Drake’s Departure from Universal Music Group Would Disrupt the Music Industry

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Frazer Harrison — Getty Images

In 2011, Kreayshawn released the hit song Gucci Gucci.

It was massively popular and stayed on the Billboard Hot 100 for 10 weeks, earning millions of streams world wide, and launching her career as a pop star.

Last month, she tweeted that she was broke and deeply in debt to Sony Records.

In the music industry, there’s a recurring tale that artists tell.

A legendary record label signs them and makes their dream come true, only to rob them of all creative freedom, and leave them disillusioned and in financial ruin.

For years, we’ve seen this tale unfold in different ways.

Last year, Taylor Swift revealed that masters she didn’t own had been sold by her label to industry mogul Scooter Braun of Ithaca Holdings for nearly $300 M.

In 2010, Lupe Fiasco’s fans gathered in front of Atlantic Records to confront the record label executives who were preventing Fiasco from releasing his next project.

Stories like this are common, not because people in the music industry seek to destroy artists, but because the model for creating artists is completely broken, and leaves opportunities for record labels to exploit the artists who they are supposed to support.

The structure of a record label is similar to that of a Venture Capital firm.

Record labels invest in hundreds of artists by giving them advances to fulfill a contractual obligation to create music, then seek a return on that investment.

However, this return on investment comes in the form of the label owning the artist’s music, controlling the creative process, and deciding if an artist even gets to put out their project in the end.

While artists struggle to make ends meet, music labels have been pulling in record profits. In March, Grit Daily reported that Sony, Warner and Universal Music all earned more than $1M an hour from their streaming profits.

Industry-wonk and artist Ari Herstand describes record deals as the worst kind of agreement you can enter.

Herstand likens a record deal to a bank saying “Here’s $500,000. Once you pay us back the money, you don’t own the home. We still own the home. Forever. And all of the appreciation on the home, we will make 85% of that too. Sign here.”

Another aspect which makes the recording contract unattractive is the possibility of the label declining to release your music.

If the label doesn’t think the project will perform well for any reason, they have the power to push back the release date, or keep it from releasing. This is known as “shelving”.

In 2014, Migos signed with 300 Entertainment. In 2018, they engaged in a lengthy legal battle to exit the contract, claiming that the label was preventing them from releasing any new music and was “holding them against their will”.

Though this model has proven problematic, the biggest artists in the world play by these sorts of rules, and they don’t hide their disdain for the system.

Hip hop legend has it that Tupac’s shooting was a result of him expressing thta he wanted to leave Death Row records.

Kanye West recently sued Sony Music and Universal Music group over ownership of his masters. He likened the labels refusal to grant him access to his own music as “mind control”.

Though so many artists have resentment for their record deals, they need them in order to put food on the table.

Without the advances and the 15% they receive from sales and streaming, many artists would be broke.

What if these artists had an alternative path that freed them from the glorified indentured servitude which is being signed to a record label?

In 2018, Drake rapped something curious on his full length project, Scorpion.

On the reflective tome Is There More, he pondered out loud, “Soon as this album drop I’m out of the deal”, indicating that his tenure with Cash Money Records would come to an end, and he would begin a new chapter as an independent artist.

Sure enough, Scorpion was Drake’s last release under Cash Money records, which had fallen on troubled times.

Drake still releases music under Universal Music Group, which is the parent company of Cash Money Records.

In the past, Drake hinted at his frustration with the Cash Money label.

In 2015, he cryptically released “If You’re Reading This, It’s Too Late”. The project was packed with intricate storytelling but hinted at division within the Cash Money family.

For years, artists had been criticizing the label over poor management by Birdman and Slim, pointing to missing royalties and delayed releases. With IYRITL, Drake joined the club. On No Tellin’, the Toronto MC rapped “envelopes coming in the mail / looking for a check again / ain’t no tellin”. Like Lil Wayne, Drake began to suspect that his label was taking advantage of him financially.

On the song 100, with The Game, Drake again hinted at division somewhere within the family, saying “Had ****** tell me to my face how we were family / And how they love me while they were skimmin’ off the budget / Now, when I see ’em, they’re the ones that’s actin’ funny”

Around the same time that these cracks began to appear in the foundation, Lil Wayne was in the lengthy process of suing his mentor Birdman, alleging that the label he had started with them had withheld millions of dollars in royalties, and was preventing him from releasing his project, Tha Carter V.

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Brothers Birdman and Slim. Courtesy of Forbes

In 2019, Wayne emerged victorious and scored a $10 M settlement, and the release of his project, but the battle had worn on him.

No matter how big of an artist you are, if you are signed to a label, you only see a portion of the money that comes from your record sales and streams.

In most cases, that number is between 10% and 20% for record sales (or streams), and around 60% for touring and merchandise.

Some sources say Drake gets 75%, leaving Universal Music Group with 25% as a distribution fee.

The chart below gives us an accurate idea of Drake’s earnings from Spotify.

