Nigerian record labels are facing horrendous times, with the
likelihood of most of them packing up, Nigerian Entertainment Today
investigations have revealed. If the local business model is not
overhauled to accommodate the peculiarities of a chaotic system, at
least 10 labels will either close shop or move into other aspects of
entertainment before the end of the year, experts told us over the
weekend.
The last 17 months have clearly shown that the Nigerian music scene
has gone down a path that leaves record labels and the entire recording
industry endangered. And it’s quite simple to explain: music labels are
spending but the means of recouping investments, ill defined. Artistes
on the other hand, are smiling to the bank. It’s been this way for years
now: Take for example, Record label ‘A’ signs Artiste ‘B‘ on a three
year recording deal, with a contract stating the artiste has to release
two albums during this period of time.
Record labels and the entire recording industry are endangered.
The label spends heavily on the signee – from housing to recording,
photo-shoots, publicity, marketing the brand, merchandising, video
shoots, transportation, A&R development and a whole lot more. Even
if the artiste yields success with his/her debut, creating a number 1
hit and bestseller, it is impossible, from our findings, for the label
to recoup their initial investment.
How do labels make money? Profit margin from music sales is next to nil in Nigeria.
The cost of producing a compact disk at mass production is N29. That
leaves N21 for the label/artiste. Back then we used to pay upfront for
an album but when we aren’t sure of the artiste, we change to ‘pay as
you sell’ formula’.” a top executive at Okeysonic Entertainment, one of
the popular marketers in Alaba tells NET.
How do labels make money? The general notion is that bulk of the
label’s profit should come from music sales. Sadly, profit margin from
sales is next to nil in Nigeria. With a record selling for as low as N40
in Alaba (the headquarters of physical distribution) and a maximum of
N120 (less than a US dollar) on the CD stands/stores, the music has
almost become worthless. One CD unit in the US ranges from $5 to $14. A
song on iTunes is around $1. The Nigerian model does not encourage
exorbitant jewel CD casing, and singles are rarely sold.
Music pirates have proved to be a big menace in the entertainment industry.
Following the departure of the big international companies, and the
collapse of what remained of a distribution system, Pirates had a field
day, proving to be a big menace to the industry, until the early 2000s
when big names like Big Boss Jiggaman, Kev D and co morphed into legit
agents, after seeing the possibilities in the industry following
marketing deals with 2Shotz and the Trybe Records crew.
The formula worked for a minute. But, according to pundits, the
disadvantages that came with it far outweigh the positives. Biggest
negative: the value of the music contained in a CD was greatly
compromised, as the industry unwittingly gave a critical role and power
to a group of traders with no stakes or music business education.
Kenny ‘Keke’ Ogunbe, C.E.O of Kennis Music at the Nigerian Entertainment Conference, April 2013.
‘Record Label owners today see music as bad investment due to the
monstrous problem of piracy. Pirated works can never stand the test of
time because the quality is ever and embarrassingly poor‘, Kenny ‘Keke’
Ogunbe, C.E.O of Kennis Music said in a speech delivered at the Nigerian
Entertainment Conference, April 2013.
‘We’re paying the price now’, one veteran told us. Sales have
diminished over the years, quality of music and packaging at its lowest,
with hundreds of marketers unable to put out albums.
Artistes are breaking bank; making money from shows, signing endorsement contracts and walking away with the bulk of profit.
It’s so bad that a popular marketer T Joe, who once paid up to N20m for a Psquare album is on the verge of closing shop.
‘Labels don’t make money from CD sales, where else do you want to get
back your investment let alone profit?’ CEO of Chocolate City, Audu
Maikori comments.
With Alaba going under, will digital platforms step in and save the
day? ‘Monetary digital distribution in Nigeria is still at its infant
stage. It will take companies like iTunes, Spinlet, iRoking, YSG Hub
some years to finally dominate and reduce free/illegal downloads’, Sola
Fanawopo of Financial technology says.
And even when CD sales show a glimpse of hope, it’s still downhill
for returns. For example, Burna Boy‘s label, Aristokrat Records, we are
told received a sum of N10m from Alaba marketers, UBA Pacific for his
newly released album ‘L.I.F.E’ which dropped last week and is said to be
doing well in the market. But can that amount cover the cost incurred
shooting his three high budget videos, recording sessions, photo shoots,
album listening parties, etc? NO.
