Decoding the Value of a Music Leak - Cheating Week on BTR


photo: Creative Commons – Mike Barry. JayZ and Kanye West

Among the many headlines buzzing last week with the release of Jay-Z and Kanye West’s joint album, Watch the Throne, one particularly notable claim was the fact the hip hop duo strategically guarded the record with such tight restrictions no track was leaked in advance. Billboard describes the team’s tactics in their article, “Beat the Leaks,” as sessions recorded outside standard studios in areas where Wi-Fi was unavailable or disabled. All producers showed up in person to work, no music was transferred via email, and “tracks were saved directly to password-protected external hard drives that remained locked.” These extreme measures proved successful, and the album debuted on top of the charts, selling 436,000 units.

But wait – is that figure even impressive? West’s last album, My Beautiful Dark Twisted Fantasy, debuted last year with higher sales and several key tracks spilled beforehand. West, himself, released a series of songs, one each week leading to street date (remember G.O.O.D Fridays?), including the track, “Monster,” off the album. It appears the anti-leak strategy may have served more purpose in principle than real utility. Moreover, leaking music is now deemed by many to be an acceptable practice, as a growing number of artists are actively embracing the technique for marketing ventures. Inherently, it would seem to promote ideology that music should be free; not only are cheaters avoiding punishment, their appetites are satiated, and the value of musical copyright is decreasing.

Of course, not everyone would agree.

“Everybody I know listened to Watch the Throne the day it came out without paying for it,” comments Island Def Jam recording artist and rapper, Wax, who has garnered an immense following through online distribution of his mixtapes. “The sales weren’t good because people weren’t that into the album.  People bought Kanye’s album in greater numbers because the tracks leaked were considered by most to be very dope…Music is free, and, if it is good, people have a better chance of actually paying for it.”

In fact, many believe music leaking does boost sales, the single free download eventually leading to legitimate transactions. The past couple years also brought the rise of subscription-based services and streaming outlets such as Spotify, Pandora, Rhapsody and Turntable.FM, enabling music fans to listen to anything, at anytime, from any place, and never having to spend a dime. Though these vehicles of consumption are slowly finding ways to monetize music for artists, it’s nothing like the way it used to be.

As Wax points out, “Now people say, “Support the artist and buy this album!” That was never said in the past. You bought the album because you wanted it, not as an act of charity.”

DJ Skee, considered a forerunner in music industry innovation, similarly views the Internet as a marketing platform and tool for expanding the reign of music worldwide. Named one of Billboard’s “30 Under 30” industry heavyweights, DJ Skee hosts four Sirius/XM radio shows, a show on KIIS-FM in Los Angeles, and runs online entertainment company, Skee.TV. As a multi-faceted pioneer in the wave of new media, he consults for brands like Daimler-Chrysler and T-Mobile, and distributes music videos and web content through his partnership with YouTube. Accordingly, he attests to the promotional potential of a leak, in lieu of any negative outcomes.

“It usually has the opposite effect and actually gets your music heard by more, thus making your brand bigger,” he observes. “Today, we need to accept that music has become free for most people. Whether it’s downloaded, heard on FM radio, streamed online, etc., music doesn’t have much of a value, monetarily wise. Even if you sell a million (extremely rare) on iTunes of a single, after Apple’s cut, the label’s reimbursement, writer/producer cuts, and the money that’s gone into marketing, (shooting a video, promoting it at radio, etc,), you don’t walk away with a ton of cash.”

Hence, why DJ Skee believes there is often a difference in opinion between artists and labels on leaking – the former seeking a voice, the latter struggling to uphold dissolving business models. Record labels continue to invest substantial time, energy, and legal fees in removing illegal downloads from the web, yet no evidence suggests these efforts have made a positive contribution to sales. Though Frank Ocean’s mixtape, nostalgia, ULTRA had been out on blogs for months, Def Jam had it pulled from all sites earlier this year to prepare for its re-release. Similarly, their parent company, Universal Music, recently made news for using the Digital Millennium Copyright Act as leveraging power to take down a song on the web by rapper, Skepta, which they wanted for their artist, Eminem.

Likely, another fruitless effort.

A look at trends in music licensing demonstrates further testament to the psychology and habits of today’s music consumer. The Harry Fox Agency, a company that handles mechanical and digital licensing, and tracks publisher and self-published songwriter royalties, notes a correlation between the arrival of streaming services and the increase in related licensing. At present, 69% of their digital licenses pertain to streaming and limited downloads (generally tied to subscription plans), while less than a third are attributed to permanent downloads.

“For songwriters, royalties have decreased as physical sales decreased,” comments Paul Wallace, Director, Licensing and Royalty Collection Departments. “CDs are down by 7.0% (YTD June 2011), digital tracks are up 10.3%…but the increase has not been enough to offset physical decline.”

Rates for permanent downloads are comparable to physical products, while limited downloads and streams fall into “variable per-play rate based on a number of factors such as subscriber count, service revenue, content cost, and PRO costs.”

Significant, too, is the value of free marketing ascribed to leaks. Labels spend a sizable chunk of an artist’s recording budget on marketing endeavors that no longer make sense in the evolving market. Given new developments, a leak appears to have little to no negative impact on sales, and offers hefty incentive in the means of publicity, if handled appropriately.

“Often artists, labels, or individuals will just “throw” a track out with no plan, follow up, or anything, and it gets lost in the masses of music available to the world,” notes DJ Skee, also acknowledging the authority endowed by distributing music directly from its source. “Adele is having one of the most successful projects of the year due to people spreading the word about how great her album is. It didn’t do amazing first week numbers, but stayed steady which is extremely rare. Also, other artists who have put out great projects have benefited just from buzz and overall brand building, leading to sales of tour items, merch, and sometimes even physical product.”

Adds Wax, “The biggest benefit is that fans get to hear new unreleased music. It is always good to feed the appetite of your fan base.”

With experts now toting the power of recommendation services in a climate of oversaturation, this allowance assuredly carries weight.

So, in the end, was the stringent grip on Watch the Throne worth it? As Wax explains, one negative consequence of a leak is spreading unfinished work before final touches; in that sense, circumventing early dissemination allots an artist the time he needs to complete his record. Furthermore, every artist is different, every game plan lending itself necessarily to his needs.

“Artists have the chance now to control everything from distribution to shows to business,” stresses DJ Skee, who regards the future of music as an exciting environment where artists control their own destinies, unfiltered by corporate evils. “I feel each artist will have a different method for generating revenue that is customized for them…This (Watch the Throne) worked because it was Kanye & Jay-Z.”

Perhaps, the power couple’s leak-free accomplishment was also a matter of bragging rights, as neither artist is known for his modesty. To quote from a previous collaboration, “Difficult takes a day, impossible takes a week.”

Success in today’s music business truly is all relative.