Understanding The Business of Music

Friday, November 30, 2012
I normally wouldn't discuss this because I consider music to be really irrelevant. But, I do have readers and associates that are involved in the music industry. There was also a time when I was involved in the music business. Fortunately, I gave it up to pursue something more meaningful and more profitable to me. When it came to the music business, I was a lot more knowledgeable than your average person trying to break into the industry... which plays a huge role in why I gave it up. I sit back and observe a lot of people that are still trying to make it. There are some people that manage to do well in the music business despite being an underground artist with no major connections. But of course the vast majority of rap artists trying to make it are broke and constantly throwing away money.
By observing these people, I noticed that the successful and the unsuccessful had something in common. Those that were successful understood that music is a business. And like any other business, if you don't approach it as such, you're not going to make it. While those that were unsuccessful failed to understand that music is a business. Instead, they convince themselves that to make it in the music industry, you have to be a great artist and love hip-hop... but that's complete bullshit. If you have to put out corny music to sell, then that's what you do. Again, music is a BUSINESS and the name of the game in any business is to generate revenue. If these broke ass "true to hip hop" types understood that, they'd be a lot better off.
I remember when I used to hear people dissing artists like Soulja Boy, who I admit is pretty sub par as an artist... but who cares? The guy managed to be way more successful than these backpacking nerds who take pride in being a broke unknown rapper. Those types who claim they stay broke because they love hip-hop, knowing damn well they're doing everything they can to get on the scene, but can't because nobody is checking for them. You know what types I'm talking about. The ones you see proclaiming that hip-hop is dead and making up wild conspiracy theories as to why major artists made it and unknowns such as themselves didn't.
Wanna know why major labels don't put out what some of you think is "real hip hop?" Because that stuff doesn't sell! Many of you claim you want real hip-hop, but you won't buy it from the artists, instead you pirate their music. Putting out "real hip-hop" isn't free. Since you aren't willing to pay for it, the labels assume that there's no market for it. Therefore, they make music to cater to the people who will buy the music they put out. If that means putting out "wack" music, so be it. That's another reason the backpack crowd will stay broke, because they don't understand the idea of a target audience. They're too busy trying to impress backpack listeners who won't even buy their CD! They'd much rather get props from these guys and feel "real," instead of generating sales. I don't understand it...
Not only do you have to cater musically to the audience who buys music, you also have to brand yourself a certain way. What I mean by that is --- artists brand themselves as whatever character they need to be in order to fit their music persona. Artists will brand themselves as gangsters, thugs, sex symbols, conscious types, etc. Its all a part of playing the role to sell records. Throughout the years, major labels have perfected this tactic. They take a guy who has an image they like (let's use a gangster rapper as an example), brand him as some tough guy from the streets and have a ghost writer construct lyrics to fit that street life for them. They market this artist to the public as someone from the streets. Take an artist like Plies. He portrays himself as being a gangster, a goon or whatever you want to call it. But outside of the music, Plies is a really intelligent, educated guy. In fact, he sounds nothing like he does on the records. Its all an act. I take my hat off to Plies for that, by the way. Some artists don't seem to understand that, which is why a lot of them try to actually live that life they rap about and end up getting themselves in trouble in order to build some sort of street credibility... not knowing that these gangster artists are manufactured. The trick is to get the audience to believe its real! It's really no different than a director recruiting an actor for a movie.
Back to the successful artists. As was already stated, they approach music as a business (because it is). They understand that like any other business, you need capital in order to push the product (the product being themselves). They also understand marketing and branding. If they themselves don't understand it, you'd better believe they have people around them who do. Now let's talk briefly about capital. You absolutely need capital at some point in order to make it in music. Everything that goes along with creating an artist costs money --- studio time, mixing & mastering, legal counsel, artwork, clothing/cars (labels usually buy those items to create the artist's image), music video production, marketing, traveling, etc. A successful artist will have an investor put up the money to pay for all those things. As for marketing --- with today's technology and the rise of social media, its a lot easier for artists to market themselves and develop a fan base. But that's still no substitute for marketing and branding in the traditional sense.
The unsuccessful artists think the only money they need to spend is on studio time. They don't even realize the existence of the other things. These are the guys that are constantly spending money on what they think is an investment in their career, but that money goes to waste. Some even get caught up with shady people who call themselves "managers," but in reality, that person has no connections and no knowledge of the industry. All they do is take their money. But of course, that could have been avoided have they bothered to educate themselves on the game. I have seen guys that are damn near 40 years old, still trying to make it as a rapper, that fit this category of artist to a tee. By the way, if you're past 26 years old and haven't made it, then its time to find something else to do. Either that, or become involved with music from behind the scenes.
Back in the days, the record labels would provide all of those things for you. They'd sign the artist and provide the capital, marketing & branding experts, lawyers, choreographers, etc. In other words, a label was just a group of people who funded and marketed an artist. But today, a lot of artists are going independent and skipping the label thing altogether... which I encourage. Record labels essentially own an artist while they're under contract. They decide what that artist's music content will be, how that artist will look, how that artist will conduct themselves in public, etc. That's why a lot of artists are going independent because they want complete creative control and because they understand that chances of getting a record deal with a major label is really slim.

An artist might not make as much money independent as they would with a major label but they're still better off, in my opinion. Imagine a major artist who has a platinum album that sells 2 million copies. That artist will get around $.50 (fifty cents) per unit sold, which grosses $1 million dollars. Some of you may be thinking that's pretty good. But hold on! Now they have to reimburse the label for all the money they spent promoting them and other services provided. Then comes Uncle Sam! Out of that $1 million dollars, the artist might end up with about $40,000. Now let's take an independent artist who has a pretty good following. He hasn't released any videos or spent any big money that major labels usually spend promoting an artist, he's developed his following through social media and performing around his city. He releases an album and sells it for $10. He sells 50,000 units, totaling $500,000. His investors get 60% of the revenue, which would be $300,000. That leaves the artist with $200,000. Because the artist didn't have major expenses like the guy on the major label, he'll probably walk away with $125,000.
While we are on the subject of investors, let me explain something by telling you about a conversation I had with an artist. This guy is an independent artist who's pushed his music using his own money. He's done good so far to establish a fan base. He also made the smart move of hiring a personal attorney. Recently, he and I were talking and the subject of investors came up. He asked me whether or not I could put the money up for his tour or whether I knew someone who'd be interested. I had to respectfully decline, and why? First off, when I asked him about his business plan, his plan wasn't solid. Secondly, he was unwilling to take advice. Third, and probably most importantly, he couldn't tell me how I'd get my money back if things didn't work out as planned. With any investor, getting their money back is the first priority. They're not concerned about how much money they stand to make until they've worked out a risk management system to avoid losing money. He couldn't assure me that I'd get my money back, so I couldn't make that agreement.
Conclusion: Music is a business just like any other business. Don't get it twisted. That "love for hip-hop" shit leads to empty bank accounts and starvation. If you're going to pursue music, think like a businessman (or woman), not as an artist. An artist tend to let their emotions cloud their judgment, which can be fatal to their success. The businessperson on the other hand approaches it all objectively. They have no problem identifying a niche and filling that need. Fuck loving hip-hop because it doesn't love you. Many of you are going to claim that you're not doing it for money. What kind of sense does that make? You're spending money to create music, so why make get a return on the money you spend?
Sean T. Alexandre is an experienced investor, entrepreneur, research and writer for First Point Capital, LLC, a company formed to serve the needs of up and coming entrepreneurs, investors, and scholars who wish to reach opulent goals and stay consciously afloat in these fast changing times.


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