Most labels are not part of these deals. In fact only recently did
some labels – including Storm and Kennis – begin executing 360 deals
meaning they reserve management rights and have the right to share in
proceeds from brand endorsements and other career related loot.
There’s not a single record label in Nigeria that can be considered a
big business. The Allwell and Tony Elumelu Foundation, headed by the
globally respected Michael Porter recently honoured 50 fastest growing
businesses in Nigeria, highlighting giant strides in businesses from
technology, marketing communications, finance, agriculture, oil and gas,
etc. There was no record label or music business on the list.
On the average, each of the top five labels in Nigeria, including
Empire Mates Entertainment, Chocolate City and Mavin, attract earnings
of N130m P/A covering sales commissions, performance commissions, and
earnings from endorsements. On the average, according to NET
investigations, each label will have to spend up to N80m, covering music
videos, producers and session fees, accommodation, travelling,
transportation, salaries, running cost, PR, styling, payola, etc.
Empire Mates Entertainment
Mavin Records
ChocolateCity
Meanwhile, an average top 5 artiste, like Wizkid, D’Banj could earn
up to N500m in one year from shows, appearance fees and endorsements.
Label commissions are on the average, around 25%, leaving the artiste
with N375m. Most artistes (except those who are self-signed) rarely bear
executive costs, so they end up being more liquid than the labels. Even
after lavishing millions on expensive lifestyles, they still keep a
margin at least double what their label has.
Storm Records
Little wonder in the last 17 months, over 20 artistes have fired
their labels; most of them walking out of their contracts leaving the
labels in debt with some of them closing shop or venturing into
something else.
A clear example is Storm Records; run by Obi Asika and Olisa Adibua,
the label is the closest to Kennis Music in terms of volume of signings
in contemporary times. Storm has been home to Darey, Sasha, Jazzman
Olofin, 2Shotz, Naeto C, Ikechukwu, GT the Guitarman, Alaye, Sauce Kid
as well as General Pype, Tosin Martins, Ms Jaie, Yung6ix, L.O.S. Most of
these artistes have since left the label, with the owners rebranding as
Storm 360 and focusing on TV production, content management, branding
and other media related businesses.
Kennis Music
Kennis Music (which at some point was paraded as the biggest label in the country) now focuses more on its
Kennis Music Channel which currently airs on cable network
Star Times and terrestrial TV,
Galaxy Television.
YSG Entertainment
Another is
YSG Entertainment (headed by
Obiora Obianodo, son of Vincent
Amaechi Obianodo, owner of Young Shall Grow Transport services), the label rapper
Vectoris
signed to. YSG kicked started their digital store ‘YSG Hub’ this
August. A rep for the label however says that has been in the pipeline
for months.
‘If you have made investment in a business and it’s not profitable,
you have to diversify’, A&R and music expert Ayo Rotimi explains but
then adds that ‘this is however not a solution’.
Unlike their labels, Nigerian artistes don’t really care if their CD
sells or not. It seems like they’ll rather promote their songs (and most
times offer for free download) and brand (especially on social network –
Facebook, Twitter, Instagram) in other to score a performance or bag an
endorsement deal. The bulk of the fees, after management takes it cut,
of course goes to them.
‘There are artistes I know that don’t care if the music sells. People
are not keen to make albums anymore’, renowned disc jockey and
long-time entertainment entrepreneur DJ Jimmy JATT tells NET adding that
the system has been ‘unfair’ to labels. The ‘cool’ DJ says anytime he’s
asked why he hasn’t started a label, his response is ‘What’s the gain
for me?’
‘Why, how can an artiste be wealthier or even more influential than
its label? That’s like saying a can or the brand Bournvita is bigger
than Cadbury’, Rotimi says.
In February 2013, Wizkid blatantly walked out of his contract with
EME, only returning months later after it became clear taking a walk was
not as easy as it looked. Chocolate City’s Brymo and Jesse Jagz are
still on the run, abandoning a label that gave them shelter when they
needed it most. The label insists they still have valid contracts.
Part of the reasons the artistes are trying to walk, sources told
this newspaper, is because most labels now insist on enforcing the 360
clauses in their contracts. Same reason Eedris, Tony Tetuila and others
left Kennis music many years back. They could not live with the fact
that apart from benefiting from their show earnings, the label would
also retain management rights and get a cut off all their career-related
earnings.
