Trapital - it's just business

memo 003: it's just business

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Back with another memo. This is your weekly breakdown on what matters in the business of hip-hop. Before we get into all that, my thoughts and prayers today are with Jacob Blake in Kenosha, Wisconsin. Last night's shooting was tragic and unnecessary. I wish him a safe recovery.

This week we dive into record label disputes with between SZA-Top Dawg Entertainment and Migos-Quality Control Music, Hipgnosis' acquisition of RZA's catalog, the MTV VMAs, and TikTok suing the U.S. government.

Record label disputes

Photo by Elizabeth Wirja via Vogue UK

Two of hip-hop's popular record labels, Top Dawg Entertainment (TDE) and Quality Control Music (QC), have had recent public disputes with its big-name artists.

Delays, delays. SZA was upset over her album delay and told fans to ask TDE exec Terrence "Punch" Henderson about it. It's now been three years since her CTRL album and her fans are impatient.

Back in 2016, SZA almost quit the music industry over frustrations leading up to CTRL. This isn't her first public complaint about TDE.

A few weeks prior, Migos sued their longtime attorney Damien Granderson for abusing trust as the group's fiduciary. He allegedly cheated the trio out of money in favor of the Migos' record label QC, which Granderson also represents.

These artist-label disputes surprised some fans since QC and TDE are perceived as artist-friendly business partners.

It's still business. We still don't have the full story in either dispute, but there are two things to remember. First, a record label is still a record label, whether it's a legacy institution like Columbia or Atlantic, or a popular upstart like Dreamville or Roc Nation. It's still a business relationship between people. Disputes are inevitable, as SZA herself alluded to.

Second, artists know they can rally public support in record label disputes (while record labels can't do the same). In the court of public opinion, your favorite artist is like Lavar Ball: Undefeated. Neva Lost

These disputes should be less surprising. There have surely been bigger internal conflicts at both TDE and QC that were never made public. Not all labels want to screw artists over. Disputes can happen at good companies, too. It's part of the game.

Hipgnosis acquires 50% stake in RZA's catalog

Hipgnosis Songs Fund, a music investment firm boosted its assets by acquiring 50% of the catalog owned by Wu-Tang Clan's RZA, which includes hits by his iconic Staten Island rap group, The Notorious B.I.G., and Kanye West.

Overpay now, reap the rewards later. Hipgnosis has been on an acquisition frenzy that would make Amazon jealous. In 2017, the company raised $1 billion to acquire the publishing rights to the biggest songs in the world. The company targets the most valuable catalogs with high replay value and offers so much money it's hard to turn down. It has purchased some assets at 20x multiples (in an industry where even 10x is considered high).

As of March 2020, the company owns over 13,000 songs from musicians both past and present. The company pulled in over $80 million in revenue with a catalog worth nearly $1 billion. Songs include "Despacito," Amy Winehouse's "Back to Black" and Mark Ronson + Bruno Mars' "Uptown Funk."

Are people happy about this? an unnamed publishing exec said about Mercuriadis, "Fuck that guy. What he's paying is obscene."

Well, damn.

Own the IP. CEO Merck Mercuriadis said, “When compared with the three major song companies, we have achieved between 7% and 12.5% of their revenue on between 0.5% and 0.9% of their number of songs.” The company's strategy with music is similar to the IP strategy in other forms of media. It relies on the popular notion that people love the stories they grew up with, and want to consume all variations of that content in perpetuity.

Future moves? Expect Hipgnosis to make stronger stakes in hip-hop, which is streamed at much higher rates than other genres. There's tons of potential in publishing revenue streams.

MTV's VMA challenges

Photo via MTV

Next Sunday's MTV Video Music Awards are charging ahead in New York despite pandemic challenges and canceled performances.

A "virtual" show. This year's show won't be held at the Barclay's Center in Brooklyn. Instead, performers must travel to various outdoor NYC locations to participate. New York Governor Andrew Cuomo granted performers a partial exemption from the state's 14-day travel quarantine. But scheduled performers like Roddy Ricch and J Balvin have since dropped out of the show.

If the show is virtual and there's no audience, then why force performers to travel to New York? Sure, the VMAs have a longstanding 37-year history in New York, but I'm sure that both fans and advertisers wouldn't have cared if they switched it up this year given the pandemic.

Why not run it back? The recent BET Awards laid the blueprint for virtual award shows done right. The performances were pre-recorded with their own teams. It led to several creative performances, like Megan Thee Stallion's Mad Max-inspired set. ViacomCBS, the parent company to both BET and MTV, could have run back the same playbook.

MTV cares a lot about its NYC traditions, but the 2020 VMAs may be more difficult than they need to be.

TikTok v. The United States of America

Today, TikTok has sued the U.S. government due to the president's executive orders to block the app's U.S. operations.

A response to executive orders. President Trump has issued two EO that impact TikTok. First, a 45-day transaction ban on both TikTok and WeChat. Second, a 90-day EO for ByteDance to divest both its assets and data. These orders have led to the TikTok US' acquisition rumors, namely Microsoft, Oracle, almost every FAANG company.

At this point, if your company hasn't been rumored to buy TikTok, is it even a tech company?

Legitimate concern. Jokes and politics aside, the U.S. government's concerns about TikTok are valid. The app's algorithm has been used to censor valuable information relevant to several protests including Hong Kong, Black Lives Matter in the wake of George Floyd, and other events. That data gathered and censored through the algorithm can be used in conjunction with the Chinese Communist Party's to influence TikTok users in the future.

Business as usual. I predict that the sale of TikTok US will proceed and this lawsuit will eventually be dropped or settled outside of court. TikTok may feel justified in the lawsuit, but the sooner the sale happens, the smoother sailing for all parties involved.

Trapital Player of the Week: Pharrell Williams

His new "Entrepreneur" music video with Jay Z was dope—great to see both Issa Rae and Tyler, The Creator get recognized. He also penned a new essay in Time, America's Past and Present Are Racist. We Deserve a Black Future. He's also working within the industry to get rid of terms like master and slave.

Salute to Skateboard P (not to be confused with Playoff P, who needs to get it together for the LA Clippers...)

Need suggestions!

My 13-year-old cousin is all about music. She wants to be a music producer. She plays the piano. Her favorites producers are Berry Gordy, Quincy Jones, and Timbaland. She also wants to go to Spelman for college. I'm so excited for her. She got it all figured out.

I want to provide her with the best resources and tools to support her future career in music. Any recs on good books, videos, or magazines that are ideal for a teenager?

Reply to this email and let me know!

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