Hip-Hop Fridays: Exclusive Interview With Wendy Day Part 3

Here is the final portion of our three-part interview with Wendy Day of RapCoalition. In this third part, alone, we think you may learn more about the industry than by paging through countless Hip-Hop Magazines. Enjoy…

Cedric Muhammad: What is the difference between a production deal, a label deal, and a distribution deal?

Wendy Day: The best deal someone can get is a distribution deal and it is therefore the most difficult to get. Distribution deals are given to REAL record labels--those who put out records regularly and proven themselves time and time again. Distributors look at your track record, your staff, your financial solvency, and the quality of the music you have. The best deal is in the neighborhood of an 80-20 split, with the label receiving 80% and the distributor getting 20%. Distribution deals usually offer no advanced monies, and a distributor is only responsible for getting the product into the stores. The label is responsible for getting the fans into the stores to buy it. The great thing about a distribution deal is the label (the 80%-er) owns the masters 100%. That's an "ownership deal" and truly the goal. This is what Cash Money has at Universal and what Master P had at Priority (I do not believe he still owns 100% of No Limit at this time). In a perfect world, each deal should last no longer than 3 years. Most companies who want a distribution deal are not really ready for one as most haven't released 4 to 6 records a year, nor do they have a real staff working their record, nor do they have the money in the bank to finance their own projects.

The next best deal is a joint venture (what Jay Z has with Def Jam, and Ruff Ryders has with Interscope). A joint venture(j.v.) is usually a 50-50 split (including the masters if one has a good negotiator) and includes some funding (advanced monies). Each j.v. is unique and specifies what each side brings to the table. For some labels, they handle the street marketing and video, and the distributor handles radio and retail. A very smart label learns from the distributor's staff so their staff can eventually do all the work and then they can get a straight distribution deal.

For labels that really just want to deliver finished masters and let the partner label do everything else, well that would be a production deal. I am biased against them because very few, and I mean VERY few, actually work. Many production companies take the money and forget to "trickle down" to the artists. These deals always have advanced monies involved and often offer the label a split of between 16 and 18 points ("points" is a slang music business term meaning per centage points, so "18 points" means "18% of the retail selling price"). Out of those points, the label then kicks down between 10 and 12 points to the artist. Bear in mind, all advanced money must be recouped (on each and every artist) before any profits are shared and the larger the advance is, the smaller the split usually is on the back end. An example of a production deal is R Kelly's deal at Interscope (if it still exists) or KG's deal at Arista for R&B groups such as Next.

The worst deal, and most common deal, is a standard artist deal. This is where money is advanced (usually $125,000 on the low end, to $500,000 on the high end), recouped, and then the artist receives between 12 and 15 points. Guess how often there is money on the back end.... De La Soul is the only group I can think of offhand that I know recoups and receives royalty checks from each release.

Not to depress you further, but most deals are cross-collateralized. What this means is that if you have three artists, the monies spent on all three can be recouped from each other. Let's say release on artist #1 makes you $100,000, but release on artist #2 loses you $300,000. On release of artist #3 you have to pay back that $300,000 you lost on the last artist before you make money on this one. Basically, if you lose money on two artists in a row, there will not be any more releases.

Cedric Muhammad: In the last couple of years there has been a lot of merger activity in the music business that has impacted several top Hip-Hop labels. What has been the impact of these mergers on labels that release rap music?

Wendy Day: Mergers are an important issue for everyone, but what concerns me even more is the shrinking Black music departments at major labels. Most labels have shrunk their Black music departments in favor of joint venture deals. For example, before Arista established a Black music department, they farmed out Black music through Bad Boy and LaFace. It took a minute for Arista to start signing their own rap acts directly. In general, it seems to be a very non-committal way for a label to dabble in Black music without the commitment of a full time staff. The problem with this policy is that it reduces the number of Black executives within corporate Amerikkka at the labels (even with the overall success of urban music in today's marketplace, there is only one Black CEO at a major label--and that label has the smallest market share in urban music rendering it not very successful in comparison to its counterparts).

The reduction of Black music departments at major labels also reduces the stability of jobs in the music business, because when a larger label or distributor has a joint venture with a smaller urban label, very rare is it that the smaller label can afford full time employees, competitive benefits packages, or proper training programs. Interns (free labor), unskilled employees, and the "blind leading the blind" are rampant in the music industry.

Mergers are problematic in that there are basically 5 company policies controlling music (Universal, WEA/AOL, EMI, Sony, and BMG). All of them answer to share holders, and most of them are foreign owned (all except WEA I believe). None of them are urban, yet together they probably sell or distribute 99.9% of the urban music in Amerikkka.

Cedric Muhammad: You know and have worked with some of the best producers and Hip-Hop lyricists. What qualities and attributes are part of the make-up, character and personality of some of the greats? Aside from talent.