‘Without a 360 deal, it will be impossible to recoup. I think the
tradition has to change’, Audu Maikori says. ‘We’ve made quite some
money of caller ring back tunes and other music franchising’, he
explains.
‘The label risks everything; it’s 360 or nothing. Another idea is to
always push for a long term signing so you’re sure of earning something
tangible’, T-Rexx, event manager at YSG says.
Some other label owners have made up their minds about the situation
and have developed a tough skin towards the prognosis. Taiye Aliyu of
Effyzzie Records (where budding talent Yemi Alade is signed to) says he
is worried if any artiste wants to leave. ‘If I’m not seeing growth, I
won’t be investing that much’. As per making profit, he seems to be
hopeful. ‘No CD sales for sure but since we handle management also, I’m
earning, everything from performance fees, caller ring back tunes to
revenues from their YouTube page. We got a check on N500k from one of
the Telco’s last month, it isn’t much but it’s something’, Aliyu says.
So it’s been established the label is on the losing side. But should the artistes be blamed? Certainly no.
Ayo Rotimi says it’s because there is no structure.
The structure or rather infrastructure the industry lies and has built itself upon according to experts is faulty. ‘It’s plain to see, it’s not supported’, JATT says.
‘There’s no traditional
structure. It’s like we are operating 25 years backward. Face the fact;
we do not have record companies with strong structures or assets,
companies that started as natural businesses with strategic alliances’, Rotimi complains.
Music Business Education, Rotimi says, is what is being ignored. ‘It’s
not just pumping money into an artiste’s career and watching him blow.
Were the right contracts signed? Were the long-term goals conceived? Was
the deal structured to benefit both parties?’he adds.
I’ve seen labels started off with the financier adding the
word ‘Records’ to his moniker. You now get mad when an artiste realizes
he stands a better chance working on his own?’ a radio OAP told NET
anonymously. ‘Apart from the likes of Chocolate City and Storm Records
who have offices, these other guys who claim to be ‘big‘ run labels with
their mouth’.
Absolutely correct. Of every 10 record label in Nigeria, it’s
difficult to find one with a functioning office and structured system.
EME (which parades the likes of R&B boss Banky W, Pop star Wizkid,
rapper Skales and three other acts) set up a functioning office in early
2012, four long years after launching in Nigeria. We could not
immediately confirm if they still work from there. CEO Segun Demuren did
not immediately return our calls or respond to our enquiries. As huge
as Mo’Hits Records was before it got torn apart in 2012, the label’s
office never fully functioned.
NET findings also reveal that Kennis Music and Premier Music
(run by Toju Ejueyitchie) are the only two labels in Nigeria registered
with the International Federation of the Phonographic Industry.
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Same goes for digital distributors Spinlet and Iroking who have been
spending some big money but aren’t featured on the list of licensed
digital music services in the Pro-Music information resource
(www.pro-music.org) which is agreeably the most comprehensive directory
of the world’s legal music services.
Spinlet
iroking
The only services in Nigeria according to the directory are web-based music streaming service Deezer and iTunes.
‘It’s a misapplication of terminology. It would be more appropriate
if labels in Nigeria were referred to as entertainment or management
companies because there is no label structure’, Darey, respected
recording artiste and CEO at Soul Muzik says.
‘It’s hard for an artiste to trust a label, especially when he can’t
just see some structures put in place. I’ve been there before, it wasn’t
rosy’, veteran rapper Terry tha Rapman who was signed to Charles
Novia‘s November Records from 2005-2007 says. When asked if given the
opportunity, he would sign to a powerhouse label or go solo, he chose
the latter, explaining that he’d setup his own label with financial
backing.
Loopy Music
Artistes are now running their own record labels but are making the
same mistakes as existing labels. And everyone is going in circles.
Take for example an M.I who setup his very own Loopy Music label in
mid-2012 and signed three acts. Barely a year after, one of the signees,
rock band Threadstone walked away from their deal, claiming they needed
better label support.
If the proper systems are not put in place, even as millions of dollars are being made, implosion is eminent.
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The End Game For Artistes And Record Labels
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So what’s going to end this plethora of label exits? ‘It’s a problem that we all have to deal with‘, revered entertainment practitioner and CEO of Now Muzik, Efe Omorogbe says.
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Omorogbe explains
that nobody seems to have respect for contracts. Until scapegoats are
made, things might very well continue to go on the way they are. ‘There needs to be repercussions. Artistes can’t just break laws and feel they can get away with it’.
