Are distros and label services companies really killing record labels in Nigeria? [Pulse Editor’s Explainer]

Nigerian music businesses hacked a few models before the world caught up.

Are distros and label services companies really killing record labels in Nigeria? (Pulse Nigeria)

Streaming changed the world forever. Not only did it stabilize the global music industry by ensuring reasonable cash flow, it also created a new brand of capitalist competition as well as opportunity.

Streaming platforms are fuelled by music and catalogues are owned by record labels. This means that most streaming platforms are at the mercy of - major - record labels. In Nigeria, the system is a little dysfunctional with an improper - yet recognizable - structure. Over the past few years, as streaming has soared in popularity, so too has digital distribution.

Local companies like Notjustok Distro, Continued Entertainment, Ziiki Media, emPawa, Inglemind, FreeMe and Mad Solutions have been joined by GojeDistro, Ejoya and more. The idea is to create a platform that’s plugged to the streaming platforms - mostly through Merlin - and helps artists get their music on those platforms. This is because most streaming platforms - barring Audiomack and Soundcloud - don’t allow artists to upload music by themselves.

While companies like CD Baby, DistroKid and Tunecore offer a different subscription model, which charges artists a monthly/yearly fee to distribute their music to streaming platforms and - in the case of Tunecore, for example - remit 100% revenue/royalties back to the collecting bodies/rightsholders, the companies in the previous paragraph operate a different model.

They offer the artist an advance and license the artist’s music for an agreed number of years, while recouping through streaming revenue - and possibly - publishing, depending on agreed terms. In recent times, some of these companies have also started looking into quasi-360 deals, that will give them a better chance at recouping their outlay through sync, neighbouring rights, performance royalties, mechanical and more.

These companies have since been joined by bigger foreign label services companies like Platoon, EMPIRE Distribution, OneRPM, Vydia, Believe, Ditto, Africori and more. These companies come with greater financial backing, greater brand equity and a more aggressive approach, geared at gaining market share as against low purchasing power in a growing industry.

These days with the right pitch, a relatively unknown artist can get an advance of as much as $10,000 from one of these companies, while licensing their project(s) for a number of years. For artists, the attraction of this model is creative freedom, a chance at owning their catalogue and the chance to make money that might otherwise have been a distant dream, from said body of work.

In recent times, streaming platforms have started owning distro/label services/purchasing catalogue companies in a long-term play. The plan is to own catalogue, acquire an African market share of African music for the future, to stop being at the mercy of the majors, who own all the catalogue.

That’s why Apple owns Platoon and Apple Music while Boomplay owns a reported distro. If you are Apple and your total equity in 2020 was $60 billion, you can afford to spend $1 billion over a 10-year period to acquire tons of catalogs for Platoon in a particular region, which increases your market share and leverage.

It also shortens the future influence of majors in that region, even though they’ve owned the past - a share of which is now even going to companies like Hipgnosis.

The Nigerian record label

In contrast, Nigerian record labels have been around from time immemorial. But after the majors left a tattered Nigeria in the 90’s, while we were dealing with the decadence of military rule, corruption and death, the importance of local record labels rose exponentially.

Nigeria was brimming with incredible talent, in a soon-to-be-major entertainment industry and companies like Storm, Kennis Music, Questionmark, Timbuktu and more made people dream and made people’s dreams come true. Random street boys with popstar dreams could go from nothing to mainstream in six months to one year.

In the 90s/2000s, the true Nigerian record label structure/model was formed. These companies would sign artists to 360 deals, hand out an advance to these artists in the form of money and/or apartments, usually own all rights to the artist’s work in totality and perpetuity, spend ridiculous amounts of money on them for branding, marketing, music videos and more, and look to make their money off advance from Alaba Marketers/Distributors, shows and brand deals.

These Alaba marketers/distributors would then make their money back from CD sales, inflation of agreed sales and piracy. Alaba marketers were also great for promoting singles via the mixtapes, which gave the songs mileage. As DJ Kaywise told Pulse earlier in the year, it represented revenue for sought-after DJs who created the mixtapes, for the marketers and in some cases, for the label.

Till this day, the dysfunctional nature of Nigerian music means that all record labels only stand a chance at a return on their investment through 360 deals. And even with those deals, they might still not make ROI. Conversely, as artists begin to find success, they ignore the state of Nigerian music, the contract they signed, their ‘hustle days’ and the interests of the label, and hug their resent for how the label is taking a lion share off every revenue stream.

