Mixtapes & Money: Inside the Mainstreaming of Hip-Hop's Shadow Economy

January 26, 2017, 1:51pm EST

Ten years ago, the mixtape industry was on the ropes and facing an uncertain future. Now, the game, and the business behind it, has changed again.

On the afternoon of Jan. 16, 2007, just over 10 years ago, DJ Drama and DJ Don Cannon were arrested on federal racketeering and bootlegging charges related to the alleged sale of mixtapes. Authorities, backed by the RIAA, confiscated more than 80,000 CDs and thousands of dollars worth of assets and recording equipment from the duo’s Atlanta studio during the raid, as Drama and Cannon were dubbed “mixtape martyrs,” taking the fall for a scene that had fostered the early rap careers of 50 Cent, T.I. and Young Jeezy, to name a few.

By the time of the raid, mixtapes had grown from homemade mix cassettes sold on street corners and barbershops to an underground, semi-legal marketplace where album-quality releases from high-profile rappers generated between 30 million and 50 million sales each year, according to the RIAA, working out to a conservative estimate of $150 million to $250 million annually by the end of 2006. The music industry generally looked the other way, exchanging lost royalties for the promotion and buzz that artists could build from the streets up with multiple “unauthorized” releases per year. If the raid that day just over 10 years ago wasn’t quite the day the mixtape died, it was the day the mixtape, and the industry around it, changed forever.

“A lot of people were scared,” Drama says now, “Because at the time I was the top of the food chain when it came to mixtapes. It was like, ‘Who knows who could be next? Who knows what could happen?’”

In the wake of that uncertainty rose a new model and a new era for the underground hip-hop world, one that would take mixtapes global, digital and, for the first time, legitimate. Now, a decade later, the industry that sprang up to fill the void is itself facing an uncertain future, as lines blur, gatekeepers shift and corporations begin to solidify a long-gestating takeover.

For three decades, mixtapes have played an increasingly significant role in the hip-hop world. First rising from the beat and blend tapes of DJs like Kid Capri and Lovebug Starski in the 1980s and early 1990s, the likes of DJ Clue and DJ Doo Wop began using them as curated proving grounds for rising and established MCs with exclusive songs and freestyles as the 1990s wore on. 50 Cent and DJ Whoo Kid are widely credited with shifting the focus from multi-artist compilations to single-artist showpieces, adding new verses to existing production to build buzz in the streets.

“A mixtape, at its core, is rapping over other artists' beats that's already out and known,” says Styles P, a member of The LOX who came up in the 1990s and has released more than a dozen mixtapes in his career, taking the purist’s point of view. “And it's a free project. You don't charge for it and it's not original music.”

From the beginning, however, most mixtapes were for sale, and walked a legal tightrope as a result, technically flaunting the law but operating below its radar. What the RIAA would see as copyright infringement -- trafficking copyrighted work without clearances or permission -- was masked as promotional material. As the argument went, if the tape was given away for free it wasn't a commercial violation, and mixtapes would generally carry a sticker marking them as not for sale, even if the reality was otherwise.

But the market's distribution model was by definition hard to pin down; in the 1990s into the 2000s, tapes were sold for a few dollars apiece. Name DJs -- like Whoo Kid, Clue and Kay Slay in New York, or Drama in Atlanta -- could pull in thousands of dollars to host a tape, while record labels were lining DJs' pockets, spending $10,000-$15,000 to finance a tape even as their legal teams investigated and litigated, according to sources, and paying even more to manufacture them.

"People retired off that sh-t," one independent label executive says now.

The raid changed that. Before Drama and Cannon were arrested on RICO charges -- shorthand for the Racketeer Influenced and Corrupt Organizations Act, more commonly associated with mobsters than DJs -- the RIAA’s focus had been on piracy, particularly digital file sharing, and shutting down small, local record shops that traded in bootlegs and mixtapes. A high-profile target like Drama, whose Gangsta Grillz mixtape series includes installments from Lil Wayne, Gucci Mane, Meek Mill and Jeezy and is widely regarded as the most influential ever, sent shock waves through the system.

“It was like, ‘Wow, if Drama can get locked up for this, nobody's safe,’” Drama remembers. “MixUnit was the biggest mixtape website; [the raid] shifted their whole way of doing business and they stopped selling mixtapes. Various DJs went on to find other avenues to structure their career and move on. A Philly bootlegger who used to make CDs told me, just last night, after the raid happened he left the game and did something else.”

By 2009, the charges against Drama and Cannon had been dismissed. But it would take a few months after their arrest for the scene to recover. In the meantime everything froze -- but not for long.