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Until scapegoats are made, things might continue to go on the way they are.
Omorogbe raises another point: ‘It’s true that labels and companies
are notorious for not prosecuting artistes but then again when the label
sues, will they ever recoup their expenses incurred from the cost of
litigation? The legal process might be too long’.
Despite the long process it could take, some companies are determined
to go all out; it’s already coming to effect too, as some artistes who
have allegedly defaulted on their contracts are already feeling the
heat.
Two examples are YSG’s Vector and Chocolate City’s BrymO. The rapper,
we’re told still has a contract with the label ending in 2017, until
then YSG is making sure Vector (with whom they are currently having
issues) does not function in full capacity as an artiste without their
consent and approval. BrymO, Chocolate City has insisted will be facing
their full wrath, as they are still demanding he returns to the label to
fulfil his part of the signed contract, which includes releasing two
albums.
Knighthouse
Same goes for Pop act Mo’Cheddah who inside sources tell us cannot
perform any songs recorded or released during her stay at Knighthouse.
General Pype (whose stage name was reportedly trademarked by someone
else!) is in a similar situation with former Storm Records as well as
Soul E who lost the right to use his stage name while battling former
label Colossal Entertainment.
Another way labels are going after ‘defaulters‘ is by suing the
companies who dare work with artistes still signed to them. ‘A label can
wait till their artiste goes behind their back to sign a deal with
another record label or company, and then sue them (the company)’,
Omorogbe suggests.
‘Any label that wants to sign an artiste should confirm if the
artiste has been officially released, make background checks and also
ask for an official release form, this is standard_’, Ayo Rotimi says.
‘There should also be penalty clauses in contracts’._
Brymo and a rep from Spinlet after signing a
new deal which will see the Pop singer’s new album distributed via the
digital platform
Sources tell us when Vector was approached to participate in the
annual ‘Nokia Don’t Break the Beat’ as a judge, YSG wrote the show
organizers a warning letter to back off. Chocolate City tells NET that
Spinlet will be hearing from their lawyers following the digital
distribution deal the company recently signed with BrymO.
Darey offers a suggestion ‘Why can’t artistes have partnership deals
instead of walking away? How much of the industry do they understand?
Once a label is worthy of offering a 360 deal, the artiste if he/she
insists can start his/her label under that parent company and run
semi-independently.
What Darey is talking about is called ‘_Joint Venture Deals_’ (or JV
Deals), a viable solution to some of the artiste and label battling
creative and/or financial differences.
A clear example is Hip-Hop recording artiste Rick Ross. In 2006, Ross
signed to Slip-N-Slide Records (whose parent label at the time was Def
Jam). In 2008, he ended his contract with S-N-S and fully signed to Def
Jam, then went on to launch his own label ‘Maybach Music Group’ a year
later under Warner Bros. In 2012, he then ended his contract with Warner
and moved MMG to Atlantic Records. MMG has signed over 10 acts
including successful artistes Wale and Meek Mill.
Naturally, a Wizkid could have a Star Boy/EME, an M.I with a
LoopyMusic/Chocolate City, and an Olamide with a YBNL/Coded Tunes joint
venture deal.
Worried about going under, some leading labels are now coming
together, plotting a record label coalition with key focus on
distribution. NET confirmed over the weekend, that nine record labels
are joining forces to stand as one (although they will still operate as
individual units). Backed by telecoms company Etisalat Nigeria, the
idea, according to industry sources who spoke with NET, is for the
labels’ properties to be distributed via a new platform (including the
Cloud 9 app recently created by Etisalat). It’s a big budget project,
we’re told. And this may be the coup that’ll take the business back from
the hands of marauders into the arms of the real McCoy. Although the
label heads have not categorically confirmed this, Etisalat launched
Cloud 9 as an independent platform two weeks ago. Chocolate City
chairman Hakeem Bello-Osagie is also the chairman of Etisalat. We can
confirm that Chocolate City is part of the coalition, as well as EME,
Now Muzik, and Storm 360.
With a common goal and centralised method of operation, will come a
consolidation that should make it hard, even impossible, for labels to
continue being at the mercy of the corporates, marketers, and even the
artistes they’re in bed with. Hopefully, this new model will create a
new path for an industry desperately in need of direction. And
hopefully, the labels not part of the 9 coalition will leave ego aside
and align for the good of all.
Written By ‘By Osagie Alonge’
Culled From
NET
