a volume shooter with a high-efficiency rating. He’s James Harden (in the regular season).

Shoutout to Nas’ friend and venture capitalist Ben Horowitz, his business manager Anthony Saleh, and the rest of the squad that’s been with him on this journey.

Hip-hop’s best investor? Listen. It’s tempting to compare Nas and Jay Z’s investment success. I get it. We’ve compared their every move since their feud 20 years ago. And it’s hip-hop, we love a good debate. As Saleh said, it would be tough to see Nas in a tech investment Verzuz.

But this ain’t “Ether” vs “Takeover.” It’s apples and oranges. Nas invests early stage. Most of the QueensBridge checks range from $100,000 – $500,000. Meanwhile, Jay Z moves a private equity investor who occasionally dabbles in startups. Hov held Ace of Spades for almost 15 years and just sold 50% of it to LVMH for nine figures. In 2017 he sold 33% of Tidal for $200 million, just two years after buying 100% of the company for $56 million.

Read more about Nas’ investment strategy in Zack O’Malley Greenburg’s book A-List Angels, he has a whole chapter dedicated to Nas.

Motown Records track record of success

Ethiopia Habtemariam (center) at the 2019 ASCAP Rhythm and Soul Music Awards (via ASCAP)

Today it was announced that Ethiopia Habtemariam was promoted from President to CEO and Chairman of Motown Records. She will report directly to Universal Music Group Chairman and CEO Lucian Grainge.

A turnaround story. Her promotion is a great time to highlight the success Motown has had under her leadership. When she was promoted to President in 2014, the record label had recently split from the Island Def Jam Music Group hodgepodge. The label still had tons of history but lacked some modern relevancy at the birth of the streaming era. This turnaround happened due to many factors, including the smart use of derivative work and strategic partnerships.

Derivative opportunities. Motown: The Musical brought the iconic sound to Broadway and overseas to the UK. Motown Magic is a Netflix animated series that brought the hit songs to a younger generation. These derivative works were smart and timely extensions to bring the underlying work to life. And as the entertainment landscape evolves, the opportunities are endless. I won’t be surprised if Motown starts selling NFTs featuring Martha and the Vandellas!

Ideal partnerships. The Motown sound is no longer modern. But instead of just relying on today’s soul artists, Motown strengthened its ties in hip-hop through its joint venture with Quality Control Music. The deal allows QC’s artists to benefit from the global distribution offered by Motown, Capitol Records, and Universal. It also allowed Motown to benefit from QC’s successful run which includes Migos, Lil’ Yachty, City Girls, and more.

The legacy label blueprint. Habtemariam’s era leading Motown can inform other legacy labels that are stuck between the past and the future. Look at Def Jam. When I broke down Def Jam’s strategy with music journalist Gary Suarez, we said that the label needs to decide whether it wants to preserve its New York hip-hop roots or book the most bankable acts possible.

The solution that worked for Motown can work for Def Jam. Motown’s heyday may seem more dated than Def Jam’s prime but think about it this way. In 2021 we’re farther away from LL Cool J’s “Doin It” than “Doin It” is from Marvin Gaye’s “What’s Going On.” In other words, it’s been a long time!

Read more about Habtemariam’s promotion in UMG’s press release.


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The movie soundtrack comeback

In the past few years, more artists have curated movie soundtracks. They have revived a medium that’s been lagging since the height of the CD era.

In March 2018, Black Panther: The Album and The Greatest Showman held the top two spots on the Billboard 200. It’s the first time that two film soundtracks topped the charts since 1998. It was a signal of a moment that’s led to chart-topping soundtracks like A Star is Born, Creed II, Frozen II, Queen & Slim, Judas and the Black Messiah, and plenty more. The soundtrack is back, y’all!

It’s a fascinating trend. Here’s why it’s happening now:

– The rise of music biopics. Each year, Hollywood becomes more risk-averse and more reliant on IP. Music biopics like Straight Outta Compton, Bohemian Rhapsody, and Rocketman have exceeded expectations because audiences are familiar with the material. People enjoy hearing their favorite songs over and over. Music biopic soundtracks are collections of known hits and a few new ones.

– Streaming. As I mentioned in my memo on the rise of publishing catalog sales, the streaming era has made it easier to predict proven successes. But it’s also made it easier to consume music. Soundtracks are no longer the “risk” that they were in the mid-2000s when CD sales tanked. Music supervisors would love to own a share of a bankable track like Pharrell’s “Happy” (from the Despicable Me 2 soundtrack), especially when it’s easier than ever to play it.

– Black culture. The lines between Hollywood and music are more aligned than ever, especially in Black entertainment. It brings me back to the days of the hit movie Waiting to Exhale. Whitney Houston was on her game with that and The Bodyguard soundtracks in the 90s. Now, Kendrick Lamar has curated Black Panther: The Album and Beyonce curated The Lion King: The Gift. As I’ve written before, Issa Rae’s business model creates synergies across her businesses in the same way. Her record label Raedio has signed artists who will create music to be featured in her upcoming HBO show and video games. It’s all in the same game.

Random fact! when Jay Z’s Reasonable Doubt dropped in June 1996, it was outsold by The Nutty Professor soundtrack, which had come out three weeks earlier. The Nutty Professor helped boost sales for Reasonable Doubt since one of Jay Z’s singles was on both albums. In other words, The Nutty Professor soundtrack was like a Drake stimulus package for Roc-a-Fella Records!

Coming soon from Trapital

Podcast – interview with Mick Batyske, DJ, marketer, investor, and podcaster. We talked about how the mind of a DJ is similar to the mind of a marketer, investor, and how his deal flow for investments, and more. Drops later this week!

memo 29: NFTs potential in hip-hop

Hey! After I started writing this week’s memo, I saw that Jay Z sold 50% of Armand de Brignac (Ace of Spades champagne) to LVMH! Good for him. In 2014, Jay Z’s original 50% stake was worth around $50 million before he acquired 100% of the company. In 2019, Forbes reported that the company was worth $310 million, far less than the $500 million Jay Z said it was worth on 2018’s “What’s Free.” Either way, not a bad exit! One of the reasons Jay Z bought the company was to boycott Cristal after a chief exec made racist remarks in 2006. Check out Web Smith’s analysis on the Jay Z-LVMH deal at 2PM.

This week’s Trapital memo covers my podcast interview with Ted Lucas, NFTs potential in hip-hop, Donald Glover’s 8-figure Amazon deal, and Spotify’s Stream On event and the company’s upcoming changes.

new podcast: Ted Lucas, Slip-N-Slide Records

Ted and I talked about him starting his independent record label in 1994 and how much has changed since then. He went onto sign Trick Daddy, Trina, Rick Ross, Plies, and more. We also talked about Miami’s legacy in hip-hop and why South Florida still doesn’t get the credit it deserves. We also talked about  R&B’s comeback, and the wave of tech folks moving to Miami. Had a lot of fun in this one. Ted had me cracking up! Too funny. Such a great convo.

Listen on Apple Music, Spotify, or watch on YouTube.

NFTs potential in hip-hop

The late MF DOOM was just gettin started in NFTs with his Blockchain auction. (via PR Newswire)

Non-fungible tokens (NFTs) have come a long way since CryptoKitties first debuted in 2017. These digital assets have been valuable for NBA collectibles and have big potential in hip-hop too.

What is an NFT? An NFT is a digital asset that relies on blockchain technology. “Non-fungible” means the asset is unique and not interchangeable. In the physical world, this includes assets like artwork and real estate. But in the digital world, this can include digital versions of collectibles, like Logan Paul selling unique Pokemon cards, or NBA star Ja Morant’s digital highlight sold on Top Shot. Blockchain technology makes it easier to verify authenticity.

If you’re less familiar with NFTs, you might think this is dumb. Technically, you can watch Ja Morant highlights for free on @houseofhighlights. But to be fair, you can also make Vincent van Gogh’s Starry Night your computer background free of charge. And you print a copy of Starry Night, frame it, and put it up in your home. But that won’t stop people from visiting the MoMa to see the original!

Potential in hip-hop. When I was young, I bought tons of NBA trading cards. My goal was to get the best rookie cards from the 1996 NBA Draft Class. I loved hip-hop too, but there was no hip-hop trading card culture. There were iconic magazine covers, but it wasn’t the same. I wish I had a trading card of OutKast winning Best New Artist at the 1995 Source Awards, or Suge Knight’s “come to Death Row” pitch. But now that hip-hop culture is everywhere, NFTs can offer that experience.

There’s already great momentum. The late MF DOOM had just held an auction for augmented reality NFTs for his signature masks. Soulja Boy recently minted his own NFT. Hip-Hop Legends NFT is also selling several collectibles on its marketplace. As Cherie Hu said in her January article in Water & Music (paywall) on NFTs, hip-hop is ahead of most genres.

But there’s still room for more. For instance, XXL Magazine could issue NFT “highlights” for its Freshman Class. Artists themselves can issue NFTs too. Someone like Travis Scott would do well here. He’s already helped set the tone for drop culture in e-commerce. Do you know who else would have loved NFTs? Nipsey Hussle. His $100 and $1,000 mixtapes were a step in this direction.

An investment in the artist. I often hear people ask “how can I invest in XYZ artist’s career?” NFTs aren’t investments in artists, but the value can track their rise like a Vanguard account. If a buyer thinks there’s an arbitrage opportunity with a particular artist, then the value may go up if the value is reached. Trading card culture offered this, but NFTs can improve on this in several ways.

For more on NFTs, read Jonathan Bales’ Lucky Maverick post on why he spent $35K on a Ja Morant highlight.


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Donald Glover’s plans with 8-figure Amazon deal

Donald Glover (via AP)

The 37-year-old star ended his deal with FX for an 8-figure deal with Amazon which will include a content channel, curated content on Prime Video, and other projects exec produced by Glover.

Multi-hyphenate meets multimedia company. It’s a big deal that includes his upcoming remake of Mr. & Mrs. Smith with Phoebe Waller-Bridge. It also includes future TV shows and production work. There was no mention of Amazon Music, but I could see the streaming service teaming up with Childish Gambino on something. At this point, Glover could become a part-time product manager for Amazon Web Services and I wouldn’t be surprised. Dude does it all.

As artists become more multi-hyphenate, multimedia partners like Amazon can become stronger contenders, especially in hip-hop. In my 2019 essay How Rappers Can Get More Mileage Out of Their Music, I broke down how Glover extended “This is America” into a concert tour, stadium run, and even used the dance moves in Guava Island—an Amazon exclusive film. These multimedia content deals might become the new 360 deals, for better or worse.

An odd run. Donald Glover’s business and artistic decisions have always been a bit of a mystery. Last year’s 3.15.20 album, released by “Donald Glover” not Childish Gambino, had one of the weirder rollouts in recent memory. It appeared, then disappeared, then reappeared? The song titles were all numbers. The moment came and went, unlike his previous musical albums that were both commercially and critically acclaimed.

Atlanta, which seemed destined for TV greatness, has had just two seasons in five years. And his Adidas partnership ended a year after it started.

Glover always marched to the beat of his own drum, which has served him well. He has switched it up and changed focus in each stage of his music and entertainment career. By definition, he’s the opposite of a serialized content creator who offers a steady and predictable work. But that means his output will be unpredictable! Let’s see how it all works out for him and Amazon.

Read more about Glover’s deal from The Hollywood Reporter exclusive.

Highlights from Spotify’s Stream On event

Meghan Markle and Prince Harry made a surprise appearance following their pregnancy news for Spotify’s Stream On event. Picture: Spotify

Prince Harry and Meghan talk about Archwell Studios, their production company for exclusive Spotify podcasts. (via Spotify)

Today at 11am ET, Spotify hosted Stream On, a live event which felt like part-documentary, part-Apple keynote, and part-Justin Bieber concert. The streaming titan announced its growth in new markets, more monetization tools, and more content.

Announcements included:

  • Spotify enters 80+ new markets, including Nigeria HiFi sound, like what Tidal and Amazon offer.
  • Spotify Audience Network is a new marketplace where advertisers can more easily reach listeners on both Originals and Exclusives.
  • Open Discovery Mode to more record labels. Discovery mode allows labels to prioritize tracks in Spotify’s algorithm in exchange for payment. (Spotify’s version of Google’s sponsored ads in search).
  • Canvas is now available to all artists. Artists can create short looping visuals that appear when tracks are played.
  • RADAR, a program that offers emerging global artists editorial and marketing support, is expanding.

On the music side, Spotify’s improvements are two-sided. The better the experience is for artists, the easier it is to extract value from record labels and content owners via its pay-for-play Discovery Mode. Spotify’s commanding position in music streaming also helps this.

But Spotify’s international expansion may have some challenges. In many African countries, music streaming has been a challenge due to limited bandwidth and mobile data plans. Alternatives like Mdundo, an ad-supported music download service, have been popular options. Spotify has not explored this space, but it definitely could since mobile connectivity is still a challenge.

On the podcasting side, the marketplace could be huge if executed well. In January, The Verge reported that Spotify itself has been one of the primary sponsors for many Anchor podcasts. That dynamic has to change. A well-run marketplace can make that a reality.

Watch Spotify’s full Stream On event here.

Coming soon from Trapital

Podcast – interview with Mick Batyske, DJ, marketer, investor, and podcaster. We talked about how the mind of a DJ equates to the mind of a marketer and investor, and how it impacts his deal flow for investments and more. Drops next week!

memo 28: the Fenty identity

Hey! Happy President’s Day. I hope you approach this week with the same confidence as DaBaby telling the world he charges $300,000 for a verse. That’s high, but I ain’t mad at him! If you don’t believe in yourself, then who will?

This week’s memo covers the latest Trapital Podcast, Savage X Fenty’s growth and Fenty LVMH’s decline, The Weeknd’s customer acquisition strategy, and Jay Z and Jack Dorsey’s Bitcoin endowment fund in Africa and India.

New podcast: J. Erving, Human Re-Sources

Human Re-Sources founder J. Erving came on the podcast to talk about selling his indie distributor to Sony Music, where he’s now EVP of Creative Development, and an EVP at The Orchard, where Human Re-Sources now sits. We also talked about his experience managing artists like Jeremih, why record labels and indie distributors keep teaming up, how to evaluate and develop talent in today’s era.

Tap in. Listen on Apple Podcasts, Spotify, or watch on YouTube.

