Hip Hop Stars Understand The Real Business Models For The Music Industry

from the making-all-the-scarce-goods-valuable dept

It’s funny every time we hear someone say that the music industry is in trouble. There’s very little evidence that’s true. More music is being produced today than ever before — and plenty of people are still making a ton of money in the music business. What’s actually in trouble is the traditional recording industry, which is quite different than the music industry. When we point out business models for musicians, we seem to get a lot of pushback, but there’s more and more evidence that artists are successfully embracing the model we’ve put forth — and they’re raking in the cash doing so. Forbes just came out with a report about how much money the top hip hop artists are making, and they’re doing quite well. However, it’s not because of just the music, but how they’ve used the music to sell all sorts of other things.

It’s exactly the model we described (though, many could probably do even better if they further embraced freeing their music). The music itself is an infinite good and can be used to the musician’s advantage to make scarce goods much more valuable. As Lea Goldman, the associate editor at Forbes who put together the story notes: “they are smart enough to know that it’s not just about selling albums. That’ll keep you going for maybe two, three years tops. It’s about building an empire and plowing those earnings into lasting businesses that will generate income long after the music stops selling.” For some artists, that means branching out into totally different businesses. When people attack the business model we’ve described, they snicker at “selling t-shirts.” However, the article notes that hip hop artists are creating full lines of clothing that sell well and sell for a premium because of their association with the artist. Also, the successful hiphop stars all seem to recognize one of the key “scarce” resources they can sell: an association with themselves. Many of these musicians took in millions by doing sponsorships, by producing other musicians albums or simply by appearing on other musicians’ recordings. So, can we now set aside the myth that the music industry is in trouble? It’s only in trouble if you’re solely in the business of selling plastic discs — and that’s because those discs are increasingly obsolete.

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Comments on “Hip Hop Stars Understand The Real Business Models For The Music Industry”

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Sanguine Dream says:

Bout damn time...

Bad Boy…

Say what you want about the rap industry but when comes to using their money wisely they have shining examples as well as failures. Most people are so caught up in trashing today’s rap (which I agree has gotten progressively worse in the last 10 years or so) that they don’t realize that these people have their hands in much more stuff than their next album.

And as for the recording industry to the devil with them.

Mark says:

Re: We used to call that...

What? When did we call this scenario selling out? These are smart decisions made by these folks. “Selling Out” would be Pearl Jam allowing their tickets to be sold through ticket master and not through Monkey Wrench….. Oh wait..

On a side note, I regged a new site, not sure what I should put up, suggestions??? http://fuckyoumyspacefriend.com


sam says:

and mike….

i’ll say it again… if i as a musician want to only sell my music, you don’t have the right to rip me off!!!

you do have the right to completely ignore my songs! you also have the right to tell me that i’m going to slowly descend into poverty/homelessness… you don’t have the right to just go copy my music, and give it to 10,000 of your closest friends…


ps… the fact is, the vast majority of people in the music world don’t have the music fan base to do any significant revenue outside the actual music…

Jayzee, Prince, and maybe 100 others can do it.. but that’s out of how many music persona!

chris (profile) says:

Re: Re:

i’ll say it again… if i as a musician want to only sell my music, you don’t have the right to rip me off!!!

where the hell did anyone say that? sure, it will happen, but no where in this article or in any article previous has that been said?

you also have a right to get a real job, which is a right that you should probably exercise since selling music is a doomed proposition.

Mike (profile) says:

Re: Re:

i’ll say it again… if i as a musician want to only sell my music, you don’t have the right to rip me off!!!

Sam, I’ve said this to you probably 100 times already, and I’m not entirely sure why you still insist I’m saying something I haven’t.

I have NEVER said that it is okay to copy someone else’s work if they don’t want it copied. I haven’t. So please stop assuming that every time I say it makes sense for the creator of the content to let it go free that that means that anyone should just have the right to take it for free. I have never said that.

It might make me take you a bit more seriously if you could understand that simple fact.

Second point: copying is not “ripping off”. But, we’ve gone over that before too.

you do have the right to completely ignore my songs! you also have the right to tell me that i’m going to slowly descend into poverty/homelessness… you don’t have the right to just go copy my music, and give it to 10,000 of your closest friends…

We agree. That’s exactly what I’ve said before. Why do you think I’ve said something else?

Jayzee, Prince, and maybe 100 others can do it.. but that’s out of how many music persona!

This is what I find to be funniest of all. Whenever I point to no name artists doing this, people tell me “it’ll never work for the big name artists.” Whenever I point to big name artists doing it, I’m told “it only works for big name artists.”

