Trapital - Hip-hop's challenger brands

Weekly article | June 24 | Read in browser

Hey! As I mentioned last week, today I am doing a newsletter swap with Ernest Wilkins, who covers culture and marketing at Office Hours. We both wrote about the concept of "challenger brands."

Ernest's article is on No Limit Records. It's featured below in full. My article is on how Quality Control Music took over Atlanta. You can read it in his Office Hours newsletter here.

After his article, I will still include links to recent content and other Trapital updates.

Thanks!
Dan

How No Limit Records Became Hip-Hop’s Iconic Challenger Brand

A cultural analysis on how Master P took the iconic brand to the top. Written by Ernest Wilkins from Office Hours.

If I called a company a “challenger brand,” would you know what that means? The term comes from a 1999 business book called “Eating the Big Fish’.

The book defines challenger brands by three specific criteria:

1. State of the market: meaning the brand is not a market leader nor a niche brand
2. State of mind: meaning the brand has ambitions beyond conventional marketing resources
3. Rate of success: meaning the brand has experienced significant and rapid growth in its market.

You’ve heard of Challenger brands: Warby Parker, Casper, Oatly, Under Armour, you get it?

These brands carve a piece of the marketing landscape as well as a share of the market for their products by using unorthodox tactics to do more with less. These challengers build themselves to the point where one of the significant players realizes it’s financially smart to buy the company out to increase their share in the market and, in turn, bring the full muscle of a major behind the challenger brand than to compete. How does the challenger brand concept apply to rap? To have productive conversations around the business in creative industries, we need to disconnect the music’s emotion from the company that makes the music. The music industry is selling a product. That product needs to be looked at the same way the founders of other challenger brands look at their creations: A brand that exists in a marketplace.

For the sake of hammering this metaphor home, I want to clearly apply the challenger brand metaphor to one of hip-hop’s biggest success stories: Percy “Master P” Miller and No Limit Records.

The Original No Limit Records Logo

How Master P built No Limit into a challenger brand

From the New York Daily News:

“(Master P) knew he couldn't compete with other record labels' huge promotion and music video budgets but this much he could do: give his audience more for less. That, he figured, would keep them coming back. So, a No Limit album would come with about 20 minutes more music than the average CD. Two-CD compilations were sold for the price of one. He formed a group, TRU, consisting of himself and his two younger brothers, Silkk the Shocker and C-Murder, and made sure to cross-promote every upcoming project in his current releases. Then he hit the road and sold everything out of the trunk of his car. "The same way you would see someone selling cologne or Avon? That's how I sold it," Master P boasts. "For somebody to sell it out the trunk of their car, you just really know he believes in that product.”

The story of No Limit Records has a dark origin. Master P's grandfather was killed in a work-related accident at a New Orleans hospital. The hospital settled a negligence claim over his grandfather's death, and Miller got $10,000 of the money.

Master P attended the University of Houston on a basketball scholarship before relocating to Merritt Junior College in Oakland to be closer to his family, who lived in nearby Richmond. At college, he learned the fundamentals of business, but he also learned about the system of trade. Consider entry-level concepts, things like Tax IDs, and ways to structure a company. That knowledge gave him an upper hand in negotiations.

“So check this out. The first thing gon' come to you is a lawyer and a financial adviser. Think about it. The women, all that's gonna come, the opportunity, all that. But a lawyer and a financial advisor. Now imagine you're from the ghetto. You've never had no money. All of a sudden this guy comes up with a suit on and he's going to tell you what to do with your money. But this how he's gonna get you: He's gon' tell you, "It's not going to cost you no money. I'm going to take 5 percent of what you make, and I might even give you some money."

Because they already know what you're worth. So all they're going to do is write checks for you, pay your utility bills write the checks to your parents, your friends or relatives, whoever, 'cause you ain't got time to do that. So they want 5 percent of your money. So think about this, 5 percent of your money, you never met 'em. So two or three years from now, when you get that big contract, it's a hundred million dollars. What's 5 percent of a hundred million dollars? That's five million dollars!

For somebody you just met or somebody else just introduced you to that person. One of your friends that probably plays basketball or whatever introduced you to that person that you gon' give five million dollars to that you've never met. That's how easy they got five million dollars from you and they never knew you.”

