Kanye West - The Music Industry's White Knight and Black Sheep.

The record industry is long overdue for a good mix up and Kanye is about to deliver it.

Picture this… it’s a Monday night around 8:30 pm. You’re done with work for the day, you’ve had your dinner and have moved to your couch to graze before bed. Chances are you’re rewatching your favorite show for the 27th time while mindlessly browsing the same four apps on your phone.

10 minutes pass and you open up Twitter. A new Kanye tweet. A minute passes… another tweet from Kanye. And then another. What’s our presidential hopeful going on about this time? Buckle up, it’s time to tune into another wild rant in real-time.

That’s how it went down for me. Except this rant isn’t wild. He’s right on the money. Kanye launched a war on the music industry and the predatory contracts that aren’t equitable to both parties. You don’t have to agree with everything he says or represents, but in this situation, he is right.

Let’s take a few steps back here and talk about the old Kanye, straight from the go Kanye. Before The College Dropout, Kanye was the in-house producer for Roc-A-Fella Records from 2000-2002 and made significant contributions to Jay-Z’s The Blueprint album. His real goal was to become a rapper but he was met with resistance across the industry because he was viewed as a producer first. But Jay-Z reluctantly signed Kanye as a rapper to Roc-A-Fella to ensure they didn’t lose him as a producer.

Kanye had very little leverage when brokering this deal. His image didn’t fit what was relevant at the time. Capitol Records passed on him along with several other majors. As a result, the deal Kanye signed with Roc-A-Fella wasn’t favorable to him. He ultimately signed away his master recordings aka masters.

What are masters and why are they significant?

In the music business, a master recording is the official original recording of a song, sound, or performance. It is the source from which all the later copies are made. The record label typically retains the rights to the masters which entitles them to the lions share of the revenue.

These record deals are predatory by nature. They find emerging talent and lock the artists into deals that sign away their rights to their recordings in exchange for a cash advance that will be recouped against artist royalties. In some cases, the artist is prohibited from releasing on other labels.

This issue isn’t unique to Kanye. It’s affected the likes of Prince, Taylor Swift, Lil Wayne, and countless artists in between.

“If you don’t own your masters, the master owns you.” Prince

Prince’s feud with the record industry began in 1993 with his fallout with Warner. They owned his masters, his name, and his entire brand. He felt like he was a slave to the system and decided to make things public by writing the word “slave” on the side of his face.

Photograph: Brian Rasic/Rex Features

Prince famously won back his masters in 2014 after fighting constantly for over 20 years to get them back. And it wasn’t because the record company suddenly came to an actual agreement with him - it was the Copyright Act of 1976 that gave Prince the right to terminate the master recording copyright after 35 years of the publication of the work. You can read more about this on Billboard.

Even Taylor Swift has fallen victim to this. The masters for her first six albums were owned by Big Machine Label Group which signed Taylor Swift when she was 15. When Big Machine Label Group was acquired by Scooter Braun, so were the masters to Taylor Swift’s first six albums. The acquisition was reportedly valued at $300 million.

What did this mean for Taylor Swift? She was honored as Artist of the Decade by the American Music Awards last year and she alleged that she was prohibited from performing her old songs on television because it would technically be re-recording her music before she was allowed to. She wasn’t allowed to perform her music anymore. Scooter Braun finally responded and said she can and should perform any song she wants at the American Music Awards. While it appears the issue was resolved, it is insane that a label can wield this much power.

And for Lil Wayne, it was really bad. Lil Wayne entered a 4-year battle with Birdman and Cash Money which essentially boiled down to a restrictive contract he signed with them in 1996 when he was just 14 years old. The tipping point was having his album Tha Carter V’s release pushed back repeatedly since 2013. He had no control over the matter. He took to Twitter to express his frustration:

The album sat on ice until it was finally released in 2018. Five years is a lifetime in the career of an artist! In those five years, Lil Wayne had to jump through hoops to release any music at all. He resorted to releasing Free Weezy Album exclusively on Tidal in 2015. Cash Money attempted to sue for $50 million under the claim that the artist-owned service has no right to host Lil Wayne’s Free Weezy Album. The album finally made it to the rest of the streaming platforms earlier this summer. Lil Wayne also collaborated on an entire album with 2 Chainz titled ColleGrove but due to the record label issues he was facing, he was not allowed to be credited as a primary artist on the album.

No label should have this much power. Imagine what Lil Wayne’s career (and bank account) would look like if this feud with Cash Money never happened. His career was irreversibly damaged in his prime and we’ll never get to know the true potential of Weezy F. Baby. And yes, I’m still mad at Birdman.

Why are the labels are stalling to put a price on Kanye’s masters?

The answer is simple: money left on the table. Coming up with a valuation for his masters is nothing short of a tough task. His catalogs worth in 2020 will absolutely be less than what it is worth in 2025 or 2030. Kanye alluded to it with this tweet:

As streaming is becoming the norm, the recording industry revenues have quickly returned to where they were in 2007 and it’s only going up from here. Streaming accounted for 79.5% of US recorded music revenues in 2019.

Streaming revenues in the US have over doubled from $4 billion in 2016 to $8.8 billion in 2019. In that same period, US paid music subscriptions have almost tripled from 22.7 million to 60.4 million subscribers.

As these numbers continue to grow, the labels are having a difficult time putting a fair market value on the masters. If Kanye’s masters were worth $300 million today, could they be worth $450 million in 5 years? That’s a lot of money that could be left on the table for the record label. But ethically speaking, should they be the ones making this money, or should Kanye West? The same idea applies to any other artist in this position. Ideally, Kanye’s family should be able to live off his royalties after he passes.

