Is Jay-Z Taking a Pay Cut?


If you watched the NBA Finals game last night, you probably saw Jay-Z’s advertisement, announcing the release of his new album Magna Carta Holy Grail. In addition to the mastermind himself, the ad features some of the most talented producers in the game: Timbaland, Swizz Beatz, and Rick Rubin. Immediately after the ad aired, the world took to the internet — fans announced their excitement, and most seemed to agree that this was a genius marketing strategy.

So what is the deal exactly? Well, the first million Samsung Galaxy users will be able to download an app that provides access to Magna Carta for free, 3 days before the rest of the world gets access on July 4th. But what the world didn’t see in the ad, are the gritty details behind this deal.

Samsung paid Jay-Z $5 million upfront for the rights to release the album to 1 million users for free. Think that sounds like a lot? Think again. Most albums range from $10.99 to $12.99. That’s 1 million users x $13 = $13 million, versus $5 million. And because Jay-Z is Jay-Z, chances are he gets close to 70% of the revenue from his album sales.

Now how much of a coincidence it that this announcement was made a few days after Kanye West’s album leaked all over the internet? And then what about J. Cole’s? In the world of Hip Hop, album leaks aren’t a new phenomenon. Perhaps this is why Jay-Z is starting this #newrules campaign. He recently tweeted (which he never does):

Tweets

See Jay-Z may be taking a “pay cut” based on strict album sales, but he’s getting a pay raise in terms of net revenue. In 2008, he made a $150 million deal with Live Nation, part of which includes a $25 million upfront payment to Jay-Z and $10 million per album for a minimum of three albums over the next decade. In other words, Jay-Z is already getting paid for this new album release. In addition, he not only has a leg up for any upcoming tours based on the Magna Carta album, but also made a major deal with a $195 billion company. This deal will shape the future of the music industry, creating a platform for other mobile companies to compete with Apple’s music sales.

So what’s the bottom line? It’s not just about album sales. In fact, it may not be about album sales at all. Platinum status? Good luck to Billboard on calculating this one.

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