Sam, I’ve pointed to a bunch of small no name artists that are using this EXACT business model. So, you’re wrong. It does work for others. In fact, it works great, because the music is more likely to get discovered and stand out, rather than hoping someone will pay for it.

Matthew says:

If the music industry is burning my money spent on a cricket phone… to have my sister call me – and I wanna here “madonna” “lucky Star” – I SHOULDN’T HAVE TO PAY $1.99 – FUG THAT.

They need to pay their artists properly… theres a shit load of money flying around in the industry WITH THE NEW TECH. They are just fugging the artists and the songwriters as THEY ALWAYS HAVE!!!

another techdirt crap says:

since when is selling an image selling music(guest appearances on other artists albums is also selling image)? This article is brainwash material, community college would give this article an F. Nothing is cited, pure opinion. Its like saying the car manufacturer Ford has the right business model for car selling because they branched off from engineering cars to web hosting. Only high school kids get this article because they get anything that is deemed “cool”, i.e. clothes from music artists. And since when has the ‘cd’ been or is going to be obsolete? Never! Any audiophile will tell you nothing and i mean nothing compares to what a sound engineer puts on a cd. Anything not having exactly bit for bit copy is not ‘real,’ PERIOD! Just pick up a home theater and stereo magazine and price the good equipment, hundreds of thousands of dollars worth of equipment is sold from unknown companies. This equipment will only produce the correct sound from an original ‘cd’. Otherwise it is worthless equipment. Hip hop artists are hoes unto themselves with a fully immature audience base. Here is something that is common knowledge, Corporate America TARGETS the youth and the youth is replaced by more youth who will buy ANYTHING, even if it sucks. Which is why the author of this article is way off base, he has no real understanding of basic economics to see that nothing new has been done by this genre of music. All genres of music have done something that this article ‘suggests’ hip hop is inventing(business model). That is why you should read articles done by real journalists. That way your not quoting crap to your friends. PURE bias and prejudice in this article. I’m DONE!

Anonymous Coward says:

Re: Re:

“since when is selling an image selling music(guest appearances on other artists albums is also selling image)?”

And so by having a genuine ROLEX watch on your wrist and dressing nicely says nothing about the person’s tastes or gives any clues as to the person’s financial status?

…maybe it doesn’t, but they would have you to think that it does since nice clothes and an expensive watch are not worn by everyone.

What i do know is that if someone was wearing a t-shirt with a rare band which I to like, I am more likely to stop that person and chat up a conversation with them… and possibly even create a new friendship – someone to take to the next concert to share details of, “hey – thats a cool shirt! where’d you get it?”

Calm down says:

Re: Re:

So do you feel better now that you have made your “clever” post in which you point out the flaws of the article (with a “few” choice all caps words for added effect) while at the same time bashing the hip/hop genre?

Now the original Forbes article does give the impression that hip/hop artists started this trend the people here at techdirt merely stated that hip/hop artists have started to learn how to make money in ways other than music.

Brian says:

Re: Re:

So. Whats the percentage of “audiophiles” who spend “hundreds of thousands of dollars” versus the people who think a digital copy is good enough? I’m willing to bet that the number is minute. I used to love Cds…I was slow to embrace iTunes, eMusic, et al but once I did, my CD buying numbers fell to about 2/year–and only because they’re bands I really really like. So, yes, in my world, and probably more others than not, CDs are obsolete. Get over it…sorry you wasted so much money on your stereo system.

sorry you dont make enough $ says:

Re: Re: Re:

r u the author of this crap article? because you defend music that has been altered from the original copy. you can point out every star in our solar system to prove a null point. once you convert an original cd to something other than an original, you do NOT have what the recording artist wants you to have and hear! not because its a cd, but because compression on any level will not output exactly like a cd. it might sound like it, but it is missing. these are the laws of physics when it comes to sound compression. so, what do you have? something like sounding but not sounding. by the way, the audio company BOSE loves people like you who think they know music enough to know BOSE is the best, NOT! you speak on behalf of the drone masses, sorry, i do not belong to that club.

Mystified says:

Re: another techdirt crap

REAL audiophiles believe that even a CD is woefully inadequate. The music distribution industry did itself in by adopting CDs. Music is an analog experience and is a long way from being matched by commonly available digital media.

I guess everybody is right – you’re an industry shill, which means you couldn’t distinguish real music from a horse fart.

flechette says:

Re: Re: Re: another techdirt crap

A perfect example of why Caveat Emptor still applies to buying CDs. This should give you ONE example of how poor ‘quality’ cd music can be.


I think most people are missing the point of the article entirely. This has very little to do with mp3s and downloading songs, and everything to do about marketing. The mentioned artists market themselves in a way that whole other genres of music are just failing to do.