The Fenty identity—a tale of two companies

Savage X Fenty just raised a $115 million Series B round, raising its valuation to $1 billion. Meanwhile, LVMH has indefinitely suspended the Fenty house.

Put on hold. When Rihanna launched Fenty Beauty in 2017, her goal was to make the brand affordable and inclusive. Savage X Fenty followed that same beat, but Fenty’s LVMH fashion brand did not.

I’ll admit, I got this one wrong! When the LVMH deal was first announced in May 2019, I was all in. I thought it was another signal of the growing bond between hip-hop and high fashion, and the push for inclusivity in luxury. But I overlooked LVMH’s misalignment on affordability. Fenty was out here selling $870 hoodies! Shoes that cost more than red bottoms?? In a pandemic?!

No. These are not reaching the same customer.

In October 2020, LVMH CFO Jean-Jacques Guiony said that it’s “still a work in progress when it comes to really defining what the offer will be.” According to BoF, Rihanna had already expressed concerns that the high prices could alienate her base. Even if they go back to the drawing board, this will be a tough sell.

The billion-dollar lingerie brand. Savage X Fenty grew 200% in 2020. With the new funding, Savage X Fenty plans to expand its retail operation and may venture into athletic wear. Its parent company TechStyle Fashion Group also owns Fabletics, so there’s experience there. Rihanna’s lingerie brand is replacing Victoria’s Secret in the public conscience and shows no signs of slowing down.

Rihanna’s stake in Savage X Fenty is now worth $80 million according to Forbes. Like I said, that billionaire status might still be coming soon…

Read more in Why Rihanna Partnered with Amazon.

The Weeknd’s customer acquisition strategy

The Weeknd has already sold 1 million tickets for next year’s tour, which went back on sale the day after the Super Bowl. That’s at least $50-60 million in revenue.

This is why he spent $7 million of his own money on the halftime show. It was a 12-minute ad for the world to see. The better the show, the more tickets sold. It was a marketing expense.

Customer acquisition. Content is a means to acquire customers. It’s not too different from how Amazon uses Prime Video. For instance, Amazon spent $72 million on the first season of The Man in The High Castle, which attracted 1.15 million new subscribers. The average cost per subscriber was $63. That’s less than the $99 price for Prime’s annual membership and much less than the customer lifetime value for a Prime member.

Like Jeff Bezos said in 2016, “When we win a Golden Globe, it helps us sell more shoes.”

More on the way. The Weeknd also announced an upcoming 90-minute documentary on Showtime that will cover his halftime performance. He follows Lady Gaga, Travis Scott, and others who have released documentaries after their Super Bowl performances.

But Abel Tesfaye has never been the “let me bring you into my life” type of guy. He started his career as a mystery, and for the most part, he still is a mystery. It’s an impressive feat since he’s now performed on the biggest stage and dated celebrities. Will we learn more about him? We’ll see, but I assume his goal is to open the curtain enough to keep our interest, but still leave plenty unknown.

Showtime’s reach. Lately, Showtime has been a place for good content that can’t reach the masses. With just 27 million subscribers, it doesn’t have the reach of its rivals HBO, Disney+, Netflix, or Amazon Prime. Its documentaries like The Reagans or shows like Desus & Mero can get lost in the mix despite their acclaim.

Cobra Kai’s rising popularity on Netflix (and not YouTube) is a reminder of the impact of distribution. Many of those who want to watch The Weeknd’s doc will have to go out of their way for it.

Read more about The Weeknd in his pre-Super Bowl profile in Billboard.


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Jay Z and Jack Dorsey’s Bitcoin endowment fund for Africa and India

The Yacht Boys in the building tonight

Jay and Jack are back. If they keep doing business together, they need a nickname. If Roc-a-Fella had the Roc Boys, then Jay and Jack gotta be the Yacht Boys. Last week, Jack announced that they donated 500 BTC (currently worth $24 million) to ₿trust, an endowment fund to develop Bitcoin in Africa and India.

Africa and India. The two regions that Jay and Jack’s fund is focused on couldn’t be farther apart with regards to Bitcoin. Nigeria is the second-largest Bitcoin market (after the U.S.). The continent is known for its popularity in mobile payments. Meanwhile, India is trying to ban Bitcoin and is exploring a government-owned cryptocurrency. But the population growth and potential are hard to ignore.

What’s their angle? Dorsey’s been a Bitcoin bull for a while now. Square invested $50 million in Bitcoin, and Cash App’s most valuable customers are holding the cryptocurrency. It’s an opportunity to eventually expand his business. Jay Z hasn’t been too vocal about Bitcoin yet, but it’s only a matter of time. I’m just waiting for the Jay Z lyric that goes, “you wanna know what’s more important than throwing away money at a strip club? Bitcoin.”

But Jay Z has been vocal about development in Africa. In 2018, he helped raise $7 billion at the Global Citizen Festival in South Africa to support HIV / AIDs and improve cultural literacy. He’s also built water pumps for rural villages and donated to several causes through The Shawn Carter Foundation.

The future. Most Bitcoin purists believe that the decentralized currency can improve wealth inequality because it isn’t tied to inflation. But the Bitcoin learning curve is still quite high. It’s a barrier in its worldwide adoption, but this can improve over time.

The Yacht Boys are looking for board members to the endowment fund. You can apply here.

Coming soon from Trapital

Podcast – Ted Lucas, founder and CEO of Slip -N-Slide Records. Drops later this week!

memo 27: blinded by the lights

Hey! First things first, I gotta thank The Weeknd for giving us an instant meme from the Super Bowl halftime show. That performance was designed for social media. The casting call for The Weeknd lookalikes literally asked for volunteers “who can move, and follow basic instruction, like a TikTok dance!”

The show wasn’t cheap. The Weeknd put up $7 million on top of the $10 million that the NFL typically covers. But as many concert producers have said, artists have to invest in the moments that will look great on Instagram, and there’s no bigger stage than the Super Bowl. The added exposure (and memes!) should help The Weeknd sell his upcoming tour in 2022.

This week’s memo breaks down Triller’s dispute with Universal Music Group and Joe Budden’s partnership with Patreon. And if you haven’t already, make sure you check the latest podcast episode! I posted the webinar recording on The Best Hip-Hop Album Rollouts of All Time with Ernest Wilkins of Office Hours.

Read more about the dispute in .

Triller, Universal Music Group and the ongoing fight over licensing

Last week, Universal Music Group pulled its catalog from the short-form video network due to withheld payments and a refusal to negotiate moving forward. Triller has refuted UMG’s claims and told Variety “Triller does not need a deal with UMG to continue operating.” Damn. The two companies are out here jawing back and forth like Tom Brady and Tyrann Matthieu in the Super Bowl. But for better or worse, Triller is the Honey Badger in this situation.

A turn for the worst. Ironically, Triller was seen as the app with its licensing agreements in place. Artists get paid for full streams! Several hip-hop artists have invested in it. But there’s a natural tension between content owners and the social media platforms that rely on their content. No company is above it.

Songwriters need love too. According to L.A. Times, Triller had licensing agreements with Universal Music Group, but not Universal Music Publishing Group. If that’s true, then that means Triller paid the recording artists, but not the songwriters.

To double down on this, last summer, Music Business Worldwide reported that National Music Publishers Association CEO & President David Israelite called out Triller’s issues “The pattern of tech platforms asking for forgiveness instead of permission to use songwriter’s work must stop. Triller must legitimize its business by properly licensing all music on its platforms.” And two days ago, Israelite posted on Instagram that “Famous artists care about songwriters. Just because they use your company to promote their art doesn’t mean they will stand by you if you don’t respect all music creators.”

Triller’s not alone here. TikTok has been criticized by both major labels and publishers for similar. But today, TikTok just announced a new global licensing alliance with both UMG and UMPG. Gotta love the timing! But TikTok can flex its 800M+ monthly active users and its influence on UMG’s artists as a bargaining chip in negotiations. Meanwhile, Triller has 65M+ monthly active users. It has a fraction of the users and a fraction of the clout.

Triller’s opportunity

Triller positioned itself as a platform focused on music, hip-hop specifically, and had more tools for creators to make dope do-it-yourself videos. But the distinction between Triller and TikTok has blurred. TikTok’s hip-hop focus is now as strong as ever, and both apps have adopted each other’s features. How long until they both have a version of Snapchat Stories?

Top-down vs bottom-up. So far, Triller, like many creator-first apps, acquires users in quality, not quantity. It’s different than TikTok, which attracts the masses because it appeals to casual users, and therefore attract creators due to its audience size. Triller was top-down, while TikTok was bottom-up. Similarly, even though Twitch has better livestream tools than Instagram, it can’t match the reach of an IG Live session.

Runner-up status. The best-case scenario for Triller is to be the Lyft to TikTok’s Uber. Lyft has a quarter of the users of Uber, but it’s still big enough to be a formidable presence. Triller also needs its own viral moments or trends. The closest thing has been the boxing matches with Mike Tyson vs. Roy Jones, Jr and Jake Paul vs. Nate Robinson fights. Triller launched The Fight Club to keep Snoop Dogg’s legendary commentary going. It’s the most unique asset it has at the moment.

Read more about Triller in .


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Joe Budden, Patreon, and the quest for equity

via Patreon

Last week, Joe Budden brought his podcast network to Patreon and was named the company’s Head of Creator Equity.

Budden’s end goal. In August I wrote about his podcast ending its two-year exclusivity on Spotify. His success validated Spotify’s podcast strategy, but he never got the nine-figure checks that Joe Rogan, The Ringer, or Gimlet got. In a recent episode, Budden said that in year two, Spotify offered him $21 million and all his rights, but he turned it down.

Get in on the upside. Budden said he joined Patreon because he’s seen too many companies make bank off the creators who help build platforms, but the creators never got in on the upside. Patreon has always positioned itself as creator-friendly. It takes 12% of the revenue that content creators generate on the platform.

It sounds good and all, but there are two important questions:

  1. Do Patreon creators have equity in Patreon? I doubt it. But I assume that’s what Joe wants. Patreon is now valued at $1.2B and plans to go public this year. Is there enough time to make room on its cap table for the service’s top creators, especially those who gross $200,000 annually? Budden himself may have equity in Patreon as part of his new role and this move, but we’ll see about the rest.
  2. How will Patreon help The Joe Budden Network? Patreon’s value prop is helping creators get paid by their fans. But The Joe Budden Podcast never had this issue. His merch and live shows were always in high demand. I went to a live show in 2018 in San Francisco. Tickets sold out so quickly I had to bought mine off someone on Twitter! And this was before the Spotify deal. Demand was never the issue.

The Joe Budden Network is now home to two other podcasts—”Girl I Guess” and “See, The Thing Is…” It doesn’t need Patreon to build its audience and add future shows. But the freemium content and offerings can help monetize the loyalty.

Independence has been a career goal for Joe Budden. He’s now been through two lifecycles as a creator. From Def Jam to Shady Records to independent rapper, from Complex, to Spotify, to independent podcaster on Patreon. The ultimate test of this next move is whether Patreon’s top creators—especially the few who are responsible for a majority of the company’s revenue, will get paid when the company goes public.

Read more about Joe Budden + Patreon in the company’s

Coming soon

Podcast with J. Erving, founder of Human Re-Sources – drops later this week! I was originally going to run it last week but had to make a scheduling change. Coming soon!

memo 26: big bank take lil’ bank

Each week, the Trapital Memo is sent to thousands of readers who stay ahead of the latest trends in the business of hip-hop. Sign up here to join us:


Hey! Happy Black History Month to you and yours.

What a wild, wild week in the stock market though. I have no shares in GameStop or AMC, but I’ll say this: I bet 50 Cent had a come up in all of this. That dude always finesses something in moments like this, especially if Ja Rule is speaking out on it!

Before we dive into this week’s memo, make sure you check the latest Trapital pod episode. I posted the audio and video recording of Def Jam’s Past Present and Future with Gary Suarez. You can check it out on Apple Podcast, Spotify, watch the video on YouTube, or wherever else you listen to podcasts.

This week’s Trapital memo covers two topics: Sony Music’s acquisition of indie distributor AWAL, and Lil’ Baby’s rise.

Why major labels acquire indie music distributors

via AWAL

Today, Sony Music acquired Kobalt’s indie distributor AWAL and its rights business for $430 million. It continues a trend of major labels acquiring the companies built to disrupt them.

The indie evolution. This acquisition is ironic since AWAL literally stands for Artists Without A Label! It started as an alternative to distribute music without signing to major labels and giving up any masters. AWAL, like Human Re-Sources and The Orchard, brought their indie businesses under the Sony Music Group umbrella. But given the recent industry trends, this acquisition is not ironic at all. There are a few reasons this continues to happen:

  1. The barbell effect. This barbell effect has roots in media, but it applies to music too. One side of the barbell is for the major record labels. They have the power, money, and global distribution to maximize artist potential. The other side of the barbell is for the small and targeted players. Thanks to the internet, small players can run a low-cost operation, stay competitive, and continue as long as they’re profitable. But the companies in the middle of the barbell, like many indie music distributors, are likely to struggle.They want to offer artists the services of a major record label with the cost structure of a DIY distribution service like TuneCore. As a result, the indies often make a choice: Do we stay nimble and potentially hold our artists back? Or team up with the Big 3 to benefit from their global reach and marketing budgets?

    This topic is top of mind because I just interviewed J. Erving for the Trapital Podcast. His indie distributor Human Re-Sources was acquired by Sony in December, so we talked all about this. Look out for this episode later this week!

  2. Major record labels want to compete. Even though some indie distributors get caught between barbells, they’re still valuable. They take on the initial risk and benefit when the bet pays off. If record labels only sign artists after they built up clout on an indie or non-label service, there’s less upside.But when labels acquire distributors, the labels can tap into the artist development that many indie distributors have, and become the go-to spot if artists are ready to level up. No major label wants to miss out on that. This is why Republic Records—which currently has the top four albums on the Billboard 200!— is the first partner for DistroKid’s news matchmaking service to help indie artists get seen by the majors.

