economics of a typical hip-hop deal

[lrossmusic]

I found this quite interesting and saved it some time ago but can't remember from where. Nevertheless I thought maybe some of you might find it interesting as well.

 

 

The Numbers

 

Big Sums in Advances Get Whittled Away

 

In a Manhattan office cluttered with sports memorabilia, Mr. Padell, the accountant, outlined the economics of a typical hip-hop deal, with the caution that no two deals are identical. Not all rappers, he said, had the advantages of Ja Rule, who also makes money as a writer, as a frequent guest performer and as a partner in a record company aside from his albums.

 

"Let's say you're a successful artist your last album sold, say, 1.5 million copies," he said. A performer with such a track record might negotiate an advance against royalties of around $1 million. This, he conceded, sounds like a lot of money."But . . . " he continued. He started ticking off expenses. Out of their advances, performers pay for all recording costs, including studio time and personnel. As hip-hop has become more successful, album sales and radio airplay increasingly depend on big name producers like the Neptunes,Timbaland and Jermaine Dupri, who charge anywhere from $35,000 to $100,000 per song. Many rappers also call in other artists for duets or cameo appearances at $10,000 to $50,000 a song, Mr. Padell said. The performer also pays for the rights to any digital samples, which vary widely in cost.In all, Mr. Padell put recording costs at about $700,000 all paid for by the artist leaving $300,000, still a lot of money. "But . . . " he said again.Out of this figure, the performer's manager gets 20 percent, or $60,000; the business manager or accountant takes 5 percent, or $15,000. The lawyer, who

negotiated the deal in the first place, might get 5 percent of the entire advance, or $50,000.

After these fees the artist has $175,000.

 

Of this, about $70,000 would be due in taxes, leaving $105,000 for making it to near the top of the hip-hop game. True, many performers also get money for concert appearances or publishing fees. But in turn, Mr. Padell said, his hip-hop clients often support a network of parents, siblings and friends, and many of them tithe to their churches.

Mr. Padell said that performers who make a 500,000-copy gold album, might end up with more money working for UPS.

[daddyelmis]

The members of TLC described their personal experience with this scenario, I believe, when they did their Behind The Music episode.

 

The other aspect is the money that the record company fronts for cars/limos, parties and the "aura" of success that can drive sales. These costs are also recoupable and drive the individual, take home pay down further.

 

My view is that the personal fortunes of major hip-hop artists comes from the tangential income streams -- clothing, merch, and those that get into production on their own.

[Billster]

That scenario is pretty much true of ALL major label deals - promotion comes out of the artists pocket, and is recouped from sales before anything else.

 

I remember reading once that basically you needed to have about four successful albums before you would see much in the way of income. before that, you are re-paying any advances you may have received.

 

I think the model could be changing, as more artists are able to self-produce a reasonable final product independently, and then ink for promotion and distribution without incurring further production costs.

[Jeebus]

Originally posted by CapitalB-Billster:

I think the model could be changing, as more artists are able to self-produce a reasonable final product independently, and then ink for promotion and distribution without incurring further production costs.

This is where the big labels are losing control, hence the insulting RIAA lawsuits.

[Jotown]

Originally posted by CapitalB-Billster:

That scenario is pretty much true of ALL major label deals - promotion comes out of the artists pocket, and is recouped from sales before anything else.

 

I remember reading once that basically you needed to have about four successful albums before you would see much in the way of income. before that, you are re-paying any advances you may have received.

And that is true. Hip Hop has not cornered the market on this particular model. All genres are subjet to the same number crunching reality listed above.

 

And it is not neccasarily a major label conspiracy, just the fiscal reality of the big leagues; like it or not.

[Angelo Clematide]

1) I know Mr. Padell.

 

2) Get the $175,000 an run.

 

3) Four pair of HIP-HOP BURLESQUE BAGGY-PANTS.

 

4) If short-and-tight was now gay, then what was straight?

 

5) A 120 page contract no one understand, and any lawyer refuses to...

 

6) A bottle of cheap "champainge"

 

8) A producer who writes the lyrics:

 

i'm hip you hop

i flip you flop

i'm hip you hop

oh no, not again

 

i'm a priest you're a nun

i exorcise you obei

i'm hip you hop

oh no, not again

 

i'm hip you hop

i'm flipflop you're hips hop

i sing you rock

i f*** you s***

 

i'm a w**** you're a teenie

i'm a pi** you're a shrimp

i love teenie you love w****

i'm a nigger youre a figure

 

i'm hip you hop

now or never

seems to be clever

uuh c'mon baby

 

i'm hip you hop

i flip you flop...

 

8) A frigidaire to store the contract, in case the band accidently runs into success later.

 

9) Due to Michael Jordans early influence, were first to convert and transmogrify...

 

10) Males have abandoned the Body Erotic to females and adopted the role of gangster, of thug, of sideshow psycho, trapped in this dysfunctional persona of their own creation with no hope for escape...

 

11) Enough said.

 

Sicerely

 

Mr. Padell

[lrossmusic]

I talked to some industry folks in the past who more or less told me that initially artists should more or less forget about any record royalties and look to gigging as their main source of income. They went on to say that the record company in successfully exploiting the record would in the process put the act in a position to do big gigs at least for the period of time that the record was happening. If the act wasn't prepared or lacked good management then they just lost out. Tough racket.

[Billster]

Lross - Roger McGuinn once testified that he never expected to make money from records, and viewed them as promotional items for concert performances. Prince has done that to the nth degree with his last tour, giving the album away with each ticket purchase.

[TheSoundman]

I guess you'd be up the creek without a Padell...

[Super 8]

This reminds me of several years ago when I was working for a startup company. There I was in a room by myself, assembling a ton of office furniture (more than a ton, actually ), and I went over and looked at the invoice and realized that the smart people were the one's in the business of selling wankers like us furniture to start our business.

 

We didn't succeed -most don't. And, we lost a lot of money. But that office furniture store sure made a bundle.

 

Just like the music industry. The people who sell you the things you need to live your dreams make out quite well on the deal.

 

So how does this article account for Mtv Cribs? I know everything is all smoke and mirrors, but do these people actually OWN those houses or those cars?

 

Would it be safe to say that 'weekend warriors', in a good band, playing weddings and corporate parties, make out better over the long haul then most major label 'stars'?

[lrossmusic]

Originally posted by Super 8:

....

Would it be safe to say that 'weekend warriors', in a good band, playing weddings and corporate parties, make out better over the long haul then most major label 'stars'?

Maybe in some cases. However the difference does seem to come down to having been 'famous' or more widely know at leats for a hot minute. Once an act has that even one national hit facilitated by a major label it can go on for years with gigs coming in from wherever the record went nationally or worldwide. There are many groups we can probably think of like say the Village People or The Drifters or even lesser know entities that are still doing relatively well. Had they not had that exposure, however brief, it may have been much more difficult to stay afloat.