Universal Music Group chairman Lucian Grainge spent the weekend of Aug. 20 thinking long and hard about his business. As Twitter buzzed with will-he-or-won’t-he speculation about the imminent release of Frank Ocean’s oft-delayed sophomore album, Blond -- an Apple Music exclusive, paired with pop-up shops in four cities, that officially dropped that Saturday -- the British executive could take little comfort in a UMG act headed straight for the top of the Billboard 200 on the strength of 225,000 to 250,000 equivalent album units earned in the week ending Aug. 25. That’s because Ocean -- signed to Def Jam for his previous Grammy-nominated album, 2012’s Channel Orange -- was no longer on the label, having maneuvered out of his contract by reimbursing the company for the $2 million-plus spent on Blond and releasing it to iTunes via his own Boys Don’t Cry imprint.
All Def Jam got for its trouble after an anxious four-year wait? A streaming-only “visual album” called Endless, released the day before, that is ineligible for the Billboard 200. But it will fulfill Ocean’s contractual obligation to the label, multiple sources confirm, with one insider asserting that the label had not known about the existence of Blond. Marvels an insider: “He is emancipated, and all proceeds and kudos go directly to Frank. Pretty f---ing ballsy.”
The Ocean salvo comes in the wake of several high-profile UMG artists who, in the last six months, have aligned with streaming services Tidal and Apple for the initial distribution of their music. Among them: Drake (for Views) and Kanye West (The Life of Pablo), and, slightly further back, Ariana Grande (Dangerous Woman), Rihanna (Anti) and U2 (Songs of Innocence). While not every rollout has been smooth (both West and Rihanna saw hiccups upon release -- the former self-inflicted by insisting the album wasn’t ready for consumption, the latter, signed to RocNation and distributed by UMG, with an accidental leak hours before it officially dropped), it was Ocean’s album that signaled a last straw for Grainge, who in turn issued a corporate mandate to label heads that UMG would no longer allow album exclusives to one platform and on a global basis.
Frustration for UMG, the world’s biggest music company, stems from the belief that exclusives inhibit maximum sales and revenue potential. For some artists and managers, however, taking advantage of the streaming companies’ high-stakes, high-spending battle for market share offers a portal into direct deals with retailers that could make an affiliation with labels look redundant.
“Artist managers like exclusives because of all the marketing dollars that come with it, but they are being shortsighted and not realizing the opportunities they’re losing,” says one UMG insider, who notes that for Universal label contracts, it is at UMG’s discretion whether to allow an exclusive. (The mandate doesn't apply to distributed labels, who can still use the exclusive strategy, if they so choose.)
Troy Carter, Spotify’s global head of creator services and former manager to Meghan Trainor and John Legend, agrees, telling Billboard in a recent interview: “Most labels are getting around to understanding that exclusives aren’t great for the business. As a manager, I would want my artists’ music to be everywhere. When you carve it out to one service, you miss out on fans.”
But while streaming exclusives can hurt a record company’s bottom line, for certain artists -- chief among them Drake, who has the second-largest-selling album of 2016 in the United States, with 1.4 million (only Adele’s 25, with 1.5 million sold this year, is ahead of Views) -- the success of such a campaign is evident. Still, there are those like Russ Crupnick, managing partner of MusicWatch, who question the logic on a more macro level. “There’s been too much conversation about exclusives,” he says. “What is the real core benefit of Tidal? It’s not having a Kanye or Beyoncé exclusive; it’s the fact that I can use it to listen to any kind of music that I want, on demand, in any order. That’s the reason why people sign up for subscriptions.”
“It’s the Wild West,” adds one manager of top-tier stars. “Some artists have had great results -- like Beyoncé, Chance the Rapper, Future and Drake -- but they are few and far between. It’s a strange environment right now for most acts, who have to hear, ‘Give us an exclusive even though we’re not going to give you much.’ ”
So what do you get when you partner with Apple Music, which boasts 15 million paid subscribers? A hefty advance, a dedicated marketing spend, premium placement atop the iTunes store, maybe a TV commercial and a Beats Radio show in addition to the less immediately tangible bonuses like additional paid media connected to the release, global exposure and barters that might incorporate social media campaigns. Says one insider familiar with Apple’s positioning: “They’ll literally throw everything they can at it. You can’t get to No. 1 on Spotify alone.”
Tidal, on the other hand, whose exclusives are limited to equity partner artists like founder Jay Z and wife Beyonce, Kanye West and Rihanna, offers a media buy valued at as much as $4 million. Witness the slew of outdoor billboard ads for Rihanna’s latest album Anti.
Spotify with its 35 million subscribers (more than 70 million of them using the service for free) has not yet engaged in the exclusivity war, opting to wait out windowing with a one-and-all ethos. But aligning with the Swedes has its perks: optimal placement near or on popular playlists, promotion and marketing support -- initiatives you can attach a dollar amount to. “Rather than saying, ‘We want your music exclusively, they’ll say, ‘We want you to get behind the platform and we’ll give you X amount of money to promote on the platform or to use for video content and so on,’” a source explains, adding that if Spotify does get shut out by an exclusive, they might “bury” your act or “not promote your artist and that can be extremely damaging.”
So far, reaction to UMG’s edict has been one of support, as the UK’s Entertainment Retailers Association (ERA), representing digital music services and music retailers, stated on Aug. 24. “We have long believed that a level playing field is the key to healthy competition in the entertainment market,” said CEO Kim Bayley, adding that ERA’s members believe that exclusivity deals are “confusing for consumers, potentially threaten the growth of the music streaming market and disadvantage physical retailers.”
French-owned streamer Deezer, which recently launched in the U.S., had a similar take. "We want to offer our users the best possible experience, and support artists by providing a fair and legal streaming service," the company said in a statement on Aug. 25. "We believe exclusives often compromise both of these by encouraging piracy and locking users into services they don’t want. While exclusives provide a short term benefit to the service, they ultimately pose more limitations on musicians creating a barrier between artists and their fans.”
Indeed, some critics of the exclusivity model contend that such practices could be viewed as anti-trust with Apple at the head of the potential-monopoly leaderboard. “There’s a need for a level playing-ground,” says one such detractor. “Overweighted positioning hurts non-exclusive acts, of which every major has many."
But it remains to be seen whether other releases upcoming for Universal might become a point of contention as new albums are lined up for the fourth quarter -- one to watch: Interscope artist Lady Gaga -- or whether competitors Sony, which has seen successful launches with exclusives by Future and DJ Khaled, and Warner Music Group (which, on a group level, doesn't have a unified stance on streaming) will follow along. “It’s a pivotal time for all labels again,” says a high-ranking executive. “Maybe the most important sea-change since Napster.”
With reporting by Dan Rys and Ed Christman
A version of this article was first published in the Sept. 3 issue of Billboard.