    It’s a version of this long-tail distribution map I drew in Why Roc Nation Needed to Restructure. It applies to most major record labels today. They all have their big-time artists and the labels that serve them, they also have joint ventures and other deals that serve rising artists, and the growing long-tail for indie distribution services:

  1. The long-tail business model. This trend is not unique to music. The internet made it possible for more long-tail businesses to succeed. They often start with the goal to serve individuals and highlight them as success stories. But very few of its users ever replicate those success stories. Over time, it gets expensive to serve clients that don’t drive enough money for the business. The Pareto principle kicks in—most of the revenue comes from a fraction of clients.For most long-tailed businesses, the most reliable money comes from the most established clients. But often, the most established clients either a) are companies that the long tail business initially set out to disrupt, or b) need resources that are only available at companies that the long-tail business set out to disrupt. It’s the safest bet to increase customer lifetime value, decrease customer acquisition cost, and meet investor expectations.

    We’ve seen this happen with YouTube, WeWork, digital media, and countless music distributors. I’ve referenced this point often lately in Trapital, but it’s worth repeating.

Read more about Sony Music’s acquisition in Billboard.


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Lil’ Baby’s rise to stardom

Lil Baby Shares Videos for Two New Songs: Watch | Pitchfork

Lil’ Baby via Christopher Parsons

The 26-year-old rapper is living life right now. He signs new artists to his 4PF label. He charges $100K for a feature, earns $400K per concert, and gets $300K birthday gifts from James Harden. He had one of the strongest 2020s.

Quality Control extends its run. It’s been four years since Migos dropped Culture, Donald Glover shouted the group out at the Golden Globes, “Bad And Boujee” was #1, and QC rose with the iconic group.

Four years later, the Migos have cooled off, while QC is still riding high with Lil’ Baby and the City Girls not too far behind. Some of its due to the work Coach K and Pee put in. Some of it’s luck. But that’s the formula for success. In the Def Jam webinar I co-hosted, I said that I thought QC was the strongest pure hip-hop label right now. QC has still had its challenges, but it comes with the territory.

Is Lil’ Baby a superstar? The term gets thrown around so loosely, but let’s talk about it. Last year, I tweeted about the boxes that an artist has to check to be a true superstar:

  • sell 250,000+ albums first-week
  • get top coverage on major outlets
  • headline an arena/stadium tour
  • headline major festival / event (e.g. Coachella, Bonnaroo)
  • be known by your parents (and others who don’t follow pop culture):
  • Lil Baby’s latest album My Turn sold 197,000 its first week, but if he dropped an album next Friday, I bet it would top 250K+. Still, it was technically the top-selling album of 2020 according to MRC, but MRC’s report favors artists who drop in the beginning of 2020 since it measures sales from the full calendar year. My Turn came out in February 2020, months before Taylor Swift, Pop Smoke, and others. It’s misleading to say “Lil’ Baby outsold Taylor Swift” as many sites have. But it’s still an impressive stat.
  • He gets all the top media coverage on major outlets, so that box is checked.
  • Could he headline a US nationwide arena tour by himself? No. But with another artist? Yes. I wouldn’t be surprised if Drake and Lil’ Baby do a joint tour as Drake did with Future in 2016 and Migos in 2018. Drake loves to bring the hottest act of the moment on stage with him, but Drake still gets to be the primary act. Then we’ll have to hear Charlamagne Tha God try to claim that Drake needs Lil’ Baby to sell concert tickets!
  • Would Lil’ Baby headline Coachella? Not right now. He would be on that second or third line of that lineup poster though. But he could in the future if his star continues to rise.
  • The “Mom test” is a baseline gauge for an artist’s popularity. They have to be famous famous for your parents to know who they are. Personally, my Mom has no idea who Lil’ Baby is, and I’m sure she’s not the only one.

He’s not there yet. That could change by this time in 2022 though. Not too long ago, Travis Scott was in this same spot that Lil’ Baby is in right now. Things change fast.

Coming soon

Podcast – J. Erving, founder of Human Re-Sources, EVP Creative Development for Sony Music, and EVP at The Orchard (the Sony subsidiary where Human Re-Sources now sits). Drops later this week!

memo 25: the COVID convert circuit

Each week, the Trapital Memo is sent to thousands of readers who stay ahead of the latest trends in the business of hip-hop. Sign up here to join us:


Hey! If you haven’t already, check out the latest podcast episode with music exec Binta Brown. later this week, I’ll post my Def Jam webinar recording with Gary Suarez. Also, shoutout to the publications that gave attribution back to Trapital when referencing my interview with Master P! Most didn’t, but I appreciate those that did.

Webinar – the best hip-hop album rollouts with Ernest Wilkins! On Thursday 1/28 5pm ET, I’m co-hosting a webinar on the best hip-hop album rollouts of all time with Ernest Wilkins from Office Hours! This is gonna be fun, can’t wait! Sign up here to join us.

This week’s memo breaks down the COVID concert circuit, Verzuz’ expansion into sports, and Clubhouse’s journey to its $1 billion valuation.

Artists still holding nightclub concerts despite COVID restrictions

via TMZ

In recent weeks, Bow Wow, Trey Songz, Fabolous, and others received backlash for hosting concerts at packed indoor venues for mask-less attendees.

An inevitable outcome. When the pandemic started, the concert cancellations set tons of artists back. Live shows are where many of them make real money.

We knew that the superstars would be relatively fine. We’ve seen Drake’s quarantine life. He can’t tour right now due to the pandemic and his knee injury, but he still gets paid from his new Nike deal and will earn big streaming revenue from the upcoming release of Certified Lover Boy.

But Bow Wow, Trey Songz, and Fabolous don’t have it like that. They live off nightclub performances, reunion tours, and Love & Hip-Hop. Those Bow Wow Entourage residuals can only go so far. They all have rich lifestyles to maintain. A five-figure check to perform at a nightclub is tempting, especially in a pandemic. If states like Texas have looser restrictions, some artists will risk it despite the public health dangers.

This won’t get any better. Unfortunately, these pandemic nightclub concerts will continue. They are modern-day speakeasies. In the 1920s during prohibition, these underground venues thrived despite the restrictions. It’s much harder to stay low profile in the age of social media, but that won’t stop them. If a legacy hip-hop artist had to choose between a performance guarantee and social media backlash, or no check and no backlash, a lot of them will take that check.

These super-spreader events will make it harder for this pandemic to ever end, so get ready.

Verzuz expands beyond music

Swizz Beatz and Timbaland’s competitions expand into NFL 1-on-1 matchups and posthumous celebrations.

Expand the market. Verzuz expansion beyond music is smart. This week, Verzuz will host matchups with NFL Pro Bowlers including Deshaun Watson, Jalen Ramsey, Myles Garrett, and DeAndre Hopkins.

It’s not as sexy as “Jay Z vs Drake” or “Pharrell vs Kanye West,” but those matchups are few and far between. By expanding beyond the R&B and hip-hop superstars, Verzuz maintains relevancy and consistency. As the sports matchups expand, it can lead to bigger mashups and new concepts.

For instance, the “The Match II” celebrity golf match with Tiger Woods, Phil Mickelson, Peyton Manning, and Tom Brady had golf’s largest cable audience ever with nearly 6 million viewers on TNT. Golf may not be Verzuz’ target demo, but the same can be done with other sports. Verzuz can expand into basketball, boxing, NBA players who can rap, and more.

Posthumous matchups. On ESPN’s Jalen & Jacoby, Swizz Beatz mentioned his dream battle is to do Tupac vs Biggie. Timbaland followed up to say he wants Prince vs. Michael Jackson. As I mentioned last week, estate management and posthumous careers can be difficult to navigate. It would be cool to see if done right. But please, no holograms! I saw enough after “what the fuck is up COACHELLAAAA!”

My Verzuz wish list: Janet Jackson, Usher, Mariah Carey, Toni Braxton, and Mary J. Blige. Not sure who they would go up against. Some of them could go against each other! Let’s hope it happens.


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Clubhouse’s unicorn valuation and the social media adoption curve

This past weekend, The Information broke the news that Clubhouse now has a $1 billion valuation, which resurfaced an ongoing conversation about the ownership of social platforms where Black users are one of the primary product features.

A similar pattern. Clubhouse’s growth trajectory follows an adoption curve we’ve seen before in social apps. The “innovators” are the tech folks who are investors, friends, or early invitees. The early adopters are often Black people who make it more popular by talking it up on other social media platforms. The early majority is more Black people and others who want in because it’s now cool. Then the late majority and laggards are the masses who follow because it’s mainstream.

It’s a real-life example of a quote from Dwight Schrute in The Office, “I know how to grow a business. You gotta get the Black people to do it to get the White people to do it, then you gotta get the Black people to stop doing it. One step at a time.”

Clubhouse is a bit unique. According to CNBC, Felicia Horowitz, founder of the Horowitz Family Foundation and wife of Andreesen Horowitz co-founder Ben Horowitz, and Chris Lyons, managing partner at Andreessen Horowitz (both Black) actively recruited powerful Black celebrities to join the app. Comedian and actor Tiffany Haddish is now the most followed person on Clubhouse with over 1 million followers.

An evolving discussion. When Twitter went public in 2013, there was less public discourse on this despite the rise of Black Twitter. People were more likely to say “this is amazing, how is this app free?!” But if you’re ever wondering how a social app you use makes money, then you’re probably the product.

Clubhouse isn’t just catching its own heat. It’s catching heat from all the apps that came before it. It might seem unfair, but it does come with the territory.

The ownership debate. Some people believe that Clubhouse should give some equity to the Black folks who made this app popular. I disagree. Clubhouse’s founders Paul Davidson and Rohan Seth, their team, and their investors built this platform. It’s our decision to open the app and engage. Even if the app’s founders were Black, they don’t have to share the equity with users. That’s not how this works.

However, when Black founders and creators have the next billion-dollar idea like Clubhouse, Spotify, TikTok, Twitter, Cash App, or any other platform that benefit greatly from Black culture, let’s hope they get the same funding opportunities as the non-Black founders who have gotten funding to make these apps what they are today.


Coming soon from Trapital

Podcast – audio and video recording from the Def Jam webinar with Gary Suarez. Drops later this week. Subscribe on Apple Podcasts, Spotify, or wherever you get podcasts.

Webinar – Thursday 1/28 5pm ET. A breakdown of the best hip-hop album rollouts of all-time with Ernest Wilkins from Office Hours. Sign up here.

memo 24: rock the boat

Hey! I normally send this memo on Mondays but I moved it to today because of Martin Luther King, Jr. Day. Two quick updates:

Trapital Podcast guest: music exec Binta Brown. We talked about her transition into music, where she thinks the industry is heading, and her work on the Black Music Action Coalition. To listen when it drops, subscribe on Apple Podcasts, Spotify, YouTube, or wherever you get podcasts.

Webinar on hip-hop album rollouts with Ernest Wilkins. Next Thursday 1/28 5pm ET, I’m hosting a webinar on the top hip-hop album rollouts of all time with Ernest Wilkins from Office Hours! Should be a fun conversation. Sign up here to register.

Today’s memo breaks down Spotify’s podcast strategy, Cardi B and the cost of music videos, and Aaliyah’s estate’s fight to get her music on streaming.

Spotify’s podcast push–too early to call

via Spotify

Last week, Citi told investors to “sell” Spotify stock due to concerns that its nearly $1 billion podcast investment has not led to paid subscriber growth or app downloads. Spotify’s stock price has nearly tripled since its pre-pandemic number. The soaring price would imply that the company’s bet on podcasts is a homerun hit. If Citi wants to temper excitement, I get it. The stock market went wild in 2020. But it’s way too early to make that call on Spotify’s investment.

Wrong metrics to focus on. Citi’s focus on paid subscriber growth and app downloads is premature. Spotify’s exclusive podcasts are still available on its free tier. Users don’t need a paid subscription to hear the latest episodes from Michelle Obama or Joe Rogan. This is where Spotify differs from Netflix. I won’t be able to watch Ozark season 4 without a paid Netflix subscription (or if needed, my mother-in-law’s password). The same customer acquisition cost calculations won’t work.

I would bet many people, myself included, aren’t paid Spotify subscribers but had the app on their phone and now use it more often to listen to certain podcasts. It’s one reason why analysts should separate Spotify’s (and Apple’s and Amazon’s) podcast performance into short- and long- term goals.

Short-term: ad revenue and customer retention. One of Spotify’s biggest podcast advantages is its ability to measure consumption and charge for it. Spotify can charge advertisers based on listens, not downloads. It can also do streaming ad insertion. If it masters ads, it strengthens its play to become the “Google for audio.”

Retention is also a huge play. If Spotify can make the audio experience more convenient for existing subscribers, it will reduce churn and prepare for its growing competition.

Long-term: negotiation with record labels, profitability. Spotify CEO Daniel Ek’s goal is for podcasting to make up a bigger share of its listening, which will make the company less reliant on record labels, pay the labels less, and increase profitability. Spotify’s annual revenue is around $8 billion, but 70% of that goes to the content rights holders. But if Spotify uses its podcast leverage to negotiate that down to 55% or 60%, that could add $1 billion in profit. The potential is huge, but it’s still early.

Read more about Citi’s downgrade of Spotify in Variety.

Cardi B, music videos, and their evolving role

Last week, Cardi B shared how much some of her music videos costs. “Bodak Yellow” cost her $15,000, while “WAP” cost $1 million. It’s a great opportunity to break down the role of music videos in today’s era.

It’s still a marketing tactic. Today, most music videos don’t get the crazy budgets they did in the Hype Williams era. The MTV-to-CD-sales pipeline is long gone. But videos are still a top-of-funnel promotional tool to drive business elsewhere.

A great music video will increase streams, concert tickets, merch, investments, and everything else in the artist’s revenue mix. Sure, artists also get revenue from YouTube views, but it’s not much. It would take nearly 1.5 billion YouTube streams for “WAP” to cover its $1 million budget in YouTube revenue. It’s possible, but it’s not the primary goal. “WAP” generated millions of dollars in earned media from all the pearl-clutching responses.

Budgets rise over time. “Bodak Yellow” technically has the highest ROI of all her videos, but it’s not an equal comparison. That song dropped almost four years ago, when Cardi was still collecting checks from Mona Scott-Young on Love & Hip Hop. Her music video budget matched her status. The director, vendors, makeup, and more likely charged her less too. She probably got a few deals due to her low profile. Music exec (and next podcast guest!) Binta Brown broke this down briefly on Twitter.

