Frank Ocean's Album Is the Straw that Broke Universal Music's Back (and It May Get Him Sued)

Frank Ocean at the 55th annual Grammy Awards
Jordan Strauss/Invision/AP, File

Frank Ocean arrives at the 55th Annual Grammy Awards in Los Angeles. 

In the end, Frank Ocean won, and walked away with his freedom and his money. Calculating those who lost, however, is a much more complicated equation.

Frank Ocean's four-year sabbatical from the public eye following his 2012 album Channel Orange ended emphatically and dramatically last week with back-to-back releases: the visual album Endless, released as an Apple Music video stream via Def Jam/Universal Music Group; and the 17-song album Blond, released as an Apple exclusive a day later on Ocean's own label, Boys Don't Cry, without Def Jam's -- or Universal's -- involvement.

After an interminable wait (in music industry standards, at least), Ocean fulfilled his contractual obligations, sources tell Billboard, and increased his potential profit share from 14 percent to 70 percent of total revenues from Blond within a 24-hour period, seemingly pulling a fast one on the biggest music company in the world in the process. Def Jam and its parent Universal, stuck with an overshadowed visual album that isn't for sale, and cut out of any revenue from the "proper" album that's headed to the top of the charts on the strength of  225,000 to 250,000 equivalent album units earned in the week ending Aug. 25, were left with what amounts to a very long music video and without one of their marquee artists.

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UMG chairman/CEO Lucian Grainge reacted swiftly by informing the heads of his labels that Universal was done with streaming exclusives on one platform and on a global basis, which has been at the center of the streaming services' arms race in the last 18 months, though it remains unconfirmed whether or not Grainge’s policy change was a direct result of Ocean’s strategy behind Blond. But regardless, the damage was done.

Now, the question is, how did Ocean win this battle? Did he? And what does it mean for the other labels, streaming services and the industry at large?

In July, Billboard reported that Def Jam had spent as much as $2 million on recording costs for Ocean's album, at the time thought to be called Boys Don't Cry. Now it appears that Ocean, perhaps through an advance via his new deal with Apple (though one source suggests a separate, private benefactor), paid that amount back to Def Jam, absolving him of any recoupable claims from Def Jam/UMG and essentially buying Ocean his own recordings back. Ocean delivered Endless instead, fulfilling his deal and severing his contractual ties to the major.  

But to release another full-length, fully-realized album outside the label's purview just 24-hours later is controversial, to say the least, and a source tells Billboard that while UMG hasn’t taken any legal action against Ocean or his team, the label group may have grounds to do so. (Sources close to the situation at both Def Jam and Universal Music say that no legal action against Ocean is currently being considered.)

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For one, many record contracts are based on minimum-delivery clauses, meaning that if Ocean's deal was just for two albums, he typically would have had to deliver them within a set time frame, and at a label-acceptable level of quality, in order to fulfill his contract. In addition, most recording contracts stipulate a window of time during which an artist can't release music on any other label, so as not to compete with the current project -- in this case, DefJam's Endless. By delivering Blond within just 24 hours, it raises the question of whether  Universal even knew it was coming -- and what they could have done about it regardless. 

The Frank Ocean release follows two other highly unorthodox rollouts from Def Jam artists, both via Jay Z's Tidal service: Rihanna's leaked Anti album and Kanye West's extended-streaming/eventual U-turn of a strategy for The Life of Pablo. Those two LPs at least went to No. 1 on the Billboard 200; with Ocean, Def Jam won't even have that consolation.

That makes Grainge's umbrage understandable. But it doesn't necessarily represent a coup for Apple Music, either, as the ire of the industry -- and the biggest label in the world -- turns toward the house that Jobs built. (Def Jam and Apple Music did not immediately respond to requests for comment.)

Spotify, one of the industry's favorite punching bags over the past few years due to its free tier and the low royalty payments that it generates, has long eschewed exclusives as bad for artists and bad for fans. And privately, many executives at major labels have agreed with that position, saying that, in addition to fostering piracy, the strategy segments off an artist's fan base into the smaller pools of Apple Music (15 million subscribers) and Tidal (estimated to have 4 million subscribers) rather than allowing the broader paid on-demand streaming subscriber base (68 million people worldwide, according to the IFPI) to tune in. To that end, UMG insiders critical of exclusives vocally muse that such artists as Ariana Grande and U2 would have seen much more significant debuts.

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But whether the heads of Sony Music Entertainment and Warner Music Group -- Doug Morris and Stephen Cooper, respectively -- follow Grainge's lead in shutting down exclusives is a matter of debate. The fact remains that artists from every major label -- Drake (through Cash Money's distribution deal with UMG), Rihanna and West for Universal; Beyonce, Future and DJ Khaled for Sony; Blake Shelton and PartyNextDoor for Warner -- have succeeded using exclusive or windowed releases. But some label execs have expressed concern that despite chart successes, those albums failed to reach the maximum revenue potential by being sequestered on a single service.

It's also worked for independent artists before Ocean -- Chance the Rapper's Coloring Book became the first-ever streaming-only release to reach the Billboard 200 albums chart, debuting at No. 8 as an Apple Music exclusive in May. With Ocean almost certainly set to hit No. 1 this week via his digital-only release (in addition to streaming on Apple Music, it's for sale in the iTunes Store), it raises the question of how important a record label is at all in 2016, as services offer marketing and advance money that a label would otherwise provide. And if terrestrial radio remains the final frontier that separates successful artists from superstars, well, a company like Apple has a digital version of that, too, with its Beats 1 Radio stations.

At the beginning of 2016, robust competition among, and ever-increasing revenue from, the streaming services seemed like it would finally bring the recording industry back from the brink. The question is: Can the labels and streamers get along well enough to prosper together?

Additional reporting by Shirley Halperin and Ed Christman.