For a company that launched on little more than a credit card and a belief, EMPIRE has enjoyed an impressive trajectory.
Founded in 2010 by Ghazi Shami, the music company – which currently sits at the center of the burgeoning US hip-hop market – was the third biggest independent distributor in the US last year. (Behind TuneCore and CDBaby, according to BuzzAngle data.)
In 2011, EMPIRE provided distribution for Kendrick Lamar’s debut album Section.80 released via Top Dawg Entertainment.
It has since worked on singles and albums by a wealth of artists including Anderson .Paak, Cardi B, DRAM, Fat Joe & Remy Ma, Migos, Shaggy and Snoop Dogg.
And last year, EMPIRE reached No.2 on the Billboard chart with the debut album from XXXTentacion.
“EMPIRE has been built very systematically, and slowly but surely,” Shami (pictured right, inset) tells MBW.
“From a public point of view, it seems like we’ve had this massive explosion, but if you look under the hood and follow the company for the last eight years, we’ve had a lot of stuff bubbling under the surface for a long time.”
Artists aren’t the only ones who’ve noticed EMPIRE’s growing significance.
In April, Universal Music Group announced a deal whereby EMPIRE would lend its specialized approach to distribution, digital sales, promotion and marketing as part of a multi-year partnership with all UMG labels.
Shami is also serious, however, about his firm’s own A&R department; Tina Davis was recently appointed EMPIRE’s VP of A&R after spending 10 years at Def Jam as SVP of A&R, before going on to manage Chris Brown.
Shami is a former Silicon Valley computer whizz who made his name in music as mastering engineer with his own studio in the San Francisco Bay area, where he worked with local hip-hop artists like The Game, Mac Dre and Tupac’s group Outlawz.
After building out INgrooves’ urban division as a consultant, he saw a gap in the market for a modern music company that blurred the lines between distributor and label, and EMPIRE was born.
Shami explains: “I felt like distribution in the modern space, post brick and mortar and physical, shouldn’t be just an after thought, it should be the nature of what you do as a company.”
“I felt like distribution in the modern space, post brick and mortar and physical, shouldn’t be just an afterthought, it should be the nature of what you do as a company.”
Today, EMPIRE has 50 employees and Shami is eyeing worldwide expansion. (The UK is especially in his sights.)
We sat down with him earlier this month at Midem in Cannes to chat deal specifics, competing with major labels and the future of radio, streaming and hip-hop.
Why launch an independent company in 2010 – a point when streaming hadn’t yet properly taken off?
Streaming wasn’t on the horizon for most people but it was definitely on the horizon for me. I had worked in Silicon Valley in the late ‘90s so I was already involved in streaming technology.
When I was in college, we were embedding music videos into web pages and streaming MP3s so I always knew it was going to be the future, it was just a matter of timing. The main thing that was missing was broadband access.
A mantra I always use is: access creates culture. If there is no access, there is no culture. The access to data has created the possibility for streaming culture to emerge.
How has the evolution of streaming changed what you do?
Streaming is the best shit that’s ever happened.
I hoped and prayed for this day, I saw what happened with Netflix really early and how it changed user behaviour, how video consumption changed and what happened to all the bootleggers in the Walmart parking lot and the brick and mortar stores like Blockbuster when they disappeared.
I knew that when streaming found its way to the masses it would cannibalise piracy and that is what we’re seeing happening.
“The freemium model was a genius way to do business. Streaming is the best shit that’s ever happened.”
User behaviour has changed in a whole generation of children that used to pirate music, now their parents are buying them Apple Music and Spotify subscriptions. I think the freemium model was a genius way to do business.
Streaming has been amazing for the business both from a growth and a forecasting standpoint. It helps us make better marketing decisions because of the trends we can follow and the analytics we have access to.
We are making more creative marketing decisions and we can make more informed marketing spend.
I can hop on my computer and in 30 seconds see what a record made in the last 24 hours for us a company. That provides a much more intelligent way of doing business.
What’s your strategy when working with artists?
My strategy, if you can call it that, is honesty and transparency.
When I started a label, I just wanted to engage people and service the marketplace.
In Silicon Valley I worked at different manufacturing companies that were called ‘value added resellers’ in that era. So I felt like, How do you do distribution and add value? It was really simple.
I didn’t have a motive, it was just about helping artists, half of which are my friends.
You signed a deal with Universal earlier this year. Do you remain the owner of Empire?
EMPIRE is wholly independently owned, nobody else has any equity in [the company].
The deal was really just formalising what was already going on. We were already working in conjunction with Interscope a lot and some of the other labels under the UMG umbrella wanted to do the same thing.
“We sat down with Lucian Grainge and I was like, Look, in some situations we can tug at the same dollar bill and tear it apart, but I would prefer that we reach into our pockets, turn the dollar bill into change and we can all share the change.”
We sat down with Lucian Grainge and I was like, ‘Look, in some situations we can tug at the same dollar bill and tear it apart, but I would prefer that we reach into our pockets, turn the dollar bill into change and we can all share the change.’
How does the agreement work in reality?
