Oftentimes startups come into new industries and do not subscribe to the status quo. This not because they are anti-establishment, the founders just don’t know any better and if the status quo does not make financial sense to them, they come up with something else.
This post is about an example of this happening in the music industry and it was caused by someone we all least expect. Read to the end to find out which rapper, yes rapper, upended the music industry. Expect this story to be repeated in the television industry, film industry, publishing industry and any other creative industry where the traditional deal left little ownership of created works with the creators themselves.
The story is best told by Russell Simmons in his book “Do You!” (I HIGHLY recommend for all entrepreneurs to buy two copies: one for themselves and one as a gift to someone wanting to be an entrepreneur). I removed the name of the rapper so I could reveal it later.
“When a lot of people in the industry first met x, they almost automatically assumed that he wasn’t the best businessman. He’s got a deep New Orleans drawl, tattoos on his face, and more than a few paychecks hanging around his neck…Not the kind of guy industry suits are usually comfortable around.”
Societal biases kick in as expected. But here is where we learn:
“X got a better deal for *label name removed* than any of the suits from Harvard or Howard could have ever gotten. The distribution deal he set up with Universal Records was one of the most favorable I’ve ever seen. It’s become the standard that everyone in the music industry aspires to.
“
When a music icon, someone who founded Def Jam and helped make Hip-Hop what it is today says that, we should take note. So what was so special about this deal and how did this rapper manage to get it?
The rapper and his co-founder started independent in the 90’s, built up their own distribution regionally and the big labels started to take notice (you don’t sell thousands of records in a local area and not get talked about by the big labels). The standard record label contract gives the label most of the profit while they take little of the risks and this rapper wasn’t for that.
”He wasn’t educated in the industry norms and frankly wasn’t interested in being educated about something that didn’t make sense financially to him.” Simmons points out that x and his brother refused to compromise on that vision.
Simmons himself tried to negotiate with him, but he preferred to pay Def Jam a small fee to distribute the records, keep the rights to his masters and Def Jam should loan him some money.
”Someone with a business degree would have never dared ask for those terms. But x didn’t know, or care, how the industry worked.” – Sounds like a disruptor, the best kind of startup. In the end, this rapper turned down deal after deal because it was not in his financial interest.
Universal finally gave him the deal he wanted: a pressing and distribution contract, US$2 million advance every year, US$1.5 million per artist for up to 6 artists they could put out annually, 85% of the royalties, 50% of the publishing revenues, 80% of the profits and ownership of all masters.
Yes, you read that right.
That rapper’s name is Baby and he is the co-founder of Cash Money Records with his brother Slim. They are responsible for artists like Lil’ Wayne, Jay Sean and Drake.
Jay Z has said that creators should own what they create but Baby and Slim actually lived that from day one.
Here’s to the upstarts who challenge the status quo.
Special thanks to my brother-in-law Jason Alliman who lent me Russell Simmon’s “Do You!”
eCommerce10 months ago
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