However, the 90s/2000s Nigerian record label structure is different from the current Nigerian record label model, especially as regards revenue.

2000s record labels vs. Current Distros/Label Services: Similarities and differences

While the Nigerian record label model differs from the contemporary distro/label services model on ownership of music and advance, the models aren’t all that different. Here are similarities between the 2000s Nigerian label and the current distro model;

  1. Both companies hand out an advance
  2. Both companies own the music - for a bit.
  3. Both companies try to monetize the music through direct CD sales and additional means. That’s why Fireboy’s ‘Champion’ was recently used by Bayern Munich. Recently, a distro boss told this writer that his company had started considering quasi-360 deals, so ROI can be made. 

The differences;

  1. While the label can own music produced during the subsistence of the record contract and ensuing revenue in totality and perpetuity, distros/label services companies usually only just direct sales and sometimes, publishing through licensing for a number of years.
  2. While distros/label services hand out a marketing advance, labels hand out advance and still fund the artist’s career through videos, marketing, transportation, branding and more. In fact, label spending never stops. 
  3. While labels can own an artist, distros/label services only own the music - for now. 

Present-day Nigerian record label model vs. distros/label services

In a recent Facts Only episode, this writer appraised how Nigerian artists had largely and prematurely migrated from CDs and embraced music streaming, as a cogent direct revenue generation avenue. This means that the Alaba model is fading out.

Record labels - usually funded by young, rich Nigerian men - still sign artists to 360 deals, hand out advance in form of a house and cars, spend loads of money on other important facets for the artist and own rights to music made/released during the subsistence of the record deal in totality and perpetuity, but the advance that they used to get from Alaba is now gotten from distros/major labels.

For example, Ayra Starr’s debut album, 19 and Dangerous was released under Platoon and MAVIN Records.

We work with labels these days. Our goal is to provide as much comfort to our users as possible. Most of the music that goes through in Nigeria comes from labels,” says Chioma Onuchukwu, Head of TuneCore West Africa.

This is because streaming has risen to become the major source of direct music revenue, not CDs. Due to how artists can’t upload their own music on most DSPs, labels now need distros/label services companies. These days, labels can also license the totality of rights to their artist’s music to a distro/label services company for a number of years, for even more money.

In recent years, certain labels have also signed up their entire roster to distros/label services companies for ridiculous amounts of money.

Thus, while these companies and models aid each other’s cause, the aforementioned similarities and differences still apply. The only difference is that distros/label services companies have replaced Alaba in terms of advance, playlisting, distribution, channeling and consumption of the music.

Alaba and Distros/Label Services/Streaming: The similarities [Additional Insight]

In a way, Alaba was doing what distros/label services/streaming companies currently do, but in a different way and with slight differences.

While distros/label services companies now simply hand out the advance and distribute the music to streaming platforms, Alaba used to hand out the advance, create the frontier for consumption [CDs], playlist the singles, distribute the music to points of sale, recoup the money and pay artists/labels accordingly.

While streaming now playlists the songs, connect the music with consumers, recoup funding and pay collecting bodies/artists/labels, Alaba used to be a one-stop-shop for everything until the digital era took over, starting furtively from the music blogs.

It just means that Nigerian music businesses hacked a few models before the world caught up.

Are distros/label services companies then killing record labels?

The long and short answer is no. What distros/label services companies offer is an alternative that positively gives Nigerian artists hope, a chance and leverage to make guaranteed money as well as retain ownership under fairer conditions, but they are not a replacement for record labels.

These days, a young artist can recoup $10,000 from an EP that he probably wouldn’t have made on the EP because a distro/label services company is playing the long game for market share or even a high-priced buy-out. He can also have money to market himself and shoot a video. Maybe even rent an apartment and/or buy a car to slash Uber/Bolt costs.

All the while, he can own the music again after three to five years. While the Nigerian record label's reality is harsher and more aggressive for the artist, a record label is still the Nigerian artist’s biggest chance at stardom. And what Nigerian artists discover after label services deals is that they want stardom, not to just make little money that can help them pass time.

After I got my first deal for an EP from a label services company, I realized that it wasn’t enough. Even worse, after my first EP didn’t really perform, I discovered that getting another deal might be hard for the company and it was totally fair,” says an artist who refuses to be named.

