Trapital - when keeping it real goes wrong
when keeping it real goes wrong
brought to you by Foster
Hey! It's been an unusual past week in hip-hop, not gonna lie. We started with Ja Rule finally getting his flowers. Then, we learned more about Nicki Minaj's "cousin's friend" than we ever needed to know. The only thing normal was Certified Lover Boy topping the charts.
Drake's #1 status is another win for Universal Music Group, which goes public on Tuesday. The major record label is valued at $39 billion ahead of its spinoff from Vivendi and listing on the public market. This deal is a culmination of the sky-high catalog sales, the rise of streaming, music licensing deals, and more. UMG CEO Sir Lucian Grainge himself is expected to net at least $150 million!
With all that money, Grainge could have bought Genius, blockchain-based streaming service Audius, and invested in Clubhouse. Those are all the topics we're gonna cover in today's newsletter. Let's dive in.
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new Trapital Podcast: DJ Semtex
The HipHopRaisedMe author and podcaster came back on the Trapital Podcast to chat about Donda, Certified Lover Boy, and Semtex's career in hip-hop journalism. We talk about the differences between radio interviews and podcast interviews, post-pandemic live events, and more. If you missed Part 1 of our recent convo on Drake, Kanye West, and Rihanna, check it out here.
On the Trapital Podcast, hip-hop's heavy hitters explore their ideas that helped them level up their game. Learn more here.
why Genius sold for less money than it raised
Last week, Genius was sold for $80 million in a fire sale to MediaLab.AI Inc. It was sold for $80M, which is less than it raised! It's a disappointing exit for a company once valued near $1 billion, but it's a reminder of the importance of platform dependency.
Hip-hop lyrics were the beginning. In the early 2010s, Rap Genius came out the gates hot with its bro culture image. Hip-hop lyric websites weren't new, but Genius stood out because of its annotation. People could add context to popular lyrics, which viewers could see with one click of a button. Often, the artist offered that annotation.
It created a world where Jadakiss could explain what he meant when he said he had, "the scales that they weight the whales with." We could quickly clarify whether Lloyd said "she's fine, too" or "she's 5'2." It was a beautiful thing.
Early investors like Andreessen Horowitz wanted Rap Genius to annotate the entire internet. A sample of that vision is on this Business Insider webpage when the company raised $40 million. As Nieman Lab's Joshua Benton wrote,
But Genius learned the hard way how dependent its platform was on another universal internet layer—Google.
When "annotating the world" goes wrong. In 2013, the company tried to pull a fast one on Google. It artificially juiced its value on Google search rankings by asking for other sites to embed code on its site that linked back to Genius. Google hates when sites play games like this, so it punished Genius on its search engine optimization. In many instances, Genius didn't show up until the 5th or 6th page—even when people searched for "rap genius."
Then in 2019, Genius tried to sue Google for copyright infringement because Google display songs lyrics from Genius at the top of its search engine results before it links back to Genius. But the courts dismissed the case because Genius did not own the copyright itself.
The shift to hip-hop media. When Genius sold last week, it sold a multimedia company focused with a focus on hip-hop content. Standalone media companies can still be successful, but it's not quite the unicorn opportunity that "annotating the internet" once was.
According to Bloomberg, many of Genius' investors and employees won't be paid out in full due to the company's obligations to preferred shareholders. I saw a copy of the cap table, which confirmed the seven and eight-figure payouts that most of Genius' C-level staff received.
Meanwhile, VP of Content Strategy, Rob Markman, the most recognizable media personality at Genius, came away with just under $700,000. He was the only Genius content creator I saw named on that cap table. It would have been great to see more of Genius' longtime employees celebrate this moment. But unfortunately, this is how preferred stock works, especially when a company can't pay back its investors.
Genius' startup journey is a lesson in many things. In the meantime, best of luck to all the former employees as they find new employment.
Read more about Genius' sale in Bloomberg.
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Foster has a selective application process, but Trapital readers can join for free! This month, I'm hosting a special Trapital Room in Foster.
Come through! This week we're exploring another potential Trapital story—influencers investing directly in artists. There's a lot to break down. Sign up here to join us.
Audius: streaming's web 3.0 solution?
Audius, a blockchain-based streaming platform, just raised $5 million in a strategic investment round from Nas, Pusha T, The Chainsmokers, Katy Perry, and more.
The Web3 streaming provider. In recent years, several platforms have aimed to improve how artists are compensated in the streaming era. Audius is tailor-made for the Web 3.0 era of the internet. Users can buy $AUDIO tokens to gain ownership and governance in the company. On Audius, 90% of revenue flows straight to the rights holders, while 10% is used by Audius to run the platform.
Audius launched in 2018, a few years ahead of the NFT wave. The platform now has over 100,000 artists and 5 million users.
An alternative, but not yet a replacement. Some believe that Audius will rival Spotify, but it's still early. In a press statement, The Chainsmokers summed up their use case for Audius, which many others will likely follow:
"We plan to upload the stuff we play live, which we wouldn’t typically share on traditional music platforms. It’s a purer alternative to the more polished album rollouts that we will continue to deliver. As an artist it’s empowering to share different creative choices and to test stuff out in a lower-stakes environment.”
Audius will be a place for hardcore fans who want the B-sides and deep cuts. In turn, those artists get to invest alongside their favorite artists who are also owners of the platform. Audius has recently partnered with TikTok, which may strengthen its ties with major label artists.
The platform has the attention of fans and artists on the cutting edge of web3. It's a lucrative place to be, but any company that wants to challenge Spotify will need a solution for the back catalogs, which accounted for 54% of UMG's 2020 recorded music revenue.
Read more about Audius in Rolling Stone.
can Clubhouse stop the competition?
On Saturday, Clubhouse was buzzing because of an ongoing financial dispute between entertainment marketer Karen Civil, rapper Joyner Lucas, comedian Jessie Wo, and countless others.
I'm not gonna break down the "he said," "she said," you can read the details here. But I will break down some interesting things I noticed.
Clubhouse's big weekend. On Saturday, the main room with Karen and Joyner was maxed out at 8,000 capacity. There were several spillover rooms, livestreams on YouTube, and play-by-play commentary on other platforms. It had to be the biggest day on Clubhouse since Elon Musk's interview in February.
But Elon Musk is one of the richest and most famous people in the world. Meanwhile, Karen Civil and Joyner Lucas are mostly known in entertainment and media circles. It's a reminder of the power of Black culture, which was a key driver of content.
Clubhouse may have had a head start in drop-in audio, but its decline in usage and increasing competition are a challenge. The saving grace for Clubhouse is that many of its investors are influential cultural figures too. If those figures ever become the subject of drama, they can have the convo on the platform they invest in. But that's a "stars aligned" scenario. Clubhouse may need more than that to recapture its pre-vaccine popularity.
The entertainment industry woes. Last December, Desus Nice shared an evergreen tweet that I wish they could mint as an NFT because it's that good.
In that Clubhouse room, folks were casually talking about things that frustrate many people about the music industry:
These are all reminders of the nonsense that still goes on! But it's also why I support so many hip-hop artists who have invested in better solutions. They lived through all this shit and want better for the next generation.
Certain people will always desire an easy way out. That will always be there. And unfortunately, grifters will always be there to take advantage. But no one wants to be told, "just keep pushing," or good music will find the right people, but that's the reality
For more on this Clubhouse room, read this article in Complex.
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