But all that changed when Cardi became a superstar. Her record label upped her music video budget accordingly, and the expectations rose. She quickly made it on the 2019 Forbes’ Hip-Hop Cash List at $28 million and lowkey implied that the number was too low! All the discounts are gone after that.

Next-level video? Many artists now want the video that checks all the boxes: performs well on TikTok, increases concert ticket sales, sells merch, wins awards, and helps the song top the Billboard charts.

Focus matters more as the platform options increase and the success metrics grow. It makes life easier for the artist that knows what they’re good at and doubles down. But it’s harder on the artist that’s focused on everything.


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A generation misses out on Aaliyah

Aaliyah via Sal Idriss/Redferns

Last Friday would have been Aaliyah’s 42nd birthday. This August will be 20 years since she died in a plane crash. Each anniversary and milestone is another reminder that most of her music is not on any digital streaming providers.

As an Aaliyah fan, it’s frustrating! In 2019, I wrote about the reasons for posthumous career challenges. But Aaliyah’s estate challenges are on another level. There is a great Complex article on why we haven’t heard Aaliyah’s music and the role of her uncle, Barry Hankerson, who currently owns the masters for most of her music. I have nothing new to add there, but let’s focus on what we’ve missed as a result.

Lost relevancy. When the music rights owners hold back, it makes it difficult for the artist’s legacy to live on. Remember the 2014 Lifetime biopic on Aaliyah? Zendaya was cast to be Aaliyah, but pulled out because “the production value wasn’t there” and “there were complications with the music rights.” The end result was a film that got hated on more than Virgil Abloh’s Pop Smoke album cover. If all parties were on board, the film could have been a lot better. The poor reception from that project made it tougher for future projects to reach the masses.

To be fair, there are other challenges outside of her estate’s dealings with the music rights holder. Aaliyah’s story can’t be discussed at length without talking about her illegal relationship and marriage to R. Kelly. It complicates the ability for the storytelling to be transparent and get support from all parties involved.

Streaming’s boost. Songs like “Are You That Somebody,” “Try Again,” or “Rock The Boat” belong on the same streaming playlists as other artists from her era. Her songs belong on all the ‘Best Songs of the 90s’ podcasts that the major record labels and streaming providers have released. Sure, many of Aaliyah’s songs and music videos are on YouTube, but it’s not the same.

Last week, Aaliyah’s estate said that the late singer’s music release on streaming is “not within our control” but is “working diligently to protect what is in our control —Aaliyah’s brand.” It’s a carefully-worded and thoughtful response, but Aaliyah’s brand can only go so far without the music behind it.

Coming soon

Podcast interview with music exec Binta Brown – Available wherever you get podcasts. Click here to get the key points and lessons learned via email.

Webinar on the best hip-hop album rollouts with Ernest Wilkins – Thursday 1/28 5pm ET. Join us! Sign up here.

memo 23: everyone wants equity

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Hey! If you haven’t read my latest essay on TikTok’s music strategy, read it here. The response has been strong so far.

Today’s memo is on Warner Music’s investment in Roblox, Lil’ Nas X’s focus on kid’s music, and music distribution in Africa. Two quick things first:

  1. webinar on Def Jam – Thursday, January 14, 5pm ET. This Thursday, I’m hosting a webinar with music journalist Gary Suarez, who runs a dope newsletter called Cabbages. We’re breaking down Def Jam: What has the record label done well, not well, and what do we hope for its future. Sign up here to register.
  2. next podcast guest is Master P (!) The next Trapital Podcast guest is the mogul, the entrepreneur, and the colonel of the motherfuckin’ tank, Mr. Percy Miller. We talked about his plans to acquire Reebok, ownership, his latest business ventures, and more. It drops later this week.I’m gonna try something new! I will send a separate email with highlights and key points from the podcast. Want it sent to you? Click here.

    To listen when it drops, subscribe on Apple Podcasts, Spotify, YouTube, or wherever you get podcasts.

Warner Music Group invests in Roblox

via Music Ally

According to Music Business Worldwide, the major record label put eight-figures into the online game platform as part of its $520 million Series H. It’s now valued at $29.5 billion.

Get in before it goes public. On Friday, Roblox announced its plans for a direct listing to NYSE in February. It initially planned for an IPO but changed plans when Airbnb and DoorDash’s share prices went sky-high on their first days of trading. Roblox didn’t want to leave money on the table as those companies did. The direct listing becomes even more attractive for existing shareholders, like Warner.

Warner’s Roblox investment comes after Ava Max’s Roblox launch party in September and Lil’ Nas X’s virtual concert, which was attended 33 million times. Roblox and Columbia Records are likely to run it back with other artists on Columbia’s roster, or maybe Lil’ Nas X himself. The gaming platform will likely team up with other artists on other labels given its success.

Everyone wants to get paid in equity. Warner invested in Roblox for the same reason why record labels invest in Spotify and Tencent. If the record label’s content drives the growth of these platforms, the labels want in on the upside.

Sure, labels and artists get paid to provide the underlying content for Roblox, Fortnite, and digital streaming providers. But record labels want equity in these tech platforms the same way that artists want ownership in their record label deals.

Long-term wealth rarely comes from being an expense on another company’s balance sheet. Artists know it. Record labels know it. Tech platforms know it too. Everyone wants a slice.

Read more about hip-hop and gaming in Why Hip-Hop and Gaming are Still Scratching the Surface.

The Children’s Hip-Hop Market

Last week I was a guest on NPR’s All Things Considered to chat about Lil’ Nas X’s focus on children as his target customer. Since “Old Town Road,” Lil’ Nas X has been on Sesame Street, Roblox, performed at elementary schools, and released a new kid’s book, C is for Country. His lyrics and melodies are like rap-country nursery rhymes—an overlooked demo! It’s a lucrative demo when done right.

Bring two big markets together. Children’s music is big business. “Baby Shark” is now the #1 most-viewed video ever on YouTube, and that’s no mistake. Ask any parent. When kids like something, they watch it over and over. (My two nephews are responsible for at least 5% of the streams for Swae Lee and Post Malone’s “Sunflower!”) Kids music is an even bigger investment opportunity. But most digital streaming providers are built to serve adults, not kids. YouTube has reached the audience better than most, but there are still ways to tailor experiences for that audience. And since hip-hop is the most popular genre of music, there’s plenty of runway for hip-hop rappers making music for children, not just the Kidz Bop version of songs.

A market to grow with? One of the questions I answered on NPR (but didn’t make the final cut) was whether Lil’ Nas X will grow with this audience of fans born in the 2010s, or stick with the grade school demo. I bet he sticks with the grade-schoolers. It’s smarter from a business perspective. He already has a presence on platforms that will stick with that demo. He would risk losing that influence if he tried to compete with the outlets that the kids born in 2010 will shift to in five years.

This approach is unlike most artists who grow with their fanbases. But most artists make music for their peers. Look at Beyonce and Justin Timberlake. They shifted from making music for teens, young adults, parents. But it was always for their peers. Lil Nas X is 21 years old and serves an audience ten years younger than him—at least. It’s a lucrative lane that he can own, but he’ll need to double down to maximize it.

Read more about Lil’ Nas X and Roblox in the Trapital Memo from November 16.


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The future of streaming in Africa

Spotify, Apple Music, and the major record labels are all in on Nigeria, Ghana, Kenya, Ivory Coast, and other big markets. Each company is bullish on the potential. But Apple Music’s paid model and Spotify’s premium model may struggle to grow, even with steep discounts and promotional offers.

Music piracy is high. For an alternative to takeover, the product has to be better, the price has to be right, and the available technology has to enable it. Spotify’s free tier has the UX and price down, but music streaming uses too much data, and data plans are expensive.

A Kenyan startup called Mdundo is an ad-supported download service that plays pre-roll ads before each song plays. The download model is what African music listeners are used to. “We don’t think that the product that Apple and Spotify are offering is the right one for the mass market in Africa. That’s why we’re doing it in a different way,” Mdundo CEO Martin Nielson said to CNN.

The company says it could be profitable or break-even if it only focused on Kenya, but it plans to reach the entire continent.

Ads may seem intrusive to anyone with a paid music subscription, but it wasn’t that long ago that the Limewire generation had to listen to countless plugs on downloaded songs like “AOL Music First Listen” or DJ Kay Slay shouting on every G-Unit radio mixtape. What goes around comes around.

Read more about Mdundo’s strategy in CNN Business.

Coming soon

Interview with Master P – We talked about Reebok, ownership, and more. Drops later this week. Click here to get the key points and lessons learned via email.

Webinar on Def Jam with Gary Suarez – Thursday 1/14 5pm ET. Join us! Sign up here.

memo 22: Master P and Reebok

Each week, the Trapital Memo is sent to thousands of readers who stay ahead of the latest trends in the business of hip-hop. Sign up here to join us:


Hey! 2021 is here, and Trapital is starting the year off with a new podcast, an upcoming webinar, and a breakdown on Master P and Reebok.

new podcast: why artists are selling music catalogs

I posted the recording of the webinar I hosted with entertainment attorney Karl Fowlkes on Why Artists Are Selling Their Music Catalogs. We broke down the reasons why so many artists sold their catalogs in 2020, the companies that want them, and where this trend is heading. We went in much more depth than I did in that BBC World News clip. If this topic interests you, check it out:

Listen on Apple Podcasts, Spotify, other platforms, or watch on YouTube.

webinar on Def Jam – Thursday, January 14, 5pm ET

I’m hosting a webinar with music journalist Gary Suarez, who runs a great newsletter called Cabbages. We are gonna discuss Def Jam, one of hip-hop’s most storied record labels. Why is Def Jam no longer as relevant as it once was? Who should run the label next? What will it take to bring Def Jam back? We’ll break all that down and more.

Sign up here to register.

Master P and Reebok

 

One of the biggest stories over the holiday stretch was that Master P and Baron Davis are in talks to acquire Reebok. It’s exciting news. Hip-hop culture loves Master P. But will it go down? Should it go down?

In 2003, Reebok had deals with Allen Iverson, Shaquille O’Neal, 50 Cent, Jay Z, and others. Reebok was hip-hop when the NBA itself was scared of it. Meanwhile, Adidas was outside the nightclub trying to get in before they charge for cover. At the time, Reebok seemed much more likely to partner with artists like Kanye West and Beyonce, while Adidas would struggle to try to serve everyone. But the dynamic flipped, and it’s no coincidence.

In 2006, Adidas acquired Reebok for $3.8 billion—a 34% premium. But soon after, the company regretted the deal. “From the moment we started looking at the numbers, we knew it was a screwed-up business and that we’d paid too much,” a former Adidas exec told the Wall Street Journal. Sure, Reebok was far from perfect. It flooded the market with too many S.Dots and G-Unit sneakers. But if Adidas bought Reebok without looking at all the numbers, that’s on Adidas.

Regardless, Adidas’ rigid systems were bound to clash with Reebok’s agency-inspired model. And since Reebok competed for the same customer Adidas wanted for its flagship brand, Reebok became an afterthought. Reebok tried to focus on extreme-training activities with CrossFit and UFC. The cult-like communities were there, but other apparel brands did a better job cornering those markets. Reebok became this pet brand pushed into areas Adidas didn’t yet venture in. It was set up to fail.

Master P enters a crowded field. When the news of Adidas selling Reebok first broke, Authentic Brands Group (ABG) was named as a potential buyer. In 2019, Shaquille O’Neal, an ABG partner, expressed interest in acquiring Reebok since Adidas has “diluted [the brand] so much to where it’s almost gone.” Other potential buyers include VF Corp, which just bought Supreme for $2.1 billion, and Anta Sports, the third-largest sportswear company by revenue.

But those holding companies have portfolios of brands that get sold primarily in department stores. Holding companies succeed on breadth and scale. Reebok’s fate could stay the same if it became one of the dozens of brands under those umbrellas.

Master P and Baron Davis offer a different value prop. Percy Miller’s business ventures are mostly entrepreneurial. He builds from the ground-up. Percy Miller accumulates his wealth by owning a large share of smaller pies.

Reebok is not a smaller pie, but the brand still needs focus. Master P has succeeded in smaller-scale consumer-packaged goods and apparel lines, so that helps. An all-Black Reebok ownership group will inspire some business and get great PR, but this relaunch would still need more. Reebok’s comeback needs a level of focus that the brand hasn’t had since its ‘Rbk’ lifestyle days.

Will the deal go through? Master P told CNBC that Reebok is worth $500 million and there’s no way he would pay $2.4 billion. It’s a negotiation process, but I doubt Adidas sells for just 20% of its asking price. I won’t be surprised if ABG, VF Corp, or another buyer is willing to pay $1.5 billion or more for the apparel company that made over $2 billion in revenue in 2019.

One of Master P’s most popular quotes is “we in a culture that’s a billion-dollar business, but we creating millionaires.” If he gets this deal done, he gets to be in the driver’s seat of a brand that had the potential to make a billionaire out of someone like Allen Iverson, who has to wait till 2030 (!) to get his $32 million trust fund payout.

But if it falls through, it still puts Master P in a position to land more deals. Unfortunately, there are tons of businesses that make billions off Black culture and only made millionaires out of their Black talent and contributors. Reebok is one of many. In 2021, there should be more opportunities for Master P, Baron Davis, and their business partners to make moves.

Coming soon – essay on TikTok. Later this week!

memo 21: why Square wants Tidal

 

Happy Holidays! I hope you’re gearing up for a relaxing week. A few quick things:

1. I am postponing my chat with Mick Batyske until February. It was scheduled for this Wednesday, but I’m gonna take a few more days off before January starts.

2. There are more conflicting rumors on Lil’ Wayne and Young Money’s masters sale. Some have said that the sale was only for music from Young Money’s collab albums, which features songs like “Bedrock” and “Steady Mobbin’.” Others say it’s only Lil’ Wayne’s share and might not include Wayne’s own masters. All could be true, but there are reasons to doubt those rumors too. I’ll stand by what I wrote last week and the sources I referenced, but I wanted to share more context.

This week’s memo covers the report on Square’s potential acquisition of Tidal, and a brief year-end recap.

