Law & Policy, Legal Drama, Music Business

PANIC BUTTON Activated: Horrendous Business Models Threaten Existence of Nigeria’s Record Labels

Folks, check out the story below. A lot of these issues have been thoroughly discussed and delineated on Africamusiclaw.com. I have also been clear that you can’t talk music and not: 1) understand the business of music; and 2) music law. Law and music go together like bread and butter.

Also interesting points to note: Audu Maikori/Chocolate City is looking to go after Spinlet, afterall. It makes complete sense to me and we discussed that not too long on AML, given what appears to be Spinlet’s blatant interference with the contractual relations Brymo has with Chocolate City.

Also, M.I Abaga apparently had one of his Loopy talents call it quits on the grounds that they needed better support/management, some few months after signing. These are issues I have raised. I have wondered how M.I intends to do the juggle even with delegating as much as possible. He is an artist, a judge on X-factor, a business owner managing Loopy, an executive at Chocolate City. The roles are a bit demanding and managing talents is very demanding.

Stay tuned for my book, industry.

-Uduak
Photocredit: Leoandjen.com

Excerpt from TheNetng.net

“Nigerian record labels are facing horrendous times, with the likelihood of most of them packing up, Nigerian Entertainment Today investigations have revealed. If the local business model is not overhauled to accommodate the peculiarities of a chaotic system, at least 10 labels will either close shop or move into other aspects of entertainment before the end of the year, experts told us over the weekend.

The last 17 months have clearly shown that the Nigerian music scene has gone down a path that leaves record labels and the entire recording industry endangered. And it’s quite simple to explain: music labels are spending but the means of recouping investments, ill defined. Artistes on the other hand, are smiling to the bank.

It’s been this way for years now: Take for example, Record label ‘A’ signs Artiste ‘B‘ on a three year recording deal, with a contract stating the artiste has to release two albums during this period of time. The label spends heavily on the signee – from housing to recording, photo-shoots, publicity, marketing the brand, merchandising, video shoots, transportation, A&R development and a whole lot more. Even if the artiste yields success with his/her debut, creating a number 1 hit and bestseller, it is impossible, from our findings, for the label to recoup their initial investment.

How do labels make money? The general notion is that bulk of the label’s profit should come from music sales. Sadly, profit margin from sales is next to nil in Nigeria. With a record selling for as low as N40 in Alaba (the headquarters of physical distribution) and a maximum of N120 (less than a US dollar) on the CD stands/stores, the music has almost become worthless.

One CD unit in the US ranges from $5 to $14. A song on iTunes is around $1. The Nigerian model does not encourage exorbitant jewel CD casing, and singles are rarely sold.

‘The cost of producing a compact disk at mass production is N29. That leaves N21 for the label/artiste. Back then we used to pay upfront for an album but when we aren’t sure of the artiste, we change to ‘pay as you sell’ formula’, a top executive at Okeysonic Entertainment, one of the popular marketers in Alaba tells NET.

Following the departure of the big international companies, and the collapse of what remained of a distribution system, Pirates had a field day, proving to be a big menace to the industry, until the early 2000s when big names like Big Boss Jiggaman, Kev D and co morphed into legit agents, after seeing the possibilities in the industry following marketing deals with 2Shotz and the Trybe Records crew.

The formula worked for a minute. But, according to pundits, the disadvantages that came with it far outweigh the positives. Biggest negative: the value of the music contained in a CD was greatly compromised, as the industry unwittingly gave a critical role and power to a group of traders with no stakes or music business education.

‘Record Label owners today see music as bad investment due to the monstrous problem of piracy. Pirated works can never stand the test of time because the quality is ever and embarrassingly poor‘, Kenny ‘Keke’ Ogunbe, C.E.O of Kennis Music said in a speech delivered at the Nigerian Entertainment Conference, April 2013.

Record Label owners today see music as bad investment due to the monstrous problem of piracy. Pirated works can never stand the test of time because the quality is ever and embarrassingly poor’, Kenny ‘Keke’ Ogunbe, C.E.O of Kennis Music said in a speech delivered at the Nigerian Entertainment Conference, April 2013.
‘We’re paying the price now’, one veteran told us. Sales have diminished over the years, quality of music and packaging at its lowest, with hundreds of marketers unable to put out albums.

It’s so bad that a popular marketer T Joe, who once paid up to N20m for a Psquare album is on the verge of closing shop.

‘Labels don’t make money from CD sales, where else do you want to get back your investment let alone profit?’ CEO of Chocolate City, Audu Maikori comments.

With Alaba going under, will digital platforms step in and save the day? ‘Monetary digital distribution is Nigeria is still at its infant stage. It will take companies like iTunes, Spinlet, iRoking, YSG Hub some years to finally dominate and reduce free/illegal downloads’, Sola Fanawopo of Financial technology says.

And even when CD sales show a glimpse of hope, it’s still downhill for returns. For example, Burna Boy‘s label, Aristokrat Records, we are told received a sum of N10m from Alaba marketers, UBA Pacific for his newly released album ‘L.I.F.E’ which dropped last week and is said to be doing well in the market. But can that amount cover the cost incurred shooting his three high budget videos, recording sessions, photo shoots, album listening parties, etc? NO.”

The Netng.net has the full story.

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Africa Music Law™

AFRICA MUSIC LAW™ (AML) is a pioneering music business and entertainment law blog and podcast show by Fashion and Entertainment Lawyer Ms. Uduak Oduok empowering the African artist and Africa's rapidly evolving entertainment industry through brilliant music business and entertainment law commentary and analysis, industry news, and exclusive interviews.

Credited for several firsts in the fashion and entertainment industry, Ms. Uduak is also a Partner and Co-Founder of Ebitu Law Group, P.C. where she handles her law firm’s intellectual property law, media, business, fashion, and entertainment law practice areas. She has litigated a wide variety of cases in California courts and handled a variety of entertainment deals for clients in the USA, Africa, and Asia.

Her work and contributions to the creative industry have been recognized by numerous organizations including the National Bar Association, The American University School of Law and featured in prestigious legal publications in the USA including ABA Journal and The California Lawyer Magazine. She is also an Adjunct Professor at the prestigious Academy of Arts University in San Francisco.
For legal representation inquiries, please email (uduak@ebitulawgrp.com). For blog related inquiries i.e. advertising, licensing, or guest interview requests, please email (africamusiclaw@gmail.com). Thank you for visiting Africa Music Law™.

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