How many nightclubs does Greenday own?
How many appearances does Britney make on albums that aren’t her own?

Sure, there’s a few clothing lines here and there in the rock/pop world, but the hip hop scene seems to just have hit the nail on the head.

Mystified Wannabe says:

Re: Re: another techdirt crap

‘Music is an analog experience and is a long way from being matched by commonly available digital media’ true & not true!
Analog is great for stereo listening only. But, digital gives you surround sound(DTS). Now if a cd or music dvd is mastered for surround sound, analog can take a backseat. Just to let you know there are cd players that output analog signals(pricey).

mystical says:

Re: Re: another techdirt crap

‘The music distribution industry did itself in by adopting CDs’. Pure speculation. You should of said the computer and internet did the music industry in. Before cd copying there was tape copying. How about you say that tapes hiss big time, and that digital to analog converters exist, and vice versa. Analog to digital converters still record and produce the ‘hiss’. So, what is so quality about ‘Analog’, besides left and right speaker configuration? You see, the point is a sound engineer made a ‘cd’ to sound a certain way. When you degrade the sound with compression you defeat his intentional signal. Please read peoples comments word for word. As you see, you have proved yourself wrong. Unless of course you love the hiss?

no dah says:

Re: Re: Re:2 another techdirt crap

Of course you don’t need to compress a cd audio to rip it. But, I personally believe the masses leave the settings in their music player to copy at a sub standard rate to cram more sub standard sound onto some device to make more space for compressed music. 400-600 megs for 1 cd on an ipod or 4-6 compressed cds in place of 400-600 megs on an ipod. on top of that these cd albums are downloaded from p2p sites, etc., who knows what quality these are?

Lance (profile) says:

And not just Hip Hop

“Everyone I talked to about television, people in the music business, told me, ‘You better not be doing television on a regular basis or people won’t come to see you. Why buy a ticket if they can see you on television?’ Well, that was a myth. It wasn’t true.” – Porter Wagoner, Country Legend


Anonymous Coward says:

This site has totally been jacked by mouthpieces of the RIAA and MPAA. They are jumping at the chance to dispute any reference to infringing their legal rights. I just installed an open network where my neighbors can listen to my music collection through my wireless network. I bought every one of these CD’s that I then ripped onto MP3 because I got tired of loaning them the CD’s. They can only listen to one at a time…am I starving an artist?

Dave Allen (user link) says:

Don't neccesarily agree...

I think the premise that the recording industry is in trouble and that the music business is not is fair. I still think that the industry as a whole is suffering, what was once an $18 billion industry is shrinking fast because the record labels and most recording artists initially failed to embrace the new paradigm. The argument you put forward could be applied just as easily to the indie music world. It is not getting any better either. Record labels need to turn themselves into what they already do best – marketing and promotion companies. Forget owning the masters and copyrights, make money helping to brand, market and sell their clients music.

Dave Allen Pampelmoose

Fred says:

Every time Mike posts one of these, I think “bring it on!” I can’t wait until the Mike Economy is in place, and everyone else subsidizes my music listening pleasure. All I want is the music. I don’t want the concert (I’m old and have kids, so no more rock shows for me). I don’t want the t-shirt or the fan club or the exclusive tracks or the hip hop clothing line. I couldn’t possibly care less about “associating” with the “artist”. I just want a high-quality digital track to play on my iPod and through my non-audiophile home theater setup. I willingly pay a buck a track for that now, but if I can get it for free because other people buy the “other stuff” that will support the future music biz, great. It’s great to be a free rider.

marv p (user link) says:

my website is the new music industry business model

I wanted to introduce a new website that we have established (www.mododi.com) here in the Midwest. Mododi originally began as a documentary on Midwest music, but later became a web based community that focuses on the story of high-end independent artists trying to break into the industry mainstream. Their struggle to do this, while continuing to make good music and remain true to themselves, makes for a very compelling storyline. Mododi combines the mediums of video and audio to create an online presence that displays more of the artists than the traditional “Youtube” or “Myspace” method that many are currently using. First, Mododi creates a community of like minded artists that, first and foremost, are dedicated to making good music. This can not be stressed enough, as the music is what drives the site. Mododi keeps the focus on the music by creating a play list of the hottest independent artists in the region and giving them a forum for their music to be heard. The video clips on the site further serve the purpose of introducing and exposing the artists to a broader fan base. The artists and their music are not censored which, to us, would serve no real purpose. We are proud of our site, as to date, we have not seen any other entity which is doing what we do, the way that we do it..we are the future of the industry…enjoy!!


Marv P

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