We are distributing a lot of artists that they are finding and signing to their labels, that they feel might be better suited to be in a younger, more fluid arrangement.
A downstreaming deal?
I don’t like the connotation of that, I would call it a horizontal stream! Let’s call it a lateral move.
Does that UMG deal mean you don’t have a joint venture with Atlantic anymore?
That is winding down.
In the press release announcing the deal with Universal, they praised Empire’s “unique approach” to distribution. What is unique about your approach?
We are still very excited about 0 – 10 in a marketplace that is looking to pick things up at 30 and overpay for them.
I think the unique approach is that we are still willing to get into the trenches and do the heavy lifting, and we are not afraid to work with artists that have nothing going on but great music.
“We are still very excited about 0 – 10 in a marketplace that is looking to pick things up at 30 and overpay for them.”
We get involved very early. We’ve taken the stance that it’s okay to get our hands dirty in a marketplace where people don’t want to get their hands dirty anymore.
How do you make that work economically?
We’ve worked with a lot of artists early that go on to become superstars in the business and we still have a lot of those catalogues.
Early on in the company we were signing talent without any advances, and people were doing deals with us because they knew we accounted properly, we picked up our phone, and we provided marketing services.
Most companies were not willing to do that because the artists weren’t generating revenue yet. It was sweat equity that was invested, not a lot of money.
So you have signed rights ownership deals before?
Yeah, sometimes. When we do rights ownership they are usually joint ownership.
I don’t believe there is any one proper deal that we should sign, it’s very case specific. We do have standard deals that are very run of the mill, like many of our distribution deals which are still non exclusive.
Outside of that, we do all kinds of different deals but the one thing we don’t do is royalty based deals — most of our deals are rooted in the ideology of partnership.
“I really believe that you get the best out of an artist if you treat them like your partner, rather than someone that is subservient to you.”
I really believe that you get the best out of an artist if you treat them like your partner, rather than someone who is subservient to you.
So most of our deals are structured like partnerships and most of the percentages are in favour of the artist.
Are you ever competing against major labels to sign talent?
We are always competing against major labels.
We lost a lot of artists to major labels because they waited for us to get them to 30 miles an hour then they wrote the big cheque. But the company was in a much different space then than it is now.
“We lost a lot of artists to major labels… But this company was in a much different space then than it is now.”
When I started I was by myself, I didn’t have any employees and we now have over 50. As we mature as a company, the retention of artists is changing.
We used to be good at only getting artists from 0 – 10, then we were good at 0 – 30; now we can do 0 – 100 and actually break records on an international level.
As we progress as a company, our win-to-loss ratio [vs the majors] is moving heavily in our favour.
You started to answer my next question: is Empire able to truly launch and develop the career of a global superstar without the help of a major?
Yes. The digital distribution age has levelled the playing field for independents in terms of access.
I push a button and a track is on Spotify, YouTube and Apple Music worldwide and it’s up to myself and our marketing, publicity and radio promo teams to make sure that we have all the i’s and the t’s crossed and talked to all the relevant people in all the different markets to work the projects.
We have local publicity in foreign territories, we work radio, we distribute physical goods, but the most important component of all of it is digital and being able to have the record readily available all over the world.
You can be in Jakarta, Indonesia and listen to the same record a kid in San Francisco is listening to, and they may have shared it via WhatsApp, Twitter or Instagram.
That access didn’t exist even five, six, seven years ago. It’s really liberating to have that at your disposal and I think the wind in our sails is our ingenuity and approach to how we work with our partners.
Are the major labels still not at an advantage due to size of budgets?
I would say the playing field is level now as far as budgets are concerned. We are doing pretty well financially as a company, but more importantly, many of the things that used to cost an exorbitant amount have been reduced.
We do a lot of very creative influencer marketing campaigns via social media; even the cost of creating video assets has been reduced dramatically. You can create a video for $10,000 now that looks like a $100k video from three years ago.
“I would say the playing field is level now as far as budgets are concerned. We are doing pretty well financially as a company, but more importantly, many of the things that used to cost an exorbitant amount have been reduced.”
Radio is not as important as it used to be, at least not domestically in the US, and that used to be a tremendous cost.
We have artists who are getting multi-platinum records without ever touching radio because the music is bred through the culture and not via mainstream TV and radio anymore.
Certain artists still require mainstream TV and radio and certain artists can be built through SoundCloud, YouTube, touring or through social media and so on.
It really depends on what type of artist you are talking about and what magnitude of critical mass you are trying to reach.
We’ve had a few things reach critical mass as an independent and they competed right alongside anything that a major label had.
Major labels will also say services companies are great but you need us to break radio…
You can see our records on the radio charts right alongside major labels.
In fact, I think last year in marketshare at radio we closed right in the middle of the pack and ahead of a few major labels.
We’ve built an amazing radio promo team that goes out and busts their asses to promote records. A lot of the guys on my promo team worked at major labels formerly.
How does your A&R team compare to those on offer when an artist signs with a major label?
I think our A&R team is one of the things that’s most special about the way we do business.