Imagine you want to fix your sink and don’t know-how. You might ask your friends, and they can share their ideas, but you’re going to do your own research on YouTube or online. I think education about your industry should be the same way. Even subscribing to newsletters like Trapital is essential for getting a broader context into your industry, you still need to get hands-on experience. Master P wanted to make moves in the record business, so what did he do first? Open up a record store in Richmond called No Limit Records. P took the foundational knowledge of the industry he got in school and directly applied it to his brand by getting active in the marketplace, both as an artist and as a retailer. He also paid a lot of attention to what the other players in his industry were doing. They all had massive support outside the traditional primary label structure, utilizing the alternative media distribution system that we know by the name, the “chitlin circuit.”

“I learned what Lil' J (you know him as J Prince) was doing with Rap-A-Lot in Houston because I went to the University of Houston to play basketball. Then in the Bay Area I learned the game from [E-40's uncle] St. Charles Walter at City Hall Records, In a Minute Records, JT the Bigga Figga, Herm Lou. I was selling music out the trunk of my car, hitting all the swap meets. Eazy-E and N.W.A. The Bloods and Crips had a big record at one time. This guy Duffy would take me around to every swap meet in L.A.

So I was out in Crenshaw, swap meets and all them things, way back in the days just selling music on consignment. And then I opened my store in Richmond and people were selling me their records on consignment. It started opening up for Tupac, Spice 1 and the rest was history.”

How No Limit cornered market share

From XXL:

“Y'all can steal all my records, I'm cool, y'all can have them. I don't even care to be honest with you. I don't care who take a record from me or an idea. If it make you some money, thank you, good luck to you. It ain't taking nothing out of my pocket. You got 10 grocery stores on the same corner. It's only hip-hop artists and black people worrying about the wrong stuff. You got a grocery store and a liquor store on each corner. None of them mad with each other. Think about it.

Look at a shopping mall. You got 20 stores in the same place. Are they mad at each other? What's an idea, man? An idea is real when you can take it to life and build a fanbase off of it. People been taking ideas from anybody. Everybody got gold teeth now because of us. Think we care? When I went to Oakland nobody had gold teeth or dreads! I was like an alien. Now that's how everybody look. So we worry about the wrong thing and I think people inflate this shit. Man, it's business.”

If you’re reading this in a city, you likely have a streetwear store or cool boutique that you can visit. That store likely stocks products from the in-house line and then usually an assortment of curated products from lesser-known brands from around the world. The format P used to craft 1995’s compilation album Master P Presents Down South Hustlers echoes this model and illustrates clearly how Master P built his sizeable share of the hip-hop market.

After P shut down his record store and moved back to New Orleans to build out No Limit, his time spent in the Bay, as well as opening slots for Tupac and Too Short, gave him a reliable face card in markets that none of his competition in New Orleans could top. He knew all the promoters across the country, and more importantly, he knew all the DJ’s. National reach, local distribution.

We know that brands dedicate $ to media because it brings awareness to their brands. This is the case whether you’re selling socks or streams. It’s my personal opinion that DJ support is the most underutilized method of brand awareness in hip-hop. As countless examples through rap’s history have proved, careers are launched on the back of strong record support from DJ’s.

Down South Hustlas defined the formula to a tee: Drop a massive project, filled with guest stars from various scenes across the country, thus ensuring DJ’s had tons of new music to play. It WAS a local song, which made it relevant to that local audience. When they went to go find “Playaz from the South”, they already knew who was going to be playing it, what stores stocked it and what DJ’s would play it that weekend. Now, take that effect and multiply it by the other 4 releases No Limit dropped in 1995. No Limit as a brand was literally the sound of people’s lives, from the street to the club to the radio. That old saying “roll with us or get rolled over” is the story of No Limit Records market dominance.

In New Orleans, P needed all the help he could get, since the city was packed with local brands all dominating the niche market. The obvious biggest competitor was Cash Money Records, but other lesser-remembered labels like Big Boy, Tombstone, and Parkway Pumpin’ provided significant competition. Miller used his business knowledge to leverage local talent to abandon their current label affiliations and sign up with No Limit. Parkway Pumpin’ alone featured a roster that included future No Limit acts like Fiend, Mac, Mystikal (who came over from Big Boy), Mr. Serv-On, and Magnolia Slim b.k.a Soulja Slim, as well as the most critical hire in No Limit history: Parkway Pumpin’s in-house producer, KLC.

