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Hey! I normally send this memo on Mondays but I moved it to today because of Martin Luther King, Jr. Day. Two quick updates:

Next Trapital Podcast: music exec Binta Brown. We talked about her transition into music, where she thinks the industry is heading, and her work on the Black Music Action Coalition. To listen when it drops, subscribe on Apple Podcasts,​Spotify, YouTube, or wherever you get podcasts.

Webinar on hip-hop album rollouts with Ernest Wilkins. Next Thursday 1/28 5pm ET, I'm hosting a webinar on the top hip-hop album rollouts of all time with Ernest Wilkins from Office Hours! Should be a fun conversation. Sign up here to register.​

Today's memo breaks down Spotify's podcast strategy, Cardi B and the cost of music videos, and Aaliyah's estate's fight to get her music on streaming.

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Spotify's podcast push--too early to call

Last week, Citi told investors to "sell" Spotify stock due to concerns that its nearly $1 billion podcast investment has not led to paid subscriber growth or app downloads. Spotify's stock price has nearly tripled since its pre-pandemic number. The soaring price would imply that the company's bet on podcasts is a homerun hit. If Citi wants to temper excitement, I get it. The stock market went wild in 2020. But it's way too early to make that call on Spotify's investment.

Wrong metrics to focus on. Citi's focus on paid subscriber growth and app downloads is premature. Spotify's exclusive podcasts are still available on its free tier. Users don't need a paid subscription to hear the latest episodes from Michelle Obama or Joe Rogan. This is where Spotify differs from Netflix. I won't be able to watch Ozark season 4 without a paid Netflix subscription (or if needed, my mother-in-law's password). The same customer acquisition cost calculations won't work.

I would bet many people, myself included, aren't paid Spotify subscribers but had the app on their phone and now use it more often to listen to certain podcasts. It's one reason why analysts should separate Spotify's (and Apple's and Amazon's) podcast performance into short- and long- term goals.

Short-term: ad revenue and customer retention. One of Spotify's biggest podcast advantages is its ability to measure consumption and charge for it. Spotify can charge advertisers based on listens, not downloads. It can also do streaming ad insertion. If it masters ads, it strengthens its play to become the "Google for audio."

Retention is also a huge play. If Spotify can make the audio experience more convenient for existing subscribers, it will reduce churn and prepare for its growing competition.

Long-term: negotiation with record labels, profitability. Spotify CEO Daniel Ek's goal is for podcasting to make up a bigger share of its listening, which will make the company less reliant on record labels, pay the labels less, and increase profitability. Spotify's annual revenue is around $8 billion, but 70% of that goes to the content rights holders. But if Spotify uses its podcast leverage to negotiate that down to 55% or 60%, that could add $1 billion in profit. The potential is huge, but it's still early.

Read more about Citi's downgrade of Spotify in Variety.​

Cardi B, music videos, and their evolving role

Last week, Cardi B shared how much some of her music videos costs. "Bodak Yellow" cost her $15,000, while "WAP" cost $1 million. It's a great opportunity to break down the role of music videos in today's era.

It's still a marketing tactic. Today, most music videos don't get the crazy budgets they did in the Hype Williams era. The MTV-to-CD-sales pipeline is long gone. But videos are still a top-of-funnel promotional tool to drive business elsewhere.

A great music video will increase streams, concert tickets, merch, investments, and everything else in the artist's revenue mix. Sure, artists also get revenue from YouTube views, but it's not much. It would take nearly 1.5 billion YouTube streams for "WAP" to cover its $1 million budget in YouTube revenue. It's possible, but it's not the primary goal. "WAP" generated millions of dollars in earned media from all the pearl-clutching responses.

Budgets rise over time. "Bodak Yellow" technically has the highest ROI of all her videos, but it's not an equal comparison. That song dropped almost four years ago, when Cardi was still collecting checks from Mona Scott-Young on Love & Hip Hop. Her music video budget matched her status. The director, vendors, makeup, and more likely charged her less too. She probably got a few deals due to her low profile. Music exec (and next podcast guest!) Binta Brown broke this down briefly on Twitter.

But all that changed when Cardi became a superstar. Her record label upped her music video budget accordingly, and the expectations rose. She quickly made it on the 2019 Forbes' Hip-Hop Cash List at $28 million and lowkey implied that the number was too low! All the discounts are gone after that.

Next-level video? Many artists now want the video that checks all the boxes: performs well on TikTok, increases concert ticket sales, sells merch, wins awards, and helps the song top the Billboard charts.

Focus matters more as the platform options increase and the success metrics grow. It makes life easier for the artist that knows what they're good at and doubles down. But it's harder on the artist that's focused on everything.

See the cost for some of Cardi B's other music videos here.​

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A generation misses out on Aaliyah

Last Friday would have been Aaliyah's 42nd birthday. This August will be 20 years since she died in a plane crash. Each anniversary and milestone is another reminder that most of her music is not on any digital streaming providers.

As an Aaliyah fan, it's frustrating! In 2019, I wrote about the reasons for posthumous career challenges. But Aaliyah's estate challenges are on another level. There is a great Complex article on why we haven't heard Aaliyah's music and the role of her uncle, Barry Hankerson, who currently owns the masters for most of her music. I have nothing new to add there, but let's focus on what we've missed as a result.

Lost relevancy. When the music rights owners hold back, it makes it difficult for the artist's legacy to live on. Remember the 2014 Lifetime biopic on Aaliyah? Zendaya was cast to be Aaliyah, but pulled out because "the production value wasn't there" and "there were complications with the music rights." The end result was a film that got hated on more than Virgil Abloh's Pop Smoke album cover. If all parties were on board, the film could have been a lot better. The poor reception from that project made it tougher for future projects to reach the masses.

To be fair, there are other challenges outside of her estate's dealings with the music rights holder. Aaliyah's story can't be discussed at length without talking about her illegal relationship and marriage to R. Kelly. It complicates the ability for the storytelling to be transparent and get support from all parties involved.

Streaming's boost. Songs like "Are You That Somebody," "Try Again," or "Rock The Boat" belong on the same streaming playlists as other artists from her era. Her songs belong on all the 'Best Songs of the 90s' podcasts that the major record labels and streaming providers have released. Sure, many of Aaliyah's songs and music videos are on YouTube, but it's not the same.

Last week, Aaliyah's estate said that the late singer's music release on streaming is "not within our control" but is "working diligently to protect what is in our control —Aaliyah's brand." It's a carefully-worded and thoughtful response, but Aaliyah's brand can only go so far without the music behind it.

Share this week's memo on Twitter, LinkedIn, or Facebook.​

Coming soon

Podcast interview with music exec Binta Brown - Available wherever you get podcasts. Click here to get the key points and lessons learned via email.

Webinar on the best hip-hop album rollouts with Ernest Wilkins - Thursday 1/28 5pm ET. Join us! Sign up here.

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