Lil Pump is among a handful of young rappers earning big paydays as the record industry’s revenue surges. But there are still lots of musicians waiting to get paid.
In August 2001, Whitney Houston signed a eight-album, $100 million contractwith Arista Records, then the largest record deal in the history of the music industry. It was an agreement premised on the prosperous past, not the starkly different future. Houston recorded only three more albums before her untimely death in 2012. Arista went through various corporate reshufflings until it was shut down in 2011. And the music industry was just beginning a decade-long tailspin that would wipe out half of its revenue and make the artist megadeal as archaic as the compact disc.
In recent months, though, echoes of the fat-cat days of the ’90s and early 2000s have reemerged as major labels make big bets on young stars propelled by the internet. One of the biggest windfalls so far has gone to Lil Pump, the 17-year-old Miami rapper who reportedly signed an $8 million deal with Warner Bros. earlier this month. Pump, whose single “Gucci Gang” climbed from SoundCloud to no. 3 on the Billboard Hot 100, sparked a bidding war among the major labels, after his initial deal with Warner was voided due to his status as a minor. His payday signals that the money-making machinery of the record industry is revving up again, both for top-selling artists who are pulling in substantial revenue from streaming and the labels basking in their generous cut of the profits. At the same time, though, there’s evidence that the amount of money generated per stream is actually trending downward, putting pressure on both labels and artists to create music that scales to a huge audience. Spotify, which will go public in the coming weeks, has transformed the music business into an ocean of pennies that’s finally turned lucrative for the winners. But it may be getting tougher for less prominent musicians to stay afloat at the very same time.
In the first half of 2017, the U.S. record industry enjoyed 17 percent jump in revenue over the same period the previous year, according to the Recording Industry Association of America. That followed the biggest spike in revenue in almost 20 years in 2016. The industry’s decade of misfortune is quickly fading in the rearview mirror thanks to streaming, which not so long ago was the bogeyman threatening artists’ livelihoods. People like Taylor Swift, Radiohead frontman Thom Yorke, and Talking Heads founder David Byrne have all disparaged Spotify with varying levels of vitriol. But all of them now have their most recent projects available on the service. The industry’s bogeyman has become its savior.
Even when Spotify was being called “the last desperate fart of a dying corpse,” the company promised that it was playing a long game that would eventually bear fruit for labels and artists. The harvest has finally arrived, at least for some. Warner Music Group’s quarterly revenue surpassed $1 billion for the first time in more than a decade at the end of 2017. Universal Music Group and Sony Music, the other two major labels, also enjoyed strong growth last year. The prosperity has led to a shift in morale at the majors, which have spent most of this century battling digital platforms rather than benefiting from them. “People aren’t walking around with quite such a grim face,” says Jeff Biederman, an entertainment lawyer at Manatt, Phelps & Phillips who represents country singer Dierks Bentley. “You definitely can see a new bounce in their step. Streaming is catching up now.”
The good times are being shared by artists like Lil Pump, who proved his popularity before releasing a proper debut album. Prior to his newly minted deal, Lil Pump had racked up 340 million streams for “Gucci Gang” on Spotify, 10 million followers on Instagram, and 585 million views on YouTube. These are metrics that would not have been as measurable or as monetizable just eight years ago, in the era when music fans traded songs on CD-Rs and quasi-legal file-sharing networks such as BitTorrent. “Artists are able to show ‘research,’ for lack of a better word. They’re able to show that what they’re doing is actually working and actually generating income,” says David Jacobs, a music attorney at Grubman Shire Meiselas & Sacks. “It used to be that you could get a crazy deal once you blew up, so to speak. … We’re seeing more and more pretty crazy deals at the beginning of people’s careers.”
The music lawyers I canvassed for this story generally agreed that the sizes of deals are trending upward in recent years, particularly for hip-hop artists. When the labels were still licking their piracy-inflicted wounds, a rookie deal for an A$AP Rocky or a Bobby Shmurda might land in the range of $1 million to $3 million. But now artists like Lil Pump or XXXTentacion are earning double that, or more. Logic, whose latest album is currently topping the charts, just re-upped his Def Jam deal, originally valued at just $200,000 in 2013, for $30 million. Record executives have become so metrics-obsessed that they wait to sign artists until they’ve grown into legitimate (and expensive) stars before even signing them. “Labels often do wait a long time before jumping in, and they do want to see Spotify streams on self releases or at least a significant social media following,” Laurie Soriano, a lawyer at King, Holmes, Paterno & Soriano who represents Frank Ocean, said in an email. “Ironically, though, they end up paying more on the deals because the value of the artist has gone up over the time when the label’s been holding off on the signing.”
