Would a 'Hip Hop Founders Fund' Work?

Hey! A few quick updates today:

1. Monday May 25 is Memorial Day in the U.S. There will be no Trapital content that day. I'm gonna turn it into a long weekend and take off next week Friday, May 22, so there will be no new content that day either. This will be my first day off in 2020. Taking a quick break to recharge. For those interested, my Trapital Calendar with Holidays and PTO is posted here.
2. Thanks again to everyone who submitted questions to the Trapital Mailbag podcast! If you haven't checked it out, here's the link on Spotify, Apple Podcasts, and everywhere else.

Today's update covers Swizz Beatz' Hip Hop Founders Fund to give back to the genre's pioneers, and LiveXLive's pricing strategy for livestream content.

Swizz Beatz Wants to Start a 'Hip Hop Founders Fund.' Will it Work?

Earlier this week, Swizz Beat floated the idea of a 'Hip Hop Founders Fund.' The Verzuz founder wants to take care of the past generation. He shared his thoughts in a recent Instagram Live session with Joe Budden.

From HipHopDx:

“I want to raise a million dollars for each icon that started Hip Hop,” he says around the 10-minute mark. “Kool Herc on down. The fact we’re not paying taxes on who started Hip Hop shows we don’t fucking really love Hip Hop. The fact that we don’t pay taxes as artists to those icons that paved the way, took the lower cut for the music that allow us to feed our family… Fuck the government. 

“We need to be paying taxes to the creatives of Hip Hop that gave us freedom of speech to move forward. I’m going to go so hard with that — Melle Mel, Grandmaster Flash and Sugar Hill Gang, minimum a million a piece.” 

Budden was onboard and agreed wholeheartedly, saying, “Every new deal that gets signed, 1 percent or a half percent should go to rapper reparations. The way they made the 360-deal standard, we can make that standard.”

It's a noble cause. It's safe to assume that true OGs are less well-off than today's rappers. They're never on the Forbes List. They get recognized at award shows, but a lifetime achievement montage can't pay the bills. They took a risk and gave hip-hop its name, but there was no "equity" compensation.

I love the concept, but there are a few challenges. First, deciding who gets funding will be subjective. Melle Mel and Sugar Hill Gang are obvious choices, but who else? Swizz did a follow-up chat with LL Cool J who was also down to support. But LL signed to Def Jam in 1984. Would he qualify for funding? Or is he disqualified because he has that NCIS money? I assume that LL's living larger than DJ Cool Herc, but I've never seen that "Mama Said Knock You Out" rapper on a Cash Kings list either.

Second, if the goal is to take care of hip-hop's pioneers, there are easier ways to do it. Instead of taxing all hip-hop acts, Swizz should first reach out to those who are most philanthropic. As I covered last week, many of them could be more effective with their giving. Swizz could pitch this fund as an alternative charitable contribution. That way, these artists can also get the publicity of donating $1 million to the Hip-Hop Founders Fund.

It plays into the vanity that exists in all public philanthropy. Social proofing is effective, especially when other well-off friends are paying up. Anyone who has attended a fundraiser gala can attest. Those pockets get looser when everyone else donates $100. No one wants to be the only one at the table who gives $25.

I understand the desire to create a "tax," but it would feel less personable. To some artists, it may seem more like an obligation than a desire to give back. Joe Budden suggested a 1% fee on label deals. The reaction would be polarizing and not every label would participate. Today's artists complain about the percentage points on their contract enough. A social security style tax may not get the response it desires.

Alternatively, some labels may buy in and pride themselves on giving back, but those will be few and far between.

LiveXLive goes pay-per-view with livestreams

The music streaming company LiveXLive has had quite the month. Last week, it acquired podcast network PodcastOne for $18 million. Earlier this week, the acquisition was scrutinized because LiveXLive accepted nearly $2 million in Payback Protection Program (PPP) funds. It's joined the ongoing debate on how PPP funding was administered, and whether LiveXLive—a company with a market cap of $200 million—should give back the money.

But he livestream company is still making moves. Yesterday, it announced a pay-per-view livestream for events.

From PR Newswire:

LiveXLive's Pay-Per-View (PPV) initiative will drive a new revenue-sharing model for both artists and LiveXLive via digital ticket sales, fan tipping, digital meet and greets, merchandise sales and sponsorship, enabling artists to go direct-to-consumer using LiveXLive's PPV platform... 

Digital event ticketing for single, multi-day and virtual tours further diversifies LiveXLive's revenue model, adding to current advertising and subscription monetization. LiveXLive's pay-per-view offering will include tour and weekend passes ($39.99 and $19.99, respectively) and an a la carte option for single shows ($4.99).

This initiative makes sense given the shift to livestreaming, but the pricing strategy seems off.

The "tour" or "weekend" pass is positioned like a music festival model. Customers have an "all you can consume" pass for all the digital events happening in a series. It's a bundled purchase. This is an easy sell for in-person music festivals since fans are also buying an experience. In my 2019 article on Coachella and Rolling Loud, I wrote about how it's less important for Coachella to have the biggest artists in the world. The machine works with enough decently popular artists. That's harder to pull off for a livestream event.

This will also be a challenge with subscription monetization. Can a livestream network secure the content to attract a healthy number of subscribers to make it worthwhile? Potentially. An ad-free, subscriber-only option could work. But that also assumes that there will be enough livestream content worth paying for. Livestream content is ephemeral. A constant supply is more important than static access to archives.

The challenge is that high-priced live entertainment experiences don't just attract die-hard hards. They also attract casual consumers who would never buy a subscription. For instance, I will buy a boxing match on pay-per-view, but I would never get an annual subscription to DAZN. This is where a splintering strategy works.

Let's say LiveXLive charged $40 to livestream a Cardi B concert. I might pay the $40 and not think twice about it. But if I had two options: pay for the $40 livestream, or an annual fee of $50, I would pause and ask a few questions. What other big concerts are coming to LiveXLive? Does the company have exclusive deals with artists I like? If there's one more artist I like, I can justify the annual $50 purchase. It plays into the economics and irrational decision-making of consumer behavior.

When people say that pricing is an art, this is what they mean.

I hope you enjoy your weekend! I'm excited for Saturday's Verzuz battle between Ludacris and Nelly. We had a short chat in the Trapital Slack on who we think will win. Sunday is also my wife's birthday, so we'll be celebrating in the most socially-distant way possible. Talk to you on Monday.