However, another artist has a different reality.

I have realized that a lot of artists who sign to a record label leave these labels to be complacent. Yes, people like Wizkid, Burna Boy, Olamide, Davido and so forth are there, but they are the exception,” says the other artist, who also refuses to be named. “I would rather stick to getting these guaranteed sums, market to help the company recoup and own my music after a few years, while maintaining total creative control, which is important for me. I make Alternative music, the system isn’t rigged to commercially favour my music.”

For this writer, one thing is certain; the label services/distro advance is usually a stop-gap for most of the smaller artists. Even the big artists who now get the six-figure or seven-figure offers/deals became who they are under Nigerian record labels, who spent endless amounts of money on video shoots, advance, marketing, payola, branding, styling and more.

While the distro/label services company can hand out $10,000 [NGN 5.2 million] to a relatively unknown artist for an EP, that money isn’t a lot of money. A substandard music video goes for around N500 thousand to one million naira. If he shoots two videos, he has three million left.

He has also suffered, so he needs to take the opportunity to get an apartment or a car somewhere. He still has to market and offer some payola here and there. In the end, most of these artists discover that $20,000 isn’t exactly a lot of money and it’s unlikely to make you ‘blow’ - even though ‘blowing’ isn’t impossible in this TikTok world.

Conversely, records labels hand the artist an advance in the form of money and/or a house and a car. They also pay for big budget music videos, marketing, promotion, styling, payola, branding and more. A record label boss told this writer about how he has no chance of recouping the N100 million outlay he made on an artist, with whom he is now in court.

A label also guarantees the artist certain privileges like a structure, legwork and more things that an independent artist’s team might not be able to do. For example, MAVIN Records has around five departments and over 30 employees, dedicated to LadiPoe, Rema, Crayon and Ayra Starr.

These labels also offer the artist a share of revenue; typically 70/30 or 60/40. On top of that, when the artist blows up, he can still leave to go get seven figures from a distro/label services company.

The distros/label services companies can’t spend those ridiculous amounts of money for obvious and understandable reasons. They are playing a long game and most of them are running on venture capital funding with a limit on carelessness.

They already know that they can’t make some of this monies back, but they know that 10 successful artists will more than make up for 50 unsuccessful experiments, on whom they still own rights. Thus, it’s a calculated win-win.

Even though they can afford to lose these monies for market share and a potential high-priced buy-out - for example, Believe bought Tunecore in 2015 - $10,000 is already a high price to pay for that. Why increase it?

Most artists are only viable within the first few weeks or months of their release anyway,” says a label services boss.

$10,000 might be too low for the artist, but anything higher for an unknown artist would be too much for the companies. Such imbalance is also a reality of the digital age.

For example, ride-hailing and streaming companies haven’t been making a killing like hardware companies like Apple because the only way they can make a killing is by offering their premium plans at a much higher pricing, which would be too expensive for the users. In countries like Nigeria, where purchasing power is crooked, N900 monthly for Apple Music is a lot of money for a lot of people already.

Thus, it’s not the fault of these companies that they can’t afford to spend endlessly like a young, rich Lagos big boy, with a huge pile of new money somewhere.

Moreover, these distros/label services companies are now signing artists to multi-album deals because of certain understandable guarantees.

But in the end, companies like Olamide’s YBNL are a hybrid record label, in partnership with EMPIRE DISTRIBUTION.

Short and even longterm, both models are likely to co-exist side-by-side and even aid each other. One is unlikely to kill the other. We might just see a reluctance from Nigerian record label bosses to make huge outlays on artists, without guaranteed label services bag.

But the reality is that, if the major label boss isn't a star, offering his artist for the longterm or offer his entire roster, he's unlikely to get the bag that might 'blow' his artist(s).

Is there a solution to how distro/label serviced advance is too meagre?

There is none and it would be grossly irresponsible and unreasonable to expect distros/label services companies to simply increase their offerings to obscure artists. We still have to pray that these distros/label services companies start recouping on their outlier successes. If that doesn’t happen, the advance is likely to be much reduced, incentivized or even cancelled.

A Nigerian artist just has to decide what he or she wants to be.

If you want to become a superstar, you join a label. If you simply want reasonable success that could lead to stardom - with no guarantees - and ownership, then stick with a distro/label services company.


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