Trapital - selling controversy

selling controversy

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Hey! Will you be in Miami at all next week? I’ll be in town for a few things and may organize a small meetup if time allows. Reply to this email and let me know!

By the way, last week I was a guest on The Logan Bartlett Show. Really great chat about music, tech, and all the trends. Someone said we were like Skip & Shannon which honestly, I’m still thinking about.

Today we have a new episode of the Trapital Podcast, the rise of Interscope Records. Our Cash Money episode earlier this year was well received so we decided to do another one. I was joined by Zack O’Malley Greenburg, author of 3 Kings, where he talked about Interscope’s story at length. This was a fun one so let’s get right into it.

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the “clutch your pearls” business model

Interscope didn’t play by the rules in the early days. The label was founded in 1990 by music producer Jimmy Iovine and film producer Ted Field. Interscope made a name for itself by signing artists that other labels wouldn’t touch. From Death Row Records to Nine Inch Nails to Tupac Shakur, the roster was stacked.

Controversy grew its awareness but quality built its loyalty.

That was the pop culture formula in the 1990s. “Clutch your pearls” was the business model that several companies succeeded with across industries. MTV took way more risks than VH1 did. The Sega Genesis released edgy video games that Super Nintendo wouldn’t touch. The same is true about Interscope. They pushed boundaries (without going too far) and reaped the rewards.

Even when controversy reached a boiling point, Interscope prevailed. After the infamous 1994 Crime Bill, the American spotlight was (unfairly) on gangsta rap as one of the problems. In 1995, Interscope stakeholder Time Warner faced mounting political pressure to disassociate from the label. Time Warner sold its $115 million, 50% stake back to Interscope in 1995. The next year Interscope sold a 50% stake in the company to MCA for $200 million. The “controversial” label had an $85 million come up and nearly doubled its value. Thanks, Time Warner!

When Pac said that Bob Dole was “too old to understand the way the game is told,” this is what he meant.

Interscope continued its edgy persona with successful artists like Eminem and 50 Cent in the 90s. Eminem became the best-selling artist of the 2000s. 50 Cent’s 2003 is in the running for the best year any rapper has ever had. Several years later, Lady Gaga had her own attention-grabbing moments as an Interscope artist, like her meat dress or the “egg” she showed up in at the 2011 Grammys.

In the social media era, the business of shock value lost its edge. It had a brief resurgence with “The Pump Plan,” but most of those artists lacked longevity. Audiences have become desensitized, so anything that does spark controversy is likely too problematic. Interscope’s 1990s playbook probably wouldn’t be as effective if a new label tried to do the same.

You can listen to our full Interscope breakdown here or read below for more.

longevity and consistency

Since Interscope launched, it has been one of the most successful individual record labels in the industry. In its 33 years, Interscope has only had two CEOs, Jimmy Iovine and John Janick. Before Jimmy left, many wondered if the label was more than just Jimmy. But he left nearly a decade ago and the label has continued to put up numbers under Janick with Kendrick Lamar, Olivia Rodrigo, BLACKPINK, and others.

It reminds me of sports teams with consistent leadership. The Pittsburgh Steelers have had two head coaches since 1992, Bill Cowher and Mike Tomlin, and Tomlin has yet to have a losing record in 16 straight seasons. And until this week, the Green Bay Packers have only had two starting quarterbacks since 1992 and have stayed competitive in most years.

In music, record labels with consistency at the top, like Interscope and Republic Records, are the ones that stay at the top of the market share reports. Those label heads are also given much more leeway and autonomy under the Universal Music Group umbrella. Both labels also signed landmark distribution deals with independent hip-hop record labels (Interscope – Death Row, and Republic – Cash Money). It all comes full circle.

the incubator for Beats by Dre

Despite the collapse of Death Row Records, Iovine and Dre stayed close. That partnership led to the launch of Beats by Dre in 2006.

As the story goes, Dre had an offer for a sneaker deal, back in the heyday of S.Dots and G-Unit sneakers. Iovine replied, “F sneakers, let’s make speakers.” Iovine was frustrated with the sound quality of the free headphones that came with every iPod. They entered the headphone market with an elevated approach.

Like Zack said on the podcast, it was the perfect partnership. Dre was this perfectionist artist and Jimmy is the marketer. Jimmy was the talker, while Dre was the quiet genius.

With Universal’s backing (they owned equity in Beats by Dre too), the headphones became a staple in Interscope artist music videos, from Lady Gaga to Soulja Boy. They doubled down on product placement with the ambush marketing campaign at the 2012 Summer Olympics in London.

Beats headphones weren’t just for utility, they were a fashion statement. Zack said he spoke with former Best Buy CEO Brian Dunn about what it took to sell $200 to $300 headphones in 2009 (after the Great Recession). Dunn said Best Buy associates were trained to sell Beats as a fashion piece. Beats wasn’t competing with Bose. It was competing with Jordan Brand.

The strategy was to make Beats its own category, not just a leader in an existing category. It all led to a $3 billion sale to Apple in 2014.

While consumers were more familiar at the time with the physical headphones, Apple was really after the new Beats Music streaming service. Apple wanted its own streaming service in the market and Spotify had already had a three-year head start since its 2011 launch in the U.S. Beats Music was the foundation of what became Apple Music, which officially launched in 2015.

Zack and I covered a bunch more in this episode:

• who is the best signing in the history of Interscope?
• what’s the “dark horse” underrated business move in Interscope’s history?
• the Death Row Records partnership in detail

Listen to the full episode here:

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