The Cost of a Hip-Hop Mixtape

Illustration by Ope Arogunmati

Wale is the undisputed leader among Nigerian rappers based in the United States. Last year, I came across music by Tunji Ige, Hip-Hop artist hailing from Philadelphia that impressed me with the versatility of his mixtape. Kelechi Emenoye, an American born rapper with Nigerian roots out of Marietta Georgia, is the newest act that stands out among the new rappers that happens to be Nigerian. He has a new mixtape out called Quarter Life Crisis, however, my focus with this article is on his last mixtape - Before the Quarter. The record was financed with proceeds of US$50 thousand earned from a competition he won. Apart from the quality of the records on the mixtape, which I believe was one of the better produced mixtape, the dissemination of the cost of producing the album by Kelechi is unique and differentiated his mixtape roll-out from his peers. The release of the information gave me a great insight into the financial investment involved in producing albums.

Music labels are private companies that are not required to disclose their financials. If we live in a world that required both public and private companies to release their financials publicly, it is unlikely that the company will provide an album level detail to dissect the costs and return on investment on each individual albums. Kelechi spent a total of US$50 thousand on his mixtape Before the Quarter, covering the cost of studio time, art and web design, features, legal and taxes. The highest cost stated was the studio time and production making up close to fifty percent of the total cost of album.

This is the first time that an artist has provided the detail necessary to determine what would be financially viable as a return on the investment for an artist such as Kelechi.

There was a record released by Wu Tang Clan about two years ago, whereby they sold one copy of the album for US$2 million to an investor. The detail of the costs was not discussed in detail; however, it can be assumed that the creators of the album felt that the value in exchange for the funds was sufficient to cover both their tangible and intangible costs. I decided to take an hypothetical approach to determining what would be sufficient as a return on investment on a record that costs US$50 thousand. 

The payback period for this album I believe is short, ten shows at US$5 thousand per show gets you to the breakeven point. However, the chance of booking 10 shows in a relative short period after releasing the record could prove difficult if you do not get a cross over hit that attracts casual listeners. The other source of revenue is through direct sales to consumers. Given that physical discs have been on the decline for the last decade, the streaming platforms act as the new age distribution channels for artists. The issue is many of the streaming platforms are not yet profitable and this is directly influencing the royalties received by newer artists such as Kelechi. Drake is the top Hip-Hop artist in the world and at over 35 million listens a month, he is ranked 6th globally on Spotify, meaning he is one of the few artists benefiting from the streaming platforms. Kelechi is not there yet, so it is unlikely that he will generate much revenue from Spotify. Before the Quarter is now left with two other sources, which are endorsements and publishing. Endorsements are typically reserved for artists with a larger fan base, however, Kelechi has the ability to work with established brands that can leverage the music he has created to back different products such as shoes and street wear, but also other consumer products like headphones.

Music is a commodity, as such individuals and large organizations have sought to find new ways to increase the margins on their records. The key concern for many of the record companies was piracy as a result of streaming platforms. Record companies were in conflict about the best business model to use. They had two choices, which was  to continue charging a single price for one specific album or create a buffet system that allows the user to select any music they would like to listen to and get charged on a recurring basis.

Even when Napster came on the scene in the late 1990’s and artists were fighting against piracy, I wondered why many of them would lead the charge with qualitative and emotional arguments and never supplying the raw numbers that would have had a stronger effect on their fans. It would take approximately a decade for streaming to be understood and artists using these platforms to gain an additional source of revenue. Yet, only Kelechi has discussed the raw numbers openly and in detail. If one is a true Kelechi fan, there is no doubt the numbers will speak to you and if you had to decide whether to pirate or pay for his work, you are more likely than not to choose the latter option.

I think record labels do themselves a disservice by not showing the financial investment details at the album level. While I understand the competitive disadvantage of releasing your financials to the public, the information can increase the value of records among consumers. If the theory that consumers purchase based on perceived value that is dependent on what we feel is the cost of production, then knowing the financial investment behind these records can result in an increase in paid consumption and lower piracy. 

There should be better metrics beyond just the first week sales and the total sales for an album that is discussed as the key performance statistics for artists. For example, there were rumours of French Montana paying a significant amount of money for the record Unforgettable. He later confirmed that he purchased it for US$300 thousand and recouped half the amount back from the record label. This type of detail is important to a consumer like me because I want to know that an artist has skin in the game, therefore increasing my commitment to the artist.

An established artist like the Kendrick Lamar or 2 Chainz may not see the point of releasing their investment capital, however, as a fan who understands that not only time but also dollars was spent on the production of a record, I am more likely to support a newer artist like Kelechi.

Kelechi's new mixtape Quarter Life Crisis was released on September 25, 2017.