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Industry wide, streaming payouts are notoriously low. Spotify’s current model pays artist $0.003 per stream. This means that if you have a song that reaches 1000 streams, you can expect $3. Other stores have payout models that are more generous, but Spotify is the leader in the space with 36% of marketshare compared with second place Apple’s 19% marketshare. Evidently, Spotify sets the industry standard for royalties.

However, Drake’s streaming payouts get a bit complicated based on his record deals. Drake has released nearly every project of his under Young Money Cash Money Records, which is distributed by Republic Music Group, which is in turn distributed by Universal Music Group.

To ensure that these projects are profitable, each label takes a cut of the streaming profits, leaving the artist with a percentage of the total earnings.

Based on the data above, Drake has accumulated more than 28,000,000,000 streams on Spotify alone. Drake’s music has been streamed enough times for each person on the planet to have heard a song of his 4 times, not even counting other major stores like Tidal, Apple Music, and Amazon Music.

According to Spotify’s pay out model (Total Streams x $0.003), Drake has generated $85 M in Spotify royalties.

However, when the complexity of his record deals is factored in, that $85 M becomes something like $35 M when he pays taxes, his collaborators and his 25% distribution fee to Universal.

This begs the question: has Drake outgrown his record deal?

Drake is the second most streamed artist on Spotify (behind fellow Canadian Abel Tesfaye), and he has become a behemoth in the music industry, boasting more number one records than The Beatles, more consecutive weeks on the chart than Michael Jackson, and a net worth that is growing at a rapid pace.

There is reason to believe that Drake would be alright without a Universal Music Group distribution deal.

49 million followers and 61 million monthly listeners on Spotify are more than enough to ensure that Drake would have adequate exposure for his next project. Additionally, a solo endeavor would ensure that Drake saw a greater portion of his profits.

Drake has become the King Midas of pop music.

Songs of his like God’s Plan, In My Feelings and One Dance have each earned more than 1 Billion streams, surpassing the streams some artists get in their whole career.

Drake even has his own record label, OVOSound, which he has used to incubate talent in the Toronto rap scene. Acts like Majid Jordan and PartyNextDoor are OVO artists.

At this point in his career, it is not necessary for him to pay a record label 25% of what his music brings in.

In dollar terms, this means that he is leaving millions on the table, for a label which he could do without.

If Drake ventured out on his own, and his next project achieved 6 billion streams like his other major ones, he could earn $5 million more on the project from Spotify alone, before factoring in physical sales and other music stores.

Maybe Drake’s declaration on Scorpion was true — maybe he is out of the deal. His last two releases are not considered studio albums, so there is a likelihood that his next project could be released through his own label, October’s Very Own.

More important than Drake leaving his recording contract is the impact that a move like this would have on the rest of the recording industry.

For years, we’ve seen the biggest stars become frustrated with their labels, unable to break free.

In 1993, Prince engaged in a lengthy legal battle with Warner Brothers Music. He felt that the financial terms of his contract were unfair, especially since the label owned his masters. Signaling his frustration and that of other artists within the industry, Prince wrote “slave” on his face, for all to see, and stopped going by the name Prince. Instead, he wanted to be called “The Artist”.

In a 1996 interview with Rolling Stones, Prince reflected. “When you stop a man from dreaming, he becomes a slave. That’s where I was. I don’t own Prince’s music. If you don’t own your masters, your master owns you.”

On his album 4:44, Jay-Z perfectly captured the lack of control that comes with being an artist when he rapped about what happened after Prince’s death “You greedy bastards sold tickets to walk through his house / I’m surprised you ain’t auction off the casket”.

Early in the summer, industry mogul Steve Stout was interviewing the rapper Russ who declared that if Drake went independent, the music industry would be “over”. He predicted that he would make at least $10 M a week for several months from the streaming proceeds of his upcoming album, and all he would have to do is post a picture announcing the album on Instagram.

For established artists who don’t have the level of exposure that Drake does, there are alternative models to making music profitable without losing ownership.

Entrepreneurs in the music space have eliminated the barriers to entry, welcoming any musician with work ethic and talent to see if they can’t establish themselves.

The Music Fund is a start up which offers artists money upfront for their future streams, while allowing artists to avoid signing to a major label for a recoupable advance.

Services such as DistroKid or TuneCore allow artists to get music to streaming platforms without a label

SubmitHub allows artists to pitch their music to playlisters all over the world.

Innovative approaches such as this, as well as demonstrate that the industry has been decentralized and is ripe for disruption.

With dedication, a strategy, and a small budget, any artist can ditch the antiquated label model, and establish themselves as a viable indie talent. However, it might take one of music’s biggest stars to show us it’s possible to. survive without a label.

These next few months will be telling. When Drake releases his next album, will it be on a label, or will he embark on a road that is sure to change the music industry forever?

Culture writer featured in Noteworthy, The Writing Cooperative, USA Today & Olustories. Comedian & Musician. Thinker. ramanmcreates@gmail.com linktr.ee/airraman

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