Two years prior, in 2005, Datpiff.com officially launched. Originally a place for its founders to share underground tapes, the site would eventually grow into the biggest online destination for mixtapes new and old over the following decade, acting as both distributor and digital library. Its largest competitor, LiveMixtapes, debuted the following March, and the Internet's mixtape marketplace exploded. But crucially, these sites offered mixtapes as free downloads, reverting their function from street retail album back to promotional tool. By the time of Drama’s arrest in 2007, mixtape distribution was in the final stages of a rapid shift from the streets to the web -- and the economics of the mixtape game shifted along with it.

“Datpiff was never created to be a business, to be a brand; it wasn’t until 2007 or 2008 when it became a full-time thing,” says Kyle “KP” Reilly, the site’s vice president. “We were operating in the realm that we knew to be legal, very differently than the MixUnits [of the world]. But we were also optimistic that what we had was the next chapter in what was still in the toddler stages of becoming a full-on genre of music in itself.”

At the time, mainstream hip-hop was nearing the end of the ringtone rap era, when tracks like Mims’ “This Is Why I’m Hot” and Soulja Boy’s “Crank That (Soulja Boy)” spent weeks atop the Hot 100. But as the mixtape world was changing, it was rescued, and ultimately re-shaped, by the next crop of rappers on the rise as the decade wore on and turned over.

“[Between] the culture of the blogs and social media, the ways that people were sharing their projects was changing,” Drama says. “These new sites started coming up where you could go on Twitter and tweet out a link to your tape and put it in a million people's hands in no time. And I think the generation that came up from that just really took it -- which always happens in hip-hop -- and elevated it and brought it to a new life.”

Over the next several years, artists like J. Cole, Drake, Big Sean, Meek and Kendrick Lamar emerged from this digital mixtape circuit to become forces of that new generation and spark major label bidding wars; Wiz Khalifa has said that Datpiff specifically aided his rise to multi-platinum recording artist. Their album-quality tapes, distributed for free online, came with mastered audio quality, allowing them to build fan bases while labels stayed behind the scenes and allowed grassroots followings to build organically.

The new generation’s rise bolstered these mixtape sites and transformed them into gatekeepers themselves. Offering projects to registered and non-registered users for free, Datpiff and LiveMixtapes independently developed a new business model for the industry, one based off advertising, exclusive partnerships and behind-the-scenes payments to and from artists in exchange for exclusive hosting rights and prime site placement. A business once based on cash transactions and back-door deals moved into the digital age with only the format truly changing.

Most sites depend on multi-tiered, traffic-based advertising to pull in the bulk of their revenue -- between 70 and 75 percent for Datpiff -- which includes ads on home pages, sponsor videos prior to downloads and promoted slots, Reilly explains. Ads promoting specific tapes can run from several hundred to a couple thousand dollars per day; more “organic” front-page placements can approach five figures on some sites, according to documents reviewed by Billboard. Sites will also pay to co-sponsor tours and parties, while Datpiff has cornered the market on incorporating DJ drops directly onto the songs themselves, adding its "Datpiff dot com" tag over intros and verses.

"There’s a network of things an artist has to have to be viable, so if you got the right position on WorldStar, the right position on the mixtape websites, you can gain a fan base,” says one manager. But, he adds, "You gotta pay to play, because the game is now is an artist-consumer type of thing.”

For artists who already have a fan base, the pay-to-play model is flipped on its head. One artist, when asked how he decides which mixtape site to upload his projects to, responded, "Depends on who wants to pay more," putting the amount on offer in the "thousands." One indie label owner said an artist on his roster with a couple mixtapes under their belt was paid $40,000 for a project by My Mixtapez; a tour sponsorship ran an additional $15,000. Multiple sources estimated the payment to a powerhouse mixtape artist like Lil Wayne or Future to be around $50,000 for the right to be the tape's exclusive host, despite the fact that tapes are almost guaranteed to surface on every major site within a matter of hours (or minutes) after a release. Reilly said in 2014 that Datpiff had exclusive deals with DJs like Drama, Cannon and Holiday to host every tape they put out.

“I mean, it's marketing, so they'll do shows and events," says an artist manager. "My Mixtapez did a lot last year at festivals like SXSW, A3C. They have a presence at all of these places because they're servicing the artist. So they're on both sides."

By January 2014, three top mixtape sites -- Datpiff, LiveMixtapes and AudioMack -- were pulling in a combined 7 million unique visitors per month in the U.S. alone, according to comScore data, with Datpiff leading the way at 3.1 million uniques. But Soundcloud, which that month boasted 250 million monthly users and raised $60 million on a $700 million valuation, largely based on its appeal in the dance music space, was becoming attractive. Rising MCs like Chance the Rapper and the Migos, whose growing local and blog buzz meant they no longer needed a larger stage to host their projects, gravitated to Soundcloud’s open platform, devoid of gatekeepers.