If you’re wondering how a label with that much talent could get raided, consider that the Parkway label operated without contracts.

Remember: No Limit had a financial base before scaling to the point where the Priority distribution deal could even be an idea. A lot of brands try to go from 0-$1,000,000 quickly, but the difference between non-players and challenger brands is that the brands can only disrupt the significant players with financial ammunition. Here’s an example: In 1992, after Master P’s second album, “Mama’s Bad Boy,” sold more than 150,000 albums independently. In 1994, his third “The Ghettos Tryin to Kill Me!” sold 250,000 units independently, and No Limit Records grossed more than $900,000! They had almost a million dollars in the war chest before they ever signed the deal. You cannot compete unless you have the capital to do so.

From XXL:

“In '95, you also signed the distribution deal with Priority. How'd that come about?

I coulda been signed it. They had came to the hood and I thought they were the police so I never talked to them, for like two years. So by that time I'm selling records on my own and I started getting good at it. I ended up bumping into Michael Jackson's attorney and he told me what a distribution deal was. He said, "You need $200,000 for marketing money so you'll probably never get that." I was like what's that? He was like, "That's an 85/15 deal where you get 85 percent and the record company get 15 percent." So when [the record label] came at me, I was getting real hot on the streets and I told them I wanted a distribution deal. And they was like, "A distribution deal?" Jimmy Iovine had offered me $1,000,000 before and I ended up turning it down. So [Priority] comes back at me and I say I want a distribution deal. They said, "OK, if you got the marketing money." I had the marketing money, I was selling CDs out of the trunk in my car, hitting city to city, opening up for all the big acts.

They had N.W.A., Ice Cube, Jay Z was on Priority, all of them. Most of those deals were probably 12 percent [or] 14 percent, that's what artist deals were. Michael Jackson had the highest deal which was 22 percent, and it was unheard of. So imagine with my deal, even if they sold 100,000 or 200,000 records, I probably made more than them just selling 10,000 units.

Ice Cream Man was the first album I put out through that deal and they thought I was probably gonna sell five or 10,000 They were like, "We're gonna be popping champagne if we do six to 10,000 units." I think we did over 50,000 units. And then it just went crazy after that. The rest was history.”

So let’s recap. No Limit won as a challenger brand because it hit all the right criteria

State of market: meaning the brand is not a market leader nor a niche brand.

No Limit outsold lesser-known labels in the same industry but didn’t perform as high as the leaders in the market.

State of mind: meaning the brand has ambitions beyond conventional marketing resources

This would be a time to mention No Limit’s cultural influence. You remember the tank. You remember seeing P in WCW at the same time as Dennis Rodman and Jay Leno. Not to mention, No Limit might be the most influential record label since Blue Note when it comes to album packaging.

Rate of success: meaning the brand has experienced significant and rapid growth in its market.

Depending on who you ask, No Limit sold about 75 million records between 1991 and 2001, the end of the Priority distribution deal. I’d say that’s rapid growth in 10 years.

No Limit’s challenger brand status was studied closely by Cash Money, who learned from the mistakes No Limit made post-distribution deal and became the behemoth you see today. Looking for a current example of the hip-hop challenger brands? Quality Control Records, coincidentally the subject of Dan’s piece in our little newsletter swap.

Thanks for reading! If you’re interested in following more of my thoughts on music, marketing and culture, you can subscribe to my newsletter Office Hours with Ernest Wilkins by clicking here. As an added bonus, here are some of the most popular Office Hours articles from the past year:

• Meet the woman who will tell you what you're going to wear next year.
• How to Create Your Own Cultural Movement
• Balance and Fit - A conversation with Joe Freshgoods and DJ Clark Kent
• Why It Feels Different This Time.
• WTF is the YeeHaw Agenda
• The Office Hours Interview - Shea Serrano

I’m also on Twitter, Instagram and LinkedIn. Stay safe out there!

Hey! Dan here. Hope you enjoyed Ernest's article on No Limit. To read my article on Quality Control Music, click here.

Have a good week. Friday is my birthday! Shoutout to all of you who have already had socially distant birthdays. We're gonna keep it very low key, but definitely looking forward to it. It's been a weird year to say the least though. These months keep flying by!

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