The analogy I like to use is, You are the car, I’m the GPS. My job is to give you directions and to keep you from crashing, and every once in a while maybe I’ll give you a shortcut to your destination, but my job is not to re-create the car.
I gave you a deal because I believed in the vehicle that you arrived in. We take a very laissez faire, hands-off approach to A&R and we only encroach when and where necessary.
We are getting really good at making records now – I spend most of my life in the studio.
“I like to think there’s not many people who sit in my seat at the head of the company that have done a lot of the creative things I’ve done in hip-hop.”
It gives me a much better understanding when I’m speaking and communicating to the artist because we are operating on the same wavelength.
The company strategy overall is that we can all speak to each other and communicate. We haven’t compartmentalised everybody into a particular section, we have an all hands on deck mentality.
Here’s some questions on the wider marketplace… when it comes to promoting music, where do radio and streaming fit in?
Typically, we like to see a record stream before we go to radio. I like to say that radio is the exclamation point on the sentence but you have to lay the sentence first.
That’s not always true, sometimes you have lightning in a bottle and you have a record that is going viral and you go to radio immediately.
The new Tyga record that we’re working called “Taste” did 45 million plays streaming-wise week one so we went to radio right away.
Sometimes I go to radio even if there is no streaming story just because I use it as an audience builder.
“One thing that a lot of the major labels don’t do that we do, is a lot of regional radio support. A record doesn’t always have to be a national record or a national promo spend.”
One thing that a lot of the major labels don’t do that we do, is a lot of regional radio support. A record doesn’t always have to be a national record or a national promo spend, sometimes I just want to get an artist hot in the region and give them a nucleus.
If you look at music and records, we are all trying to do the same thing which is to build audience and get eyes and ears.
So if I am struggling to get eyes and ears from the streaming services, I might go get eyes and ears from radio and vice versa. I might get it through social media, via YouTube, through touring support or an influencer campaign on Instagram.
Audience can come from anywhere and when you are able to multiply multiple segments of audiences, that’s when you have the potential to have a hit record.
What’s the future of radio?
If radio can get back to curating music and being culturally relevant and being early then they will be all right.
If they continue to fall behind what is happening in the now then maybe they write their own death certificate. I don’t know which way it’s going to go but it’s going to be really interesting to see.
What are your hopes for Spotify after its IPO, as well as the launch of YouTube Music?
I’m rooting for everybody to do really well.
Spotify is the only big player in music that doesn’t sell anything but music so their health and success is vital to the music business.
If they are successful, there is a lot to be said about the value of music. If they are unsuccessful, there is a lot to be said about consumers’ belief in the integrity and value of selling music.
“For a long time, people said music has no value. Streaming proves that is not necessarily true and Spotify’s success is vital in preserving that belief.”
For a long time, people said music has no value, it should be free. Streaming proves that is not necessarily true because people are paying for these subscriptions and Spotify’s success is vital in that preserving that belief.
I believe that streaming is only in diapers. I think we have a long way to go. We’ve barely even penetrated merging markets like South East Asia, Latin America, Eastern Europe, the Middle East and Africa.
Hip-hop over-indexes on streaming services — why do you think that is?
You could skin the cat so many different ways, but one of the main things about hip-hop is the way it’s created and distributed. That’s in a very fluid fashion, so access to the content is creating that locomotive charge into the marketplace.
If you’re in the studio with a really good artist, sometimes a record can be knocked out in 30 minutes. Twenty four hours later, what a distribution company and record label like EMPIRE can do is flood the marketplace with it.
We can already be on the DSPs, have a press release written, artwork created, and be working on a lyric video or shooting a video in the studio for a viral release.
The nature of the way the content is created and exploited, and the way it’s sent into the marketplace, is totally different than any other genre of music.
I think the streaming age is ripe for hip-hop and for urban music in general… Latin trap, Spanish hip-hop, reggaeton, afrobeat… all of these urban genres are created in the same way that hip-hop is created and R&B is starting to do the same.
A good friend of mine is a pretty prominent R&B artist in the States and he was telling me recently, ‘Look, we used to get the stems for records and spend a month mixing my single. Now I get two tracks, sing over them and put them out.’
This guy is catching Top 5 records at the urban AC format. That’s a very new way of doing R&B music which is much more akin to the way we create hip-hop.
Final questions… there’s been a lot of consolidation in the distribution world. Would you ever consider selling to a major?
Would Tesla sell to Mercedes?
Understood! So how about your future ambitions for Empire as an independent company?
A continued evolution and trajectory of what we have been able to accomplish for the past eight years. I want to build a bigger, better, and stronger staff and open more offices in international markets.
The publishing division of the company is growing rapidly and I’m investing a lot of time and energy into that.
We are building more creative facilities in different parts of the country so rather than just signing talent, we can actually work with talent we believe in and create from scratch.
“I don’t just want to be an operational CEO who sits behind a desk, that’s not really my passion in life. I like being on the ground level with the artist fighting for things that I believe in.”
I like being involved in the creative process – I don’t just want to be an operational CEO who sits behind a desk, that’s not really my passion in life.
I like being on the ground level with the artist fighting for things that I believe in.
Music Business Worldwide