Wendy Day: Yes, I have. I am so fortunate!!! I have worked with an array of talent: my favorites, my heroes, the needy, and even some of the biggest assholes in the industry. There are a few traits that seem consistent with success. Aside from talent, which is one of the most important factors for creating great music, but NOT a factor in maintaining a career, the most important trait is a strong work ethic. Most successful artists who have maintained any level of success work very hard, are dedicated to their work, and perfectionists.

Today is the day after Christmas and I just randomly placed calls to some of the most successful artists and producers to illustrate my point. Here is the list of 5 calls I made, and out of these five, all of them were in the studio making music: Puffy, Twista, KLC from Beats By The Pound, C-Murder, and Fiend. The three rappers have each sold more than a million records in their career so far, and the two producers (Puff and KL) have each sold multiple millions of records, Puff probably has sold over 10 million records and KL over 40 million records. Another important trait is dedication to being the best and constantly improving his or her craft.

When an artist stops growing and developing, so do the record sales. In terms of building a long term career (like Stevie Wonder), the traits that most artists seem to possess after extreme talent is long term vision, dedication, and the ability to choose opportunities based on exposure, control, and ownership, not on things as fleeting as immediate cash (we call this short term vision).

Cedric Muhammad: How do you feel about, let's call it the "ice phenomenon", where artists parade expensive jewelry etc... in their videos and rhyme about it in their lyrics? What do you think is at the root of some of this type of materialism?

Wendy Day: Ah, the "bling bling" factor....I hate those words as much as "keep it real." Materialism is an issue (a symptom of a bigger problem) in capitalist society (and the Black community) just as it is reflected in the rap community. When someone is a "have not" and used to not having, once they are able to have, they appear to go nuts! Myself included...when I was younger and made a lot of money, I didn't know any better and I went through hundreds of thousands of dollars on what, today, seems like nothing. We are not taught at a young age in this society the importance of ownership, or of building wealth, or of long range planning.

We grow up realizing that items of perceived value increase our own immediate sense of self-worth. So rather than investing $60,000 in real estate that may supply a steady source of income (rent) and increase our net worth and strengthen our credit, we prefer the short term sensation of buying a luxury car (even if it gets parked in front of the projects) or a Rolex. We focus on how that car or watch makes us feel as validated through the eyes of others looking at us. We live to impress people we don't really care about, making decisions based on opinions of others who don't even matter. Rappers are no exception. One of my goals at Rap Coalition is to help enlighten artists who are making money (sadly not many) so they won't be broke within a few short years like the artists who have come before them. I have a web site launching in February called www.keepmorewealth.org that will help enlighten people just embarking on their lifelong quest of building wealth. There will be advice and insight about flipping money from people who have done it successfully.

For example, I met a producer in LA last week (30 years old) who buys under-valued real estate through a connection at his bank and then sells the property immediately at current value. He started years ago by collecting $6,000 each from 4 friends and just flipping the money. He doesn't own a Rolex but he owns property. He has just gotten a $600,000 line of credit based on the property he now owns by himself so he can finance putting out his first artist. We all need to teach ourselves to think this way...and to keep more wealth.

Cedric Muhammad: What is your opinion of professional athletes, particularly NBA and NFL stars that embark upon rap careers? Do you think that Hip-Hop artists respect them?

Wendy Day: I understand why a professional athlete would want to invest his money in the music industry (it appears glamorous and fun to an outsider looking in). What I don't understand is why someone wouldn't study the industry and have the best people advising him about the moves he makes. I have seen TOO many professional athletes (from boxers to baseball players) lose millions of dollars in this industry doing stuff no professional within the music industry would ever do (and we have some characters!!!). I mean hell, I don't invest in a basketball team with no legs, why would they come into our world and make bad business decisions?

Eight years ago, after consulting for Dennis Scott (the NBA player), I reached out to the NBA directly and offered to hold a free informational workshop for players who were contemplating coming into the music business so they would have some understanding of the business. Industry executives like Chris Lighty (Violator), Shakim (Flavor Unit), Puffy (Bad Boy), and Master P (No Limit) offered to come speak for free and answer questions and offer insight. The NBA declined, saying they have no involvement with their players on anything outside of basketball. Wonder how well their players play knowing they are losing millions of dollars off the court.... Do artists take rapping athletes seriously? About as seriously as a professional athlete takes a rapper playing ball.

End Of Part 3

Read Part 1 and Part 2 of Our interviews with Wendy Day

For All Of Wendy Day's written articles visit her slavesnomore website

For artists seeking to learn how to put out their record label visit Wendy's Rapcointelpro website

For a report card on record labels in Hip-Hop visit Wendy's Industryreport website

Friday, December 29, 2000

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The views and opinions expressed herein by the author do not necessarily represent the opinions or position of BlackElectorate.com or Black Electorate Communications.