Why Square Wants Tidal

Jay Z, Roc Nation co-founder Tyran “Ty Ty” Smith, and Square and Twitter CEO Jack Dorsey (via GoffPhotos.com)

Last Wednesday, Bloomberg reported that Square discussed acquiring Tidal. According to Bloomberg, Square CEO Jack Dorsey wants to add more complementary business lines to a group that includes Seller and Cash App. The move seemed odd at first glance. Music streaming is a low-margin business, and Tidal is far behind its competitors. I tweeted that the primary value-add was data. But I’ve thought about it more. There are better reasons than just data.

Double down on Cash App’s potential. The mobile payment service is Square’s rising star. Cash App’s gross profit has grown over 212% year over year (as of Q3’20). It accounted for 48% of Square’s gross profit in Q3, and $849 million total gross profit for 2020 so far. It uses hip-hop artists as influencers to acquire customers at a fraction of the cost of most banks. In May 2019, Dorsey said, “This is also something we weren’t expecting, but I think Cash App has touched in the culture.”

So far, the acquisition tactics have been social media giveaways. It’s effective but limited. There’s an opportunity to go deeper with a streaming service that’s already geared toward hip-hop content.

Use content to acquire customers. Tidal is more than a music streaming service. It’s a content distributor that hosts music, podcasts, interviews, and livestream events. Cash App’s hip-hop loving customers already enjoy the content on the platform. Square can use Tidal’s existing and new content to attract more customers to Cash App. For instance, Meg Thee Stallion has recently given away free Bitcoin. She could hosts livestream Cash App concerts via Tidal and give away a certain amount to a set number of fans.

Here’s the chart from the Cash App essay I wrote in March:

Tidal can also offer free cash or Bitcoin to attract new customers. Cash App is the primary sponsor of one of the most popular hip-hop podcasts—The Joe Budden Podcast. The Tidal acquisition is a deeper step toward using hip-hop content to drive its growth.

It goes back to Jeff Bezos’ quote on Amazon’s Prime Video strategy. “When we win a Golden Globe, it helps us sell more shoes.” Those who stream Amazon video convert from free Prime trials at higher rates and buy more goods from Amazon. Similarly, those Cash App customers who use Tidal may be more valuable than others. There’s a path for Tidal to create inexpensive content that can further grow its user base.

Become a commerce platform for creators. Square’s Seller services have many tools for artists to run their commerce operations. Tidal would give Square a platform for artists to share their content (music, podcasts, livestream) within the company. This is similar to the creator playbook that SoundCloud is now running, which led to its first profitable quarter ever in Q3’20.

If Square is an early part of these artists’ careers, they might be more likely to become powerful Cash App influencers as their careers get bigger. Shopify PM Donald Richard has a great thread on this.

Everything comes at a cost. In January 2017, Tidal was valued at $600 million when Sprint bought 33% of the company. It last reported that it had 3 million subscribers in 2016. Tidal hasn’t reported on the stat since, but if the number was worth bragging about, it would have been public. Jay Z’s never been shy when his businesses do well financially!

Let’s assume Tidal is still worth less than $1 billion. Square can acquire the infrastructure to create and help produce content that its target customers and artists love. It also acquires a small yet loyal customer base of fans who vote with their dollars by supporting Black businesses, and audiophiles who love the HIFI sound quality options.

Dorsey is currently on Disney’s board. He may want to recreate that classic Disney synergy map with his own company. It’s ambitious, but there’s a path—especially if Jay Z is still connected to the business. Tidal could achieve much more than it has under the pseudo-umbrella of Roc Nation.

On that note, don’t be surprised when that 2022 Roc Nation Brunch is sponsored by Cash App.

Trapital Recap 2020

I’ll keep this brief!

Most viewed essays:

How Hip-Hop Helped Cash App Grow Faster – Square’s mobile payment service teamed up with rappers to grow fast, use their influence, and acquire the right customers.

How Issa Rae Became the Modern Mogul – The Insecure star used modern tactics to grow her audience and made timeless moves to build synergies across her businesses.

How The Weeknd Mastered His Brand – The Toronto artist maintained his mystery and still became a superstar.

How Travis Scott Growth Hacked Hip-Hop – The Houston rapper became a superstar by finding arbitrage opportunities in the industry and exploiting the hell out of them.

How Kendrick Lamar Plays the Long Game – The Compton rapper invests his money in real estate and partners with companies to amplify causes he cares about.

Most popular podcasts:

Ibrahim “Ib” Hamad on Building Dreamville, Managing J. Cole, the Dollar & a Dream Tour, and Starting Dreamville Fest – Dreamville President and J. Cole’s manager Ibrahim “Ib” Hamad talked about how he and J. Cole started Dreamville and how it became what it is today.\

Steve Stoute on UnitedMasters, a New Deal with Apple Music, Ownership in Hip-Hop, and Why Brands Value Indie Artists – UnitedMasters and Translation CEO Steve Stoute talk about ownership in hip-hop, why the music distribution company partnered with the NBA, Apple Music, and NBA 2K.

Jason Geter on Heavy Sound Labs, Launching Grand Hustle, Signing T.I. and Travis Scott, and Redefining the Modern Record Label – Heavy Sound Labs founder and CEO Jason Geter came on the Trapital Podcast to break down his rise in the music industry.

Coming soon from Trapital

Essay on TikTok – Will send out next week.

Enjoy the break. Back next week!

memo 20: the steal of a lifetime

Each week, the Trapital Memo is sent to thousands of readers who stay ahead of the latest trends in the business of hip-hop. Sign up here to join us:


Hey there. This is the second to last Trapital Memo of 2020. Next week, I’ll send out a short highlights edition with some of your favorite stories.

Next Wednesday 12/30, I’m hosting a 2021 Prep talk with DJ, marketer, and investor Mick Batyske. We’ll talk about leveraging personal brands into investments and deals. If you’re interested, click here and I’ll send you a note once the sign-up page is live.

This week’s memo breaks down Young Money’s masters sale, Troy Carter and the record label business model, and Roc Nation’s new book publishing imprint, Roc Lit.

Why Lil’ Wayne Would Sell Young Money’s masters for $100 million

This how I would be looking at Wayne too (via mymusicmylife.com)

According to a lawsuit from Lil’ Wayne’s former manager Ronald E. Sweeney, the 38-year-old rapper sold Young Money’s masters (which includes Wayne, Drake, and Nicki Minaj) to Universal Music Group for $100 million.

I intentionally held off covering this last week. It sounded like another misreported celebrity headline. Like, “Beyonce made $300 million from Uber’s IPO” or “Blac Chyna made $20 million per month from OnlyFans.” I was waiting for the fact-checkers, but they never came. Instead, we got legal proceedings that further validate it.

$100 million is a steal. The problem isn’t the sale. Many musicians have sold both publishing and masters in 2020 for reasons I previously wrote about. The problem is the $100 million.

In November, Scooter Braun sold Taylor Swift’s masters from her first six albums for a reported $300 million. That figure is more reflective of the current market. Taylor Swift’s total records sold to date is over 200 million. It’s an imperfect stat for masters valuation, but let’s use it as a proxy.

Meanwhile, Drake has sold 170 million, Lil’ Wayne 120 million, and Nicki Minaj 100 million. That’s over 390 million for Young Money’s biggest stars. The label’s total is likely over 400 million when including Tyga’s hits like “Rack City” and “Faded.”

In an open market deal, Lil’ Wayne could have gotten way more than $100 million for his own masters—let alone this deal that includes the highest-selling female and male rappers of all time. But this deal didn’t happen in the open market. It happened with Universal Music Group, his record label that he’s had ongoing legal issues with for years.

A distressed asset? The lawsuit revealed that Young Money is still in litigation with Aspire Music Group, Universal Music Group, and Cash Money over Drake’s unpaid profits. It’s no surprise. Cash Money is notorious for shady practices. Its clients have had to lawyer up to get paid. It’s an unfortunate part of the business model.

But litigation can be expensive when Wayne, according to the Sweeney lawsuit, is out here paying his lawyers 40% contingency fees (according to Sweeney’s lawsuit).

Lil’ Wayne may be in an asset-rich, cash-poor situation. He made a recent endorsement that some assumed was for money. One way to solve this problem is to sell assets and get some cash. This masters sale could help settle the lawsuit. UMG already has Drake signed to its label, so this sale could have solved several problems.

This is why this $100 million sale can’t be valued as a retail sale. It not even trade-in value. It’s bought Lil’ Wayne some liquidity and peace of mind. Meanwhile, UMG will reap the rewards for years from one of the most valuable assets in hip-hop.

It’s ironic. In 1998, Cash Money pulled off a landmark $30 million distribution deal with Universal. It was one of the biggest deals in hip-hop. Now in 2020, UMG acquired the most valuable parts of that deal right back, and then some. Yet again, it’s one of the biggest deals in hip-hop.

Read more about the Young Money masters sale in the lawsuit from Sweeney.

Troy Carter and the future of the industry

Music exec and veteran Troy Carter was recently interviewed by Music Business Worldwide. He believes once a signed artist proves their a success, the model should change. Here’s a quote:

The music industry has to change the business model; it’s as simple as that. New artists are becoming smarter and smarter, and we can’t be greedy…

So you might start off on a traditional record deal where the label gets 83% and the artist gets a 17% royalty. But if that artist becomes Roddy Ricch or whoever, [when the label has] made a significant profit, then maybe the economics flip, and that artist receives 75%, and the label gets 25%. Because now you’re de-risked; you’ve made a profit, and you have a consistent amount of revenue flowing in from [those] projects…

Carter’s not wrong. There should be more options for proven artists to renegotiate or buy back ownership of masters and publishing. This happens now in unique situations (like Jay Z or Rihanna) but it won’t happen on a larger scale until there’s a bigger threat to the major record label system.

No true threat. Independence is often considered that threat. It’s a viable alternative, but not yet a threat at the highest level. More artists than ever have succeeded on their own terms through services like DistroKid, UnitedMasters, and Stem. But as Carter himself said last year, “Taylor Swift doesn’t want to be on TuneCore. No offense.”

The industry’s business model won’t change until artists without major record label backing can replicate the global superstardom that Travis Scott has hit since Astroworld.

How disruption works. Look at Netflix, Apple, Amazon, Airbnb, and any other firm that shook up its industry. The change didn’t happen by disrupting the long tail. It happened by disrupting the head. In music, the long tail has been disrupted, but the verdict is still out on the head.

That disruption could come from one of the distribution services mentioned or a new entrant. It’s not impossible, but the industry is not there yet.

Roc Nation announces Roc Lit 101 book publishing imprint

Image

(via @roclit101)

According to Variety, this joint venture with Random House will launch in summer 2021 with books from CC Sabathia, Danyel Smith, Lil’ Uzi Vert, Meek Mill, Fat Joe, Yo Gotti, and more.

Multimedia expansion. More artists have expanded their content strategy across media. Visual albums, documentaries, and podcasts have been the wave, and books aren’t far behind. Dozens of artists have written memoirs, novels, autobiographies, and even comic books. It’s perfect timing.

Content and IP ownership. An artist’s 2021 book is the source material for that 2023 Amazon docu-series. Those IP and derivative rights can be quite lucrative.

The future deals? I won’t be surprised if Roc Nation and others sign artists to multimedia deals including albums, podcasts, books etc. It would be like “360 multimedia content deals.” Some artists may reject the notion for obvious reasons. But others may welcome the convenience, even if it comes at a cost.

Trapital Players of the Week: E-40 and Too Short

I’m an east coast guy, but I’ve lived in the Bay Area for over six years. Saturday’s Verzuz battle was special. I appreciate what these two legends have brought to hip-hop. This Verzuz didn’t get watched as much as others, but it was still a dope moment. Long live the hyphy movement and Bay Area hip-hop.

Coming soon from Trapital

  • Essay on TikTok – Coming soon, trust me. It will be your Christmas gift!
  • 2021 Prep with Mick Batskye – Wed Dec 30, 2pm ET! Click here to get more info soon.

memo 019: a loyalty-driven business

Each week, the Trapital Memo is sent to thousands of readers who stay ahead of the latest trends in the business of hip-hop. Sign up here to join us:


Hey! Last week I was on BBC World News talking about Bob Dylan selling his catalog for a rumored $300 – $400 million to Universal Music Publishing Group.

If Universal and others want to block the investment funds from buying these catalogs, these prices are about to get even higher. Get ready.

If you’re interested in this topic, this Saturday 12/19 2pm ET I’m hosting a webinar with entertainment lawyer Karl Fowlkes. We will talk in depth about why many artists have recently sold their music catalogs. We’ll discuss why it’s happening, why it matters, and how these deals will play out. We’ll also discuss Lil’ Wayne reportedly selling his masters for $100 million. You can sign up here to join us!

This week’s memo covers my podcast interview with music exec Phylicia Fant, The Breakfast Club at 10 years old, Rihanna raising $100 million for Savage x Fenty, and Clubhouse.

new podcast: Phylicia Fant, Co-Head of Urban Music – Columbia Records

Phylicia came on the Trapital Podcast to talk about her career in the music industry. Before Columbia, she had executive roles at both Warner and Motown, and launched The Purple Agency. We talked about developing superstar artists, changes made in 2020, the industry’s response to social injustice. We also talked about the documentary she worked on–Eggs Over Easy: Black Women & Fertility.

Listen on Apple Podcasts, Spotify, or watch the video on YouTube.

The Breakfast Club turns 10, and Charlamagne’s new deal with iHeartMedia

Last week, The Breakfast Club celebrated its tenth anniversary and extended Charlamagne’s contract for five years.

via iHeartMedia

2010 to 2020. It’s been a wild ride for The World’s Most Dangerous Morning Show. In December 2010, it was Power 105.1’s scrappy attempt to compete against rival Hot 97. Check out the video from one of the first episodes. Those were some humble, humble beginnings.

But in December 2020, the show is now syndicated in nearly 100 markets, inducted in the Radio Hall of Fame, and made its biggest star one of the most recognized names in hip-hop culture. The show’s evolution is a lens to the evolution of radio, media, and personalities.

Radio’s still here. “The death of radio” is one of those topics that pundits get too excited about. It needs more nuance. It’s right up there with “movie theaters are done” and “have we hit peak music festivals?”

US terrestrial radio ad revenue peaked in 2015 and won’t get that high again. But iHeartMedia, which owns Power 105.1 and The Breakfast Club, is in the audio business—not just FM radio. It’s the second-biggest publisher of podcasts. Even if radio listening dips in a post-pandemic world, audio isn’t going anywhere. Its content is easily accessible on FM radio, podcasting, YouTube, and more.

