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This week:

1.The clear-think behind the economics of a song
2.A prediction on the music industry

…And just like that our 2010 dopamine levels are restored.

The Kendrick Lamar-Drake rap beef is something we didn’t know we needed. But as aging 30 year olds, we’re too seasoned to look at the surface.

So we decided to ask the question:

What are the economics of a petty ass feud?

Well it’s interesting but unsurprising.

The common thread? Universal Music Group (UMG). Both artists’ labels are either tied to a UMG as an owner (Aftermath/Interscope) or distributor (OVO).

The outcome is irrelevant. The ongoing feud serves as a financial boon for UMG, showcasing how even amidst the drama of rap battles, corporate entities like UMG emerge as the ultimate winners.

Let’s go.

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Why song proceeds are so complicated…yet so simple

You have a song/album/LP. There’s a music label who likes your music.

Your problem is that you have this art but can’t put it out there to enough people to listen to.

The music label’s problem is that it can’t create art but it knows how to distribute it.

You partner with the music label, and in exchange for a royalty, they distribute your music, promote you, create a brand around you.

But the music label tells you, “we’re taking a risk on you. You may not be successful, so we’ll have to work really hard to make sure you make it big. Hey, if you’re successful….we’re successful, right?”

So what does the typical split end up looking like for a song?

80/20 is the split of a song between the label and the artist.

The label takes 80%, and you (the artist) get 20%. There’s also an advance that the label pays you, and it varies.

Now, it works differently for bigger artists, some have a bigger split, and it usually depends. But that’s not YOU.

But wait, that’s a shit ton of money for my effort not coming to me:

Oh yeah.

There’s a few standard deals across the music industry and the 80/20 split is one of them.

Labels also have deals with distributors, and everyone up and down the value chain when it comes to delivering a song.

Distributors? Isn’t all music on Spotify anyway?

Distributors work with radio stations, streaming apps, record stores and everyone in between, but you’re right. The majority of new music we listen to now comes from Spotify, Apple Music, Tidal, etc.

So what’s to prevent Spotify or Apple become a label and sign all these artists?

And we come to prediction time on Strategic Bites:

In the next 3-5 years, we’re going to have a large technology company with a huge base of users begin to featurize music.

This means that the company will explore signing artists big and small, and turning its own user base into fans of new music released by these artists, and then forming deals with music streamers while cutting out any middle men entirely.

The deals offered will be more favorable that yearning artists get currently. This will enable throwing a lot of darts at the board and seeing what sticks.

What AI Made This Week

Sick Fits by Ahmed

Video of the Week

Mehdi Hasan interviews 3 former Biden officials on why they resigned over the war in Gaza. Really great policy perspectives here.

Have a great week!

Ahmed and Peter