Despite rising revenues, there’s no consensus that the industry’s improving fortunes will benefit all artists. According to Steve Gordon, an entertainment lawyer and author of The Future of the Music Business, a growing number of artists are being signed to singles deals, in which they’re offered a minuscule advance to produce a couple of songs, and only offered a traditional album deal if those songs perform well. While Gordon says one upcoming artist he represents recently signed a $1 million album deal—in part because she already had iTunes downloads and social media followers to prove her value—another artist was relegated to a $5,000 singles deal that ultimately didn’t lead to a long-term album contract. “I remember being at Atlantic and then Sony, [album deals] would start at a quarter-million dollars, usually,” he says of the industry’s ’90s peak. “But $250,000 is a lot of money now for the labels. It was nothing before because they were making so much money from selling 10 million Pearl Jam albums or Mariah Carey albums or Michael Jackson albums. They didn’t care, they were floating cash, and whatever stuck against the wall stuck. They could afford the losses. But now they can’t.”
Even Lil Pump’s deal, while valuable, reflects a certain aversion to risk by Warner. While the rapper will reportedly get an $8 million advance, his contract only grants him annual payments of $9,000 to $15,000 over the next seven years, according to TMZ. Warner seems confident in the rapper’s ability to capture the internet’s fleeting attention today, but less so in the future.
Outside of the major-label universe, Spotify may actually be making it more challenging for artists to earn a decent living. The company’s stated goal is to provide a living for a million creative artists, but the ways it distributes and monetizes music hardly make that a guarantee as it scales. Spotify affords the three major labels and Merlin, an organization that represents independent labels, certain perks such as marketing support and advertising inventory. The platform’s major playlists similarly reward power players—according to research by the music website TrackRecord, 87 percent of the songs added to Spotify’s RapCaviar playlist in 2017 came from the three major labels. Forty-three percent of the songs were added to the playlist the day they appeared on Spotify, indicating that their popularity was preordained rather than crowdsourced.
Even when smaller acts are streamed, Spotify’s monetization structure hurts their earnings. David Lowery, a music business professor at the University of Georgia and frontman for the rock band Cracker, has been tracking streaming royalties from a midsized independent label for the past several years on his blog. His data show that the pay per stream on Spotify has been falling consistently over time. It’s now less than a quarter of a cent. “If you listen to music for about four hours on pretty much any of the streaming platforms, you’re going to get about 25 cents going to all rightsholders,” he says. “You’re going to have to do a lot of listening to significantly bring up the revenue.”
This dynamic—falling rates coupled with increasing scale—presents challenges for niche acts whose music is now valued in terms of daily consumption rather than a self-selected price tag. Jazz artists, many of whom resisted streaming until last fall, probably generate fewer regular spins from their listeners than a top 40 artist cranking out earworms. “Because some of the distribution barriers have come down … there’s this promise of huge global audience,” says Kevin Erickson, the national organizing director of the Future of Music Coalition, a nonprofit supporting artists’ rights. “But for people who are not making work that’s intended to operate in that sort of big, global pop way, the value proposition can look very different.”
Like many technology companies that are reshaping our world, Spotify has a habit of reinforcing feedback loops. Hit the virtuous cycle at just the right moment and you’re Drake. Fail to tap into a growing audience and you could see your paychecks dwindle as streaming rates fall. Lil Pump was lucky, but there’s a thousand other artists toiling away on SoundCloud, awaiting a big payday. More than one person I talked to equated hitting it big on streaming to winning the lottery.
“The notion that having more and more of these lottery winners experiencing these great windfalls from playlist placement as a way to make a more equitable music industry is sort of like saying that having more actual lottery winners in the state lottery would be a way of solving the problems associated with income inequality,” Erickson says. “It doesn’t make any sense.”