Radio is not as sexy as other forms of media, but it’s still a business. There’s a reason SiriusXM just extended its five-year deal with Howard Stern. If your first thought was “who the hell still listens to satellite radio?” then you’re asking the wrong question.

Media. The Breakfast Club’s biggest strengths have been its accessibility and shock value. The show is four hours per day, five days a week. That’s 20 hours of content. It gets cut into endless clips for YouTube and social media, like the Donkey of the Day. The viewership data became proof points for radio syndication markets, REVOLT, and more. If you enjoyed hip-hop and spent enough time on the internet, it was tough to miss The Breakfast Club—especially from 2013 to 2016.

But the show got tons of traction because of how reckless Charlamagne Tha God was in the early days. I repeat, he was wild. The guests saw what the vibe was and tried to be reckless themselves. The interviews with Birdman, Dame Dash, and Tekashi 6ix9ine are the most memorable. But he’s toned it down dramatically since his celebrity has grown.

Personalities. In media, this decade has seen the continued rise of individuals over institutions. Plenty of organizations have tried to stop talent from becoming bigger than the brand itself (NFL, ESPN until recently). But iHeartMedia leaned into it. Its support for Charlamagne has led to his Black Effect Podcast Network, his expanded leadership role at iHeartMedia, and his five-year extension. DJ Envy and Angela Yee have seen their platforms grow too.

A few months back, I predicted that Charlamagne would follow other media personalities and sign a deal with Spotify. I got that one wrong because I undervalued the loyalty factor with iHeart. Charlamagne said it was one of the main reasons he extended his contract. It reminds me of what comedian Roy Wood Jr said on my podcast a few months back: If you’re a Black talent and have a good thing going with an entertainment company that backs you, it’s in your best interest to ride that out since not all companies are the same.

Read more about Charlamagne Tha God and iHeartMedia’s expanded partnership in Variety.

Rihanna plans to raise $100 million for Savage x Fenty

via @badgalriri

The lingerie company has hired Goldman Sachs to raise money to expand into athletic wear and in Europe. The brand extension seemed inevitable. Savage x Fenty is partially owned by the same company backing Fabletics. And given the success of both Fenty Beauty and Savage x Fenty, Rihanna can extend into several products in cosmetics, apparel, and couture.

But replicating what Rihanna built isn’t easy. First, it’s expensive. Savage x Fenty generated $150 million in revenue and wasn’t profitable. Not many have the money or access to capital to build a brand that costs nine-figures to run.

Second, she addressed pain points in the market by improving inclusivity. That inclusivity also gives her valuable customer data. Each SKU was a different skin tone or product size. That expanded her customer base.

It was a big difference from Kanye West, who had struggled at the time to get attention of the same fashion elites who have backed Rihanna. Kanye has since found success with Adidas and Yeezy, but it took time to get there.

Read more about Savage x Fenty and Rihanna in The New York Times’ DealBook.

Clubhouse’s popularity with hip-hop

The social audio app is currently #12 in the App Store for Social Networking. The app has had an influx of Black users —especially celebrities in music and entertainment, which is intentional. In a few short months, Clubhouse went from Y-Combinator Demo Day to the Roc Nation Brunch.

I’m bullish on drop-in audio overall but noticed a few trends on this app.

White flight. When Clubhouse launched, most of the conversations were led by tech elites. But the network has grown with more Black people talking about topics that are less relevant to tech elites. Some of them have complained that Clubhouse “isn’t what it once was” or have shifted their once public chats to private rooms. It’s another reminder that “inclusion” and “comfort” are not the same.

Free game (to a fault?) In recent months, there have been some creative hip-hop rooms: 21 Savage’s trivia night, DJ beat battles, Jay Z appreciation hour, or roasting DJ Akademiks. Some of this content is perfect for the informal nature of Clubhouse. But some of it is content that should be monetized too.

For instance, Just Blaze has shared tons of stories on that app. A podcast network should hire him and do a 10-part hip-hop series on untold Roc-a-Fella stories.

The knowledge gap in the music industry. Several Clubhouse rooms have been focused on how artists, managers, and A&Rs can level up. Some of that is due to the growing demo, but it also highlights the knowledge gap in music. There’s a huge opportunity to help artist teams and young executives level up. But as good as it is to see the education-oriented rooms on Clubhouse, they’re not always the most helpful. People need more context than “own your masters.”

This is why I’m glad to see Maryland rapper IDK launching a music business crash course at Harvard. Need more like that.

P.S. – please don’t reply to this email and ask me for a Clubhouse invite cause I don’t have one.

Trapital Player of the Week: Tiffany Haddish

The Girls Trip star turned down The Grammys offer to do the pre-show for no compensation or expenses covered. She got an apology from The Recording Academy’s chief for not offering to cover her expenses and how it was handled.

It’s unfortunate, but she gets MVP because the incident improved transparency for others. There’s a popular saying “Don’t do things for money, do them for exposure.” I generally agree outside of a few exceptions (e.g. Super Bowl Halftime Show), but even there, the NFL covers production expenses that can easily hit $10 million.

Coming soon on Trapital

Webinar on Sat 12/19 2pm ET – music catalog sale boom with Karl Fowlkes! This Saturday 12/19 at 2pm ET, entertainment lawyer Karl Fowlkes and I will have a conversation and Q&A about all these catalog sales happening in music, what it means for hip-hop, and more. You can sign up here to join us.

Essay on TikTok. I am writing a deep dive essay on TikTok’s role in music, hip-hop, and entertainment. I’m excited for this one, and it’s been requested a few times. Stay tuned!

memo 18: that indie rap life

Hey! Hope you enjoyed your weekend. How is it December already?

This memo is your weekly breakdown of the business of hip-hop. This week features my podcast interview with rapper Flawless Real Talk, Chance the Rapper’s lawsuit against Pat the Manager, Drake’s Nike launch, and more.

🎙️ Flawless Real Talk’s Indie Rap Career

Rapper, producer, and entrepreneur Flawless Real Talk came on the Trapital Podcast to talk about how he manages his rap career. Last year he was the runner up on Netflix’s hip-hop reality show Rhythm & Flow, which boosted his exposure. Flawless talks about his decision to stay independent, the tradeoffs he’s made by not being signed, and his strategic partnerships to still get the opportunities he wants.

If you’re interested why artists choose to be indie vs signed, creator strategies, and building direct connections with fans, this is the episode for you.

Listen on Apple Podcasts, Spotify, Stitcher, or watch on YouTube.

Chance the Rapper vs Pat the Manager

How Chance The Rapper's Manager Reimagined the Music Business
Chance and his former manager Pat Corcoran (via Instagram)

The Chicago rapper’s longtime former manager Pat Corcoran, “Pat the Manager,” sued Chance for over $3 million in unpaid commissions.

The lawsuit itself is unfortunate. Chance the Rapper’s legal team has refuted Pat’s claims. But the more interesting parts are what was learned and confirmed from Pat’s account.

First, Pat is asking for commissions dating back to Chance’s mixtape 10 Day. That project came out eight years ago! When business partners become friends, it’s easy to let payments slide. It’s harder to have that frank, ultimatum-type conversation to get paid. But when shit hits the fan, the receipts get pulled quickly.

Second, Pat’s claims align with what myself and others predicted— The Big Day was doomed from the start. There were warning signs that it was rushed and poorly promoted. The subsequent tour was inevitably canceled. It tracks with two essays I wrote last year before and after The Big Day was released.

Pat and Chance seemed thick as thieves. But their split is not a surprise either. Chance had to ignore the haters to get to where he is, sometimes to a fault. When critics have said things he doesn’t like, he claps back time and time again.

He defied the odds as an indie artist who became the face of a movement. So when his subpar work gets criticized, which happens to every popular artist, he sees it as hate. Pat the Manager’s constructive feedback subjected him to the same fate as a music journalist who critiqued Lil’ Chano from the 79th.

Pat may no longer work for Chance the Rapper, but he still has a bright future in this industry given what he’s achieved this past decade. Chance will be fine too. He may never replicate that 2016 Coloring Book run or pack arenas on his own, but he has a dedicated fanbase that’s still with him.

Read the full legal filing by Pat Corcoran here.

Drake’s opportunity with Nike sub-label NOCTA

Drake NOCTA 4

Drake (via Nike)

Nike and Drake have launched a sub-label NOCTA in advance of Drake’s album release for Certified Lover Boy.

Here’s a quote from Drake in Nike’s press release:

“I always felt like there was an opportunity for Nike to embrace an entertainer the same way they had athletes. I thought about how crazy it would have been and what it would have meant for an artist to have a flagship Nike deal.”

This is Drake’s dream! Earlier this year he gave Nike a 5-minute long commercial with the “Laugh Now, Cry Later” music video. The Toronto rapper got his sneaker deal and ain’t break a sweat. The release of Drake’s NOCTA sub-brand has been linked with January’s release of Drake’s next album, Certified Lover Boy.

SNKRS deal? I’m not sure what OVO or Republic have planned, but this is a great opportunity to leverage Nike’s distribution through the SNKRS app.

Drake could do a pre-sale of his album through the SNKRS app. Nike could buy a set amount of albums and bundle them with the newly released merchandise. The pre-release can be done as a limited drop.

This can be similar to Jay Z’s 4:44 release with Sprint. In 2017, Jay did a $20 million deal with Sprint. The cellular company bought 1 million copies of his album at $5 each, and gave it to its customers 72 hours before it was available to the general public. Jay turns his albums into B2B and B2C products.

I drew this diagram to highlight Jay’s approach:

This is a perfect time for Drake to do the same with Nike.

I originally suggested this SNKRS collab opportunity for Travis Scott, but he’s already mastered his e-commerce drops. It’s Drake time to step it up.

Read more about NOCTA in Nike’s press release.

Trapital Player of the Week: Dionne Warwick

For the past month or so, Dionne Warwick has upped her Twitter game in advance of her 80th birthday celebration. She’s fundraising and selling merch to help fight world hunger.

On Twitter, she’s been coming for people like Chance the Rapper, The Weeknd, and more. It’s hilarious and appreciated. These tweets have boosted her following and fundraising efforts. Good for her! We need lighthearted banter like this in 2020.

Coming soon from Trapital

Next week: podcast with Columbia Record’s co-head of Urban Music, Phylicia Fant. We talk about how her record label has navigated 2020, her career up to this date, the music industry’s response to George Floyd, and more.

memo 017: drug dealers anonymous

Each week, the Trapital Memo is sent to thousands of readers who stay ahead of the latest trends in the business of hip-hop. Sign up here to join us:


Hey! First off, I hope Nate Robinson is good. The way his head hit the canvas in his boxing match against Jake Paul! Damn. I wish him all the best.

This week’s Trapital Memo covers my podcast with the CEO behind the record deal simulator—Daouda Leonard, Jay Z’s cannabis partnership, and The Weeknd’s Grammy snub.

new podcast: Daouda Leonard, CEO CreateSafe

Earlier this year, Daouda Leonard’s company released the record deal simulator—a tool built to empower artists to better manage their careers. Daouda has used these tools and others to manage Grimes and other artists. His company’s goal is to build the music industry’s operating system–an open-source resource that offers the transparency the industry needs, and an additional suite of services.

If you’re interested in what the music industry’s Bloomberg terminal would look like, this is the podcast for you.

Listen on Apple Podcasts, Spotify, other platforms, or watch the video on YouTube.

Jay Z Levels Up on Cannabis

via TPCO investor presentation

Last week, the billionaire rapper was named Chief Visionary Officer of TPCO, a new cannabis holding company. TPCO was formed as a special purpose acquisition company (SPAC) which includes Left Coast Ventures and Caliva—the company where Jay was Chief Brand Strategist and recently launched a new product called Monogram.

C-V-O of the T-P-C-O. Last year, I collaborated with 2PM’s Web Smith on an analysis of Jay Z’s partnership with Caliva. I wrote that Jay Z and Caliva were an unusual fit given Jay Z’s preference to partner with established firms, not startups. But cannabis legalization intrigues him due to the historical precedent. Millions of Black people are still behind bars for marijuana-related charges, but most of the folks who have cashed in on cannabis legalization are not Black.

Jay and TPCO plan to counteract this by investing up to $10 million in minority-owned cannabis businesses through Social Equity Ventures. TPCO also hopes Jay Z can attract the target audience through his Roc Nation connection.

How this will play out. TPCO is all in on Jay. He isn’t just “leading brand strategy.” He is the brand. In the investor deck, he’s featured on the leadership team ahead of the CEO. But there are two questions to ask:

1. Will TPCO succeed? It looks good so far. In 2020, the company is on track for $185 million in revenue and 20% gross profit. It has invested more in DTC delivery, which will increase margins further if successful. High margin consumer products rely on branding to justify the price, which reinforces Hov’s importance. And through Tidal and Roc Nation—Jay Z can reach the right customers.

Tidal could insert pop-up ads for Monogram, Caliva, or other product drops based on listener habits. For instance, anyone who listens to Curren$y is a potential target. Curren$y fans love weed. This is a known fact.

2. Will TPCO bring equity and access to cannabis? This is a tougher question. The answer comes from the diagram below:

The Shawn Carter Enterprises model is to partner with established firms. He then uses profits to invest in Black businesses. But by definition, the non-Black businesses he partners with will always get stronger first. This question has been explored in Trapital before. Can Black businesses “catch up” if this is the cycle? The alternative is to build from the ground up. But through these partnerships, Jay Z can build more access for funds that weren’t otherwise available.

It’s another example of this question: Would you rather come in first place and win $2 million? Or come in second place and win $5 million, knowing that your efforts helped first place win $10 million? There’s no right answer. But both paths are needed to create wealth and further push Black businesses growth.

Learn more about Jay Z’s partnership with TPCO by checking out the investor presentation deck.

The Weeknd’s Snub Was a Blessing in Disguise

via Duncan Loudon / Republic Records

Last week, The Weeknd did get nominated for any Grammy Awards for the upcoming show in January. It shocked many people given the success of “Blinding Lights” and After Hours.

It was even more noticeable since The Weeknd has pushed for this. He’s been wearing that red jacket and his bandages for over a year now. He was out here campaigning like Netflix trying to win a Best Picture Oscar.