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Challenging the status quo

With the series of tweets he fired off last week, Kanye has taken on the role of being the white knight and black sheep of the record industry to ensure all artists are treated fairly.

His vision is to take a page from the Y Combinator SAFE program to bring a level of simplicity and transparency to the recording industry. He tweeted out all of his contracts. He has even published his guidelines for future recording and publishing deals. His guidelines are as follows:

  1. The artist owns the copyright in the recordings and songs and leases them to the record label / publisher for a limited term. 1 year deals

  2. The record label/publisher is a service provider that receives a share of the income for a limited term. The split can be 80/20 in the artists favor

  3. DEPENDANTS Artists must be dependent on no one but themselves to manage their catalog. You should need NO ONE else to understand the business you’re in.

  4. LAWYERS the first thing that changes about Record Deals is actually lawyers. We need Plain English contracts. A Lawyers role is to IMPROVE deals…. not charge for contracts we cannot understand or track. Re-write deals to be understandable from FIRST READ.

  5. EQUITY & BLANKET LICENSES ARE THE MAJORITY OF FUTURE NEW INCOME. If you’re with a major you have invested your ‘songs’ as shares in their power to get equity and deals. Almost ALL new deals now are based on ALL songs going to a store or app. The equity is the Artists

  6. ADVANCES ARE JUST LOANS!! On Artists re-signing these stop. Advances are Loans with 75% interest rates (or worse). NO other business in the world takes a look at the business, buys shares, starts to profit when it profits. Record Companies have to buy into you, not loan you.

  7. ROYALTIES Again back to dependents. You need a business manager to read how you did? So you pay to see your money!!! NO MORE. Royalty portals need to show (and do not now) Every song you delivered Every store you are in How many streams per song Income per song

  8. PORTALS Are not just for royalties. They are for your entire business.  Every audio file, every asset, every deal stored WITH the money. Money and Music must stay together. When your term ends, download it all. Leave.

Are these terms enough to make deals more equitable for artists?

That’s it - I’m calling my lawyer!

I reached out to my old colleague and esteemed entertainment attorney, Mark Quail, for his opinion on the guidelines and ideas laid out by Kanye. I was hoping for maybe 1-2 sentences, but he has blessed us with much more.

Here’s the problem with Kanye’s view: Record labels take unknown artists with potential and put a lot of money into them by way of paying for recordings and making videos and then even more money promoting those records and videos.  It is a common trope in the record business that seven out of 10 artists lost money, two out of 10 broke even, and one out of 10 made so much money that it paid for the other nine. 

No record label can guarantee that they can make an artist a success. Furthermore, no artist can guarantee that they will be a success. All parties take a huge gamble when signing long-term commercial recording agreements. In return for investing the money that they do, the record company usually wants to own the masters and profit from them forever. The amount of money that can be made initially is great if there is success and it continues to pay nicely when those records get older and they form part of the label’s catalog.

The terms Kanye is proposing are the type of terms that an artist should aim for once they have the money and they are out of their first record contract. That’s what the Rolling Stones did when they formed Rolling Stones Records in the 1970s. But to think that you will get those favorable terms on your first record agreement from a major label is wishful thinking it best.  The risk is too high for a label to expect any type of decent return on investment.

In connection with Kanye’s comments regarding plain language contracts, that’s a common wish. The problem is that well written contracts are absolutely necessary if you want to stay out of extremely expensive litigation situations. Simple contracts that leave room for multiple interpretations of what the contract terms actually mean are a recipe for an expensive lesson in how not to do things in my opinion. If done correctly, all that complex lawyer language provides clear answers for anybody looking at the contract to determine how to move forward in the future.  Furthermore, most artists I have ever met or dealt with are not interested in spending time with the contract. They are much more focused on getting things like the side-chain compression on the bass line done just right and they pay their lawyer to get the language in the contract just right.

I think any lay person or junior artist has to look at Kanye‘s comments not in context of what is possible in these major label record contracts but in the context of a big artist who is trying to publicly renegotiate his contract.  It begins to make a little more sense when viewed that way.

Frankly, I was totally against the record industry until I got this response from Mark. He brought a lot of unique perspectives on the whole situation. Mark posts a lot of great information and advice for people in the music industry on his Instagram. Highly recommend following him - this post is a knowledge bomb.

So… what’s next?

That’s up to Kanye and his lawyers.

In an ideal world, Kanye can publicly renegotiate contracts for himself and a few other high profile artists. Kanye is in a unique position to unify artists. His efforts can lead to unprecedented transparency in the record industry. If Kanye’s suggested guidelines become common practice, the next generation of musicians will have a resource to reference when closing their next deal. Deals will become more equitable for artists.

In the grim reality we live in, Kanye will be met with significant opposition from record industry executives. Sure, maybe he’ll be able to purchase back his masters, but that would ultimately be a PR play from the labels. Major labels survive and thrive through their predatory practice, but they aren’t about to scrap their business model over one artist.

I’m unsure what’s next. I would love to see more transparency in the record industry. We’re overdue for a good mixup.

One thing is certain - Kanye is too powerful to be canceled. He will not become the industry’s sacrificial lamb. I applaud him for taking this stance and taking on this issue. He is the harbinger of the record industry. This is Kanye’s calling; his magnum opus.

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Artwork: @babygotbackhead