At the same time, labels’ stance on tapes changed once again; having come around to their value in building an artist’s independent brand, labels slowly began re-releasing mixtapes to digital distributors and streaming sites once a signing became publicly official, packaging them as retail mixtapes or EPs. That had the effect of turning the promotional product back into the retail product -- and permanently blurring the line between a promotional street mixtape and an official retail album.

In 2011, Benjy Grinberg of Rostrum Records, which fostered the careers of Khalifa and Mac Miller, said the only difference between mixtapes and albums was “you don't make any direct money off” tapes; just three years later, even that line had been erased as the practice became widespread. GoldLink’s The God Complex became available for sale in the iTunes Store, for example, months after its initial release. Mixtape singles like Rich Homie Quan’s “Type of Way” were remastered and began regularly making their way onto the Hot 100 chart. Drake’s If You’re Reading This, It’s Too Late, was released in February 2015 directly through the iTunes Store and debuted at No. 1 on the Billboard 200, disregarding a free period of any kind in its entirety. Datpiff’s traffic, according to comScore data, would never pass 3 million uniques in a month again.

“It hurt us solely on the fact that it's caused confusion amongst fans when they see a mixtape is out but it's not on Datpiff,” Reilly says. “And that's been a hard barrier to break.

Between January 2014 and November 2016, U.S. traffic dropped significantly for Datpiff (down 36 percent), LiveMixtapes (down 55 percent) and AudioMack (down 66 percent) to less than half their previous combined traffic, according to comScore. Newer, more mobile-first companies like My Mixtapez and Spinrilla emerged to fill some of that gap; in 2016, those two apps were collectively downloaded an average of 1.3 million times per month worldwide, but were still dwarfed by Soundcloud’s 5.8 million average downloads per month, according to App Annie.

Last year, some of the highest-profile mixtapes of 2016 -- Chance’s Coloring Book, Lil Yachty’s Summer Songs 2, Lil Uzi Vert’s Lil Uzi Vert Vs. the World, 21 Savage and Metro Boomin’s Savage Mode -- debuted on either Apple Music or Soundcloud, and all are currently available on Spotify. (Coloring Book is even nominated for a Grammy, the first free project to receive that honor.) The fourth installment of Meek Mill’s Dreamchasers series, which launched Meek’s career and legitimized Datpiff’s standing (DC2 is the most-downloaded tape of all time on the site), was released to all digital retailers last October and debuted at No. 3 on the Billboard 200, moving 87,000 total units, 45,000 of which were pure, legal sales.

“I think the industry realized the power of the mixtape, and they realized they had to play and be a part of it from a financial standpoint,” Drama says. “Now you can barely tell the difference between what someone's mixtape is and what someone's album is. You still have to technically go to Apple Music and spend $9.99, even if it's not their debut album.”

“It's the wording and the way the labels are trying to spin these projects,” adds Reilly. “There's no real line drawn in the sand as to what the difference is. Labels are basically packaging these albums as mixtapes mainly because I think it's easier and quicker to put them out. There's no real stress behind them, you don't have to live and die by the numbers."

To cope, Datpiff has been leveraging its relationships with artists and labels to be included in digital-first releases; for DC4, for instance, Reilly was able to cut a deal with Meek’s label Atlantic to stream the project but replace the download option with a “buy” option; Reilly says Datpiff sent 100,000 people to the purchase link, resulting in 25,000 sales. But, he says, it’s been “more of a pain” as labels take these marquee releases out of their original forums and place them in the mainstream eye. It’s caused sites like his to re-assess once again their place in the mixtape ecosystem, as both platform and library.

“I feel like as long as we still have a brand and a foot in this door and we're still able to help provide those opportunities for people to be heard by foot traffic, there’s always going to be a lane for what we do,” Reilly says. “There's a 12-year-old right now who's going to be the next 21 Savage or Chance the Rapper or Lil Yachty, kids coming up that are not at the level of a big label protecting them. And they have to get their music out.”

Now, 10 years after the raid of DJ Drama’s studio, a decade removed from the “mixtape martyr” monikers and the first death of the tape, another era and another business rose up and is dying down, while mixtape culture again re-imagines its own form and function. So are mixtapes finally dead, co-opted by the larger machine and taken away from the streets where they originated? Or has the industry and mechanism driving the art form simply shifted once again?

“I don't think it's dead -- it’s definitely evolved -- but it's also not my place to decide that,” Drama says. “I've made my mark. Looking back on it 10 years later, from the raid, where it was almost like, ‘Wow, the mixtape game is over,’ it was like a phoenix arose from that. Mixtapes are the veins of hip-hop culture and they always have been. And who knows if there's another young budding superstar on the way?”

Additional reporting by Adelle Platon.


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