Sure, snubs are part of every award show. But the day before nominations, The Weeknd was the favorite to win Album, Record, and Song of the Year. People are still upset that Beyonce, Kendrick Lamar, and Kanye West didn’t win more Grammys this past decade. I get that, but at least they got nominated!

Why it’s a blessing in disguise

  1. Outrage culture. In the age of social media, nothing generates headlines better than outrage. Even the Grammy chief had to put out a statement regarding The Weeknd. This past week, The Weeknd has gotten more media attention than any other week since his album dropped in March.

    For the next two months, The Weeknd will be the symbol of The Grammys’ devaluation of Black culture. This snub has given The Weeknd more publicity than the expected nominations would have given him unless he won those awards, but…

  1. He wouldn’t have won those Grammys anyway. I predict that the major awards—Record, Song, and Album—will be won by Taylor Swift, and would have been won by Taylor Swift even if Abel got nominated. The Recording Academy loves Taylor. She had the best-selling album of the year with Folklore. And she wisely released her recording sessions on Disney+ just in time for The Grammy voters to watch.

    Since The Weeknd would have been nominated (but not won), the Grammy “bounce” would have had diminishing returns. The week after the Grammys, he will perform at the Super Bowl halftime show for an audience 5x the size. XO Records is rightfully angry about the snub, but it might have worked out for the best.

  1. Low ratings (expected). It’s been a tough year for broadcasters televising music award shows. November’s American Music Awards had a 40% viewership drop. October’s Billboard Music Awards dropped 55% from last year.

    Last year’s Grammys brought in a record low of 18.7 million viewers. If it follows the trend and has a 50% drop, it will draw in 9 million viewers. That would be the same number who watched Gucci Mane vs Jeezy’s Verzuz battle!

    If I’m Verzuz co-founder Swizz Beatz, and a Verzuz outperforms The Grammys?! Listen. I would talk my shit and cash all the checks possible.

Read more about The Weeknd in How The Weeknd Mastered His Brand.

Trapital Player of The Week: Snoop Dogg

On Saturday night, the 49-year-old rapper delivered an all-time performance as a commentator for the Mike Tyson vs Roy Jones, Jr. fight. “This shit like two of my uncles fighting at the barbecue,” was hilarious. He even broke down in a negro spiritual at one point. I’m convinced that Snoop Dogg could turn out the Westminster Dog Show if he wanted to. Well done.

Coming soon from Trapital

Next week: Podcast with the rapper and producer Flawless Real Talk. We talk about his experience on Netflix’s Rhythm & Flow, life as an independent artist, and his exclusive partnership with a new livestream service.

memo 016: the verzuz impact

Each week, the Trapital Memo is sent to thousands of readers who stay ahead of the latest trends in the business of hip-hop. Sign up here to join us:


Hey! This week’s Trapital Memo breaks down Verzuz, Nicki Minaj and hip-hop documentaries, and more.

new podcast: Cameo CEO Steven Galanis

Steven breaks down his company’s marketplace for personalized celebrity video shoutouts. He discusses how Cameo blew up in 2020, how it found product-market fit, got early success with Snoop Dogg, and wants to solve the gap between fame and monetization. He also shares where the company is heading and potential future products from the company.

If you’re interested in creator business models, marketplaces, and flywheels, this is the podcast for you.

Listen on Apple Podcasts, Spotify, other platforms, or watch on YouTube.

The Verzuz breakdown

(photo via @verzuztv)

Gucci vs Jeezy had all the primetime event elements. There was anticipation, tension, drama, and a happy ending. A few people on Twitter said that Jeezy won the popular vote but Gucci won the electoral college. There’s a number of ways to interpret that… and somehow, they all make sense.

The event drew over 9.1 million viewers across all platforms including Instagram Live, Apple Music, and Apple TV. There’s definitely audience overlap in those numbers, but it’s still impressive.

Verzuz has branded itself well, but peak viewership still relies on the matchup. How many remaining matchups can draw an audience that can match Jill Scott-Erykah Badu, Brandy-Monica, or Gucci-Jeezy? The number is limited, but the rising success may increase participation.

The ultimate goal for Verzuz should be to get like NBC’s Sunday Night Football. Marquee matchups still get the highest ratings, but bad matchups still get tons of viewers. It’s tough task, but it’s not impossible.

The new promo run. Jeezy used the opportunity to drop his latest album, The Recession 2. It’s a smart move. This is the most mainstream publicity Jeezy has had in years, and he wisely took advantage. Brandy did the same when she released a new album around the same time as her Verzuz. This will be true for most Verzuz participants since the platform favors those who hit their peak popularity years ago.

In the 2010s, the hip-hop and R&B promo runs were on The Breakfast Club, Hot 97, Big Boy’s Neighborhood, etc. Those outlets still matter for promo runs, but not as much as they did in 2015. In the 2020s, the top hip-hop promo runs will include these massive livestream events: Verzuz battles, Fortnite and Roblox concerts, and more.

Verzuz audio on Apple Music. One of the overlooked benefits of the Verzuz-Apple Music partnership is the audio simulcast. Fans can listen to live Verzuz battles in the background while commenting on social media or group chats without switching back and forth between apps.

Apple should promote this feature more heavily. It’s an exclusive feature that Spotify and others can’t offer. Also, there’s a big opportunity for Verzuz with drop-in audio. On Clubhouse, there was a post-Verzuz discussion room that had over 1,200 people—the largest I’ve seen yet on the beta app. Verzuz and Apple can build or partner on a feature for listeners to engage in post-game commentary.

Nicki Minaj, HBO, and the hip-hop docu-series

(photo via @nickminaj)

On the 10th anniversary of Pink Friday, Nicki Minaj announced a six-part docu-series on her life coming to HBO Max.

The docu-series wave. Nicki joins dozens of music stars who have taken us behind the scenes with their documentaries. But I’m not gonna lie, six episodes feels excessive. The same content could have been stretched over three 1-hour episodes or four 45-minute episodes. But more episodes means more repeat visits to HBO Max. That means more opportunities to pitch viewers on the other HBO Max content. It’s all part of the game.

Nicki’s career. I’m intrigued to see where Nicki takes this documentary. She’s one of the most successful rappers ever. But she’s also been frustrated with the media’s portrayal of her. She’s had feuds with Lil’ Kim, Cardi B, Remy Ma, and drama with Meek Mill. Nicki says this docu-series will be ‘raw, unfiltered’ but it’s tough for any artist-produced doc to have the same authenticity as an independent production.

HBO Max’s role. The streaming service now has 38 million subscribers, one-fifth of what Netflix currently has. By doing a deal with HBO Max, Nicki’s reach is limited relative to her peers on Netflix.

But there are several considerations. Nicki might get more favorable placement and algorithm favorability on HBO Max than she would have gotten on Netflix. Also, Netflix might have only been willing to produce one 90 minute documentary (e.g. Taylor Swift’s Miss Americana and Travis Scott’s Look Mom I Can Fly).

Also, HBO Max might have been willing to pay more money than Netflix. At this point in her career, Netflix might not have paid Nicki the same amount that Beyonce, Travis Scott, Lady Gaga, or others have received. As I explained in Why Rihanna Partnered With Amazon, there are multiple reasons why streaming services are picked.

Netflix proved earlier this year with Cobra Kai that it can guarantee reach that can’t be matched on any other platform. The closest competitor is HBO, but it’s still far behind.

Trapital Players of the Week: Janet Hubert and Will Smith

After a 27-year public dispute, the actress who played Aunt Viv and Will Smith talked through their differences at the 30th anniversary of The Fresh Prince of Bel-Air reunion. It took a lot of strength on both parties, but especially Janet. Will’s comments damaged her career and caused her family tons of trauma. I’m glad they finally came together and talked it out.

This is now two straight weeks of Trapital Player of the Weeks related to feuds being settled. Anymore feuds getting settled in 2020? Think we’ll ever get a Taylor Swift – Scooter Braun reconciliation? Seems unlikely now, but if Gucci and Jeezy and Janet Hubert and Will Smith can sort it out, anything is possible.

Coming soon from Trapital

Happy Thanksgiving! Stay safe.

Dan

memo 015: the perfect partnerships

Each week, the Trapital Memo is sent to thousands of readers who stay ahead of the latest trends in the business of hip-hop. Sign up here to join us:


Hey. First things first, my thoughts are with Jeremih who’s in the ICU with COVID-19, Benny The Butcher who was shot in the leg, and Boosie Badazz who was also shot in the leg. Sad news. Get well soon.

This Trapital memo is your breakdown on the latest in the business of hip-hop. This week is about my latest podcast interview, Beyonce and Peloton, The Weeknd and the Super Bowl halftime show, Lil’ Nas X and Roblox.

new podcast: Dave Macli, co-founder of Audiomack and DJBooth

Audiomack is an artist-first digital streaming provider. In this episode, Dave breaks down why he launched Audiomack, how the company landed early projects by J. Cole and Chance the Rapper, and its expansion plans in Africa. Dave is also the co-founder of DJBooth, which recently partnered on Audiomack World—a publication within the music streaming service.

If you’re wondering why streaming services (and record labels) are more interested in media companies, this is a must-listen. Audiomack is living proof of this.

Listen on Apple Podcasts, Spotify, Audiomack, or watch the video on YouTube.

Why Beyonce is the perfect Peloton partner

via Peloton

Last week, Peloton announced a multi-year partnership with Beyonce AKA Blue Ivy Carter’s mother.

A perfect match. Queen Bey is the perfect Peloton partner for two reasons:

  1. She’s the most-requested artist on the platform. Music is a core part of the Peloton experience. If the music isn’t right, Peloton users will let the company know. The company has spent millions in lawsuits and licensing agreements to get it right. For Peloton, this Beyonce partnership is both a cause for celebration and a sigh of relief.
  2. She’s the ideal Peloton customer. Let’s forget about her near billionaire-status for a minute. Beyonce fits the profile of Peloton’s target customer:

    – Millennial parent with young kids
    – Work schedule has been disrupted by COVID-19
    – Still busy AF

The best celebrity partnerships are those products that people assume the celeb already uses. Beyonce said she’s been a Peloton customer for the past two years, which is easy to believe.

Here’s one of Peloton’s most recent commercials with a busy adult juggling it all. Peloton should do one of these with Beyonce! But the commercial shouldn’t feature Bey the entertainer. It should feature Bey the wife, mother, daughter, and friend who “got real problems just like you.” She dropped that lyric in Everything Is Love, and has reminded us of it in several interviews.

HBCU Connect. As part of the deal, Peloton is giving free two-year digital memberships to students at 10 HBCUs. Beyonce worked closely to create Homecoming-themed workout experiences. The plan is to build a recruiting pipeline for these schools at the intern and undergrad levels.

Read more about Beyonce’s Peloton partnership from the official press release.

Why The Weeknd got picked for the Super Bowl Halftime Show

Last week, Pepsi announced that The Weeknd will headline the Pepsi Super Bowl Halftime Show in Tampa, FL on February 7, 2021.

An accurate prediction. In 2019, I predicted that J. Lo would be the halftime show performer well in advance. I did the same this year when I predicted The Weeknd. That’s two straight years. At first, I said that makes me the Black Nate Silver. But Nate Silver hasn’t got the Electoral College right since Obama so I take that back.

The Roc Nation strategy. I predicted The Weeknd because of Roc Nation, which partners with the NFL on entertainment. At last year’s Roc Nation – NFL press conference, Jay Z was critical of the prior selection process for two reasons.

  1. The NFL used to interview several performers at the same time, pick one, and tell the others “thanks but no thanks.” Sure, that process works fine when Google’s hiring 53 program managers. But that process is bad for roles with limited talent pools. There are only so many superstars! The league may have already burned bridges with those they led on, which makes it easy to get stuck with subpar options.
  2. Jay Z said he didn’t like when Travis Scott played second-fiddle for Maroon 5 because Travis Scott dominated 2018. Jay Z is more likely to want a current superstar than a legacy act.

I assume there’s a hypothetical rubric that measures all these factors and others:

  • superstar popularity (e.g. will tens of millions watch? is the artist timely? have they peaked? legacy act?)
  • entertainment factor (can they put on a good show?)
  • availability / interest (have they done it yet? would they be interested? any burned bridges?)
  • external factors (relevant to broader societal issues, NFL’s Inspire Change?)
  • location (any superstars from this area? what is the region’s music culture represents?)

The Weeknd checks most boxes. He’s had the biggest year in pop music and has used his platform to raise awareness for Black Lives Matter after George Floyd’s murder.

We know that Rihanna, Cardi B, and Jay Z have all turned down past performances. My gut tells me that Taylor Swift and Drake may have been asked before, but might have got burned by the original process, had scheduling conflicts, or potentially weren’t interested. Those artists will be in the running for a while but might take some time.

Read more about The Weeknd’s success in How The Weeknd Mastered his Brand.


LEVEL: unpack the most pressing cultural news 

Minority Report is a weekly newsletter by LEVEL that unpacks the week’s most pressing cultural news, tailored to Black and Brown men age 30 and up. You’ll also get a rundown of the most facepalm-worthy stories of racism in the news (delivered with a hearty dose of sarcasm), pop culture picks that belong on your radar, and a must-read story from LEVEL. Laughs, discovery, an informed POV—what more could you ask for?

Sign up for Minority Report here, and tell a friend to tell a friend.


Lil’ Nas X on Roblox

via Roblox

Last week was the first concert series in a new partnership between Roblox and Columbia Records.

Eight months in the making. Columbia and Roblox have been in talks since the pandemic started. The major record label thought Lil’ Nas X would be great since over half of US kids play the game. The game draws over 150 million monthly active users.

The digitally rendered Lil Nas X took the stage to play his hits and release a new single “Holiday”—his first in over a year. He performed four shows total this weekend, with “stops” in Asia and Europe. Roblox hasn’t released any numbers yet, but hopefully they do! It would be great to see how it compares to Travis Scott’s 28 million viewers on Fortnite.

Roblox’s future. This online video game has gotten more and more popular with kids. Last month, Roblox confidentially filed to go public, and hopes to land an $8 billion valuation. Roblox developers are on track to earn $250 million this year and shows no signs of slowing down. The pandemic has been a silver lining since its target audience (kids) have spent more time indoors in 2020 than ever before.

Who’s next? This Columbia-Roblox partnership should continue, which means future Columbia artists may get their own Metaverse experience. The most likely ones are Chloe X Halle, Harry Styles, Jaden Smith, and Lil’ Tjay. My ten-year-old nephew is the biggest Lil’ Tjay fan I know. He’ll be pumped if that ever happens!

Read more about hip-hop and gaming here.

Trapital Players of the Week: Gucci Mane and Jeezy

These two rivals will face off on Thursday for an epic Verzuz battle. The Gucci-Jeezy beef spans decades. Verzuz hits its peak viewership when there’s legit animosity between the two acts. People tuned into Brandy and Monica just to check the chemistry, and this will be no different.

I’m glad both rappers agreed to this. Thursday should be fun! Jeezy will win (TM101 is too deep), but Gucci will make it competitive.

And if you haven’t yet, read The Autobiography of Gucci Mane. I listened to the audiobook and loved it. He breaks down the Jeezy beef in more detail.

Coming soon from Trapital

  • Trapital reader survey. Later this week, I will send you a brief survey to learn more about you and get your feedback to make Trapital even stronger in 2021!
  • Interview with Cameo CEO Steven Galanis. This company has blown up in 2020. Steve and I talk about why so many rappers joined the video-sharing platform, and what’s on deck for next year. Go subscribe to Trapital wherever you get podcasts!

Have a good week! If you haven’t yet, go read my latest essay on what the ringtone rap era can tell us about where the music industry is heading in the 2020s. Read here.

Dan

memo 014: hip-hop’s next era

Each week, the Trapital Memo is sent to 6,000+ readers who stay ahead of the latest trends in the business of hip-hop. Sign up here to join us:


Hey! What a weekend. A new POTUS-elect, a vaccine breakthrough, a hip-hop legend inducted in the Rock and Roll Hall of Fame, and a chart-topping sales bump for your boy YG.

This week’s Trapital memo breaks down Live Nation’s struggles, Supreme’s $2.1 billion sale, Spotify’s pay-for-play experiment, and how hip-hop evolves in the Biden presidency.

Live Nation has another rough quarter

(via Tuur Tisseghem)

The global entertainment company lost $3.7 billion in Q3 and $7 billion total since the pandemic restrictions.

Cutting it close. In Q3, the company’s revenue dropped 94% year-over-year. This quarter, it paid more in refunds than it generated in sales. The company now has $1.9 billion available in liquidity and has taken further cost-cutting measures to stay afloat.

CEO Michael Rapino plans to resume to concerts “at scale” by summer 2021. If concerts aren’t at scale by then, Live Nation may have to make tougher business decisions.

There’s no vaccine for fear. Live Nation’s stock is up 22% after today’s vaccine news, but Live Nation and others in the live events sector should remember an important point: Consumer behavior often lags safety precautions.

In Live Nation’s Q3 earnings call, Rapino cited a survey that said “95% of fans” are planning to return to live events when restrictions are lifted. But 2020 has taught us anything, we shouldn’t trust surveys or polls!

It may take years for society to adjust from the cultural norms that have been ingrained since the pandemic started. For instance, I watch movies now and think ridiculous things like “Did that dude just walk up to a stranger and shake hands?! Couldn’t be me.” I would have never thought twice about that in a pre-COVID world.

Vaccines can curb COVID-19 spread and eradicate the virus, but it can’t eradicate fear. Remember, the airline industry didn’t reach its pre-9/11 peak until July 2004.

That said, every locale is different. If any artists plan to tour in 2021, they should prioritize regions that are furthest along in virus containment. Live Nation just held its first arena concert with 20,000+ fans in New Zealand, where COVID-19 has been contained. It will take time to get to that point in North America, where 70% of Live Nation’s business is, and the virus is still a major threat.

Read more about Live Nation’s challenges in Music Business Worldwide.

Supreme acquired by VF Corp for $2.1 billion.

(via brandchannel)

The famed streetwear brand has been acquired by VF Corp—the owner of Vans, Timberland, and The North Face— in a deal worth $2.1 billion.

All about ROI. This deal comes three years after private equity firm The Carlyle Group bought a 50% stake in the streetwear brand for $500 million, which valued Supreme at $1 billion.

Did Carlyle undervalue the brand? Could the brand have achieved more under a luxury house like LVMH? Potentially. But Carlyle is a PE firm, not a legacy couture brand. It just made half a billion dollars in three years and sold the brand at a 4x multiple (annual revenue is $500 million). That’s legit.

The better question to ask is “how will Supreme change under VF Corp?”

Supreme’s future. Here are VF Corp’s most notable acquisitions:

VF’s strength is extending the life of mass-market consumer brands. Under VF, The North Face, Vans, and Timberland have succeeded well beyond their peak popularity. But those brands benefitted from VF’s partnerships with retailers like Macy’s and Kohl’s—stores that Supreme-heads avoid at all costs unless they a) have to walk through the store to get to the mall, or b) got a holiday gift card and have to buy something.

Supreme rose in popularity on the back of hip-hop artists, redefined hype culture, and mastered the economics of limited drops. But if Supreme peaked in 2017 (as some trends indicate), then this was the perfect time for VF to come in.

But will Supreme’s core customers still love the brand when select items are an additional 10% off if they sign up for a Macy’s credit card on President’s Day Weekend??

Read more about Supreme’s story in this article from Complex.


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Hip-hop under Biden’s presidency

Hip-hop culture shifts over time, and the U.S. political landscape is a contributing factor. How will Biden’s presidency impact hip-hop?

How presidencies impact hip-hop. Obama’s presidency was defined by projects like Jay Z and Kanye West’s Watch The Throne, musicals like Hamilton, Run The Jewels, Shonda Rhimes’ ABC shows, and Kendrick Lamar’s To Pimp a Butterfly. They instilled a belief that “we made it,” “anything is possible,” but there’s more work to do.

Meanwhile, the Trump era was defined by projects like Childish Gambino’s “This Is America,” Jay Z’s 4:44, Kendrick Lamar’s DAMN, and films like Get Out and The Last Black Man in San Francisco. They were strong reminders that the system is broken, and offered deep reflections of who we are as a country, and as individuals in a polarized society.

It’s too early to tell what Biden’s presidency will bring. These things are best evaluated in retrospect. That said, most hip-hop artists are more relieved that the Trump era will be over than they are happy to see Biden as President-elect. That alone may change the tonality.

One of Biden’s goals is to restore the country’s polarization. It’s an admirable but near impossible task in today’s media cycle. If he can improve that, it may have an even more profound impact on the art that comes from both hip-hop and Black culture in the 2020s.

Spotify introduces “pay-for-play” promotion tool

Last week, Spotify announced a new program that will give songs an algorithmic boost in exchange for a reduced royalty payment.

A controversial feature. With this new experiment, Spotify will boost these songs in their radio and autoplay format. It would give artists a chance to prioritize the records they most want fans to hear. Spotify chose to take money off royalties so that any artist can opt-in, but critics don’t care. They believe it’s a form of payola—a shunned practice in the music industry.

An ongoing concern. For Spotify’s existence, it has been criticized for embracing tactics that favor those with deep pockets. Spotify may not charge for playlist placement on its in-house playlists, but plenty of independent playlists still do.

Why Spotify is doing this. “Money” is the quick answer, but more specifically, Spotify wants to be the “Google for audio”– a search engine for all things audio. Companies pay Google ads for high placement on search results. Spotify ultimately wants its customers to do the same.

Most signed artists don’t have a say in this—the record labels own their content. But indie artists should be frustrated. While this program doesn’t directly hurt them, the broader sentiment is a reminder that Spotify’s true customer is the major record labels. And if you don’t have the bargaining power of a major record label, you’re a less important customer.

Read more about Spotify’s new program in Quartz.

Trapital Player of the Week: Blue Ivy Carter

The eight-year-old child made her voice acting debut by narrating the audiobook for Hair Love, the book and Oscar-winning short film by director Matthew A. Cherry. This announcement comes a few days after Blue was prominently featured in the Ivy Park Drip 2 drop. It’s quite the resume for the heir to The Carter throne, but we expect nothing less.

Coming soon from Trapital

Ringtone rap essay. I’ll send it out later this week!

Podcast interview with Audiomack CEO and co-founder Dave Macli! Stay tuned!

I hope you’ve recovered from an exhausting week for many of us. Let’s hope the rest of 2020 is chill from here on out.

Dan

memo 013: no country for old rappers

Hey! If you’re like me, you need an occasional break from the election. Writing this memo was my break. I hope it does the same for you by reading and sharing.

This week’s memo covers Drake’s injury and the impact it may have on his longevity, Busta Rhymes and the business model of ol’ head rappers, and Kendrick Lamar’s new publishing deal.

Drake is back in injured reserve

Drake recovering from a 2016 ankle injury (via @champagnepapi)

Aubrey Graham is recovering from knee surgery, but this is one of several serious injuries he’s faced in his career.

OVO on IR. Not gonna lie, Drake’s knee surgery is concerning. Here’s a brief history of his career injury report:

  • 2009: Drake tore his right ACL, MCL, and LCL. In an interview with Sway, Drake said “if I were to tear it again, I’d never be able to walk.” A week after that interview, he went against his doctor’s orders, performed on-stage with those torn ligaments, and collapsed. He re-injured the knee and immediately had surgery on it.
  • 2016: Drake suffered a severe left ankle injury which caused him to cancel the last few shows of the Summer Sixteen Tour. Once again, he powered through the injury, which made it worse. Drake sat in an ice tub to recover. He got clowned for his athlete-style rehab, but maybe he low-key needed it.
  • 2020: Drake had surgery again on that same right knee that he blew out in 09. The actual procedure is unknown, but that’s a serious lookin cast. That’s not the cast you get after some minor microscopic surgery. Did he tear his ACL again? How? I wouldn’t be surprised if the injury is more serious than he let on. Remember, Drake became a father and the public didn’t find out until a Pusha T diss track. Don’t rule anything out.

Like a sprained ankle boy I ain’t nuthin’ to play with. Drake is an entertainer whose business relies on mobility. He jumps around at every concert, loves to play pick-up basketball, and lives in the weight room. ‘Doing the most’ is his brand. But how long can a 34-year-old man with a bum knee keep doing the most? He can ignore doctor’s orders all he wants, but father time catches everyone.

The silver lining for Drake is that artists can’t tour during a pandemic. His Certified Lover Boy album drops in two months, but he probably can’t tour until 2022. He’ll have plenty of recovery time.

From a catalog perspective, Drake is one of hip-hop’s best bets to still sell out arenas for decades. He has endless hits. He could be an annual arena act like Billy Joel or Elton John. But if Drake can’t run around on stage the way he used to, how long until his tongue-in-cheek Derrick Rose lyric becomes a reality? Let’s hope he doesn’t end up in a wheelchair like his character Jimmy from Degrassi.

Busta Rhymes and the ol’ head business model

Last week, Busta Rhymes released his first album in eight years, Extinction Level Event 2: The Wrath of God.

NOTE – (I’m not a fan of sequel albums, but Busta gets a pass since he’s a fellow Jamaican and he made my favorite song and music video ever).

Busta Rhymes, like many rappers in his generation, are still releasing music even though they are past their peak mainstream popularity. There’s never been a better time in hip-hop for 40+ rappers. Here’s why:

  • Niche audiences. In today’s era, it’s easier than ever to reach specific target audiences through social media and digital streaming. Busta grew up in an era where his success was heavily influenced by MTV music video plays and product placement at Tower Records. But now, artists have more control than ever before. There are plenty of people who love hip-hop but don’t check for RapCaviar, Travis Scott, or Cardi B. But in today’s era, they can hear the latest from legends like Busta Buss and Lil’ Kim without relying on the traditional outlets.
  • Release music independently. Busta and his peers have already benefit from the major label system. Most of them are out of those initial record label deals. They can now earn more money per album sale (or stream) as an independent release. They still partner with other outlets for distribution support, as Busta did with EMPIRE. But Busta’s marginal cost is lower than it was during his Flipmode days.
  • More to reflect on. From an artistic perspective, older artists can make the music they want without caring about radio play or playlist placement. They also have more life experience to reflect on. There’s a whole generation of rap fans who would love to hear Busta’s thoughts on the current state of the world.

Now, Busta and his peers can’t sell out the same venues they once did, but live performance is still lucrative at smaller levels. Also, the artists from Busta’s era still gets love overseas and at music festivals. Each new release is an opportunity to remind about the hits in their back catalog.

To read more on rappers thriving after 40, read this article from LEVEL.

Kendrick Lamar’s new publishing deal with UMPG

Kendrick Lamar accepting his Pulitzer prize fro DAMN. (via Bebeto Matthews AP Photo)

Kendrick Lamar signed a new publishing deal with Universal Music Publishing Group worth a rumored $20 to $40 million.

Kendrick has been eyeing a new publishing deal for almost three years now. The market for his future catalog of releases is sky-high for good reason. Four of his albums are in the Library of Congress, DAMN. won a Pulitzer and broke streaming records at the time. His albums are taught in college classrooms, dissected like literature, and mentioned in every classic or greatest album discussion.

Perfect time for publishing. While record labels have felt the burn of the pandemic, it’s been a hot market for publishing. Artists can’t tour, so it’s an ideal time to write new songs and collaborate virtually with other artists. Musical placements in TV, film, and other digital media are still going strong too.

And as I mentioned last week, given the cut in federal interest rates, it’s popular time to make an eight-figure publishing deal with one of the biggest rappers on the planet (who also writes his own music).

A rarity in the future? Kendrick Lamar has more classic albums than not, which boosts his catalog value. But in today’s streaming era, artists are rewarded more for quantity than quality. If a record label today has a valuable talent like 2012 Kendrick Lamar, would they be fine only releasing four albums in eight years? I doubt it.

Read more about why publishing is still strong in 2020 in Rolling Stone.

Trapital Player of the Week: Beyonce

Bey won this week for two reasons. First, the Ivy Park items are almost all sold out. She had another dope celebrity influencer campaign, but it got lost in the mix of election coverage. Second, in her recent interview with British Vogue, we learned that she’s a beekeeper who owns two actual beehives, 80,000 bees, and makes hundreds of jars of honey per year. Future business opportunity?

I see what she did there, and you did too.

Enjoy the rest of your week as best you can. Tomorrow will be a historic one way or another. Do you best to stay sane and stay safe while voting!

Dan