Roc Nation Business Memo
Executive Summary
Over the past year, Universal Music Group has expanded its business and increased its
influence in the music industry. The merger with EMI changed the music industry and gave
Universal Music Group the upper hand over the two remaining corporate labels. Roc Nation
ended its partnership with Sony Music Entertainment and signed with Universal Music Group,
considerably changing the music business. Roc Nation is quickly becoming a major player as a
record label as well as diversifying the business with a sports division and lending their brand
name to Skullcandy. Roc Nation has proved it is an asset to whichever company they do business
with.
Roc Nation
In April of 2008, Live Nation partnered with Jay-Z, creating Roc Nation, a record label.
Roc Nation signed a deal lasting for four years with Sony Music Entertainment. This deal ended
when Roc Nation signed with Universal Music Group in early April of 2013. The most wellknown artists currently signed with Roc Nation include J. Cole, Rita Ora, Willow Smith, and
Jay-Z, himself. Artists like Shakira, Meek Mill, Rihanna, and Wale are also under Roc Nation’s
management division, which primarily handles artists’ tours. Recently, the company which was
solely considered a record label has been venturing into new businesses. Now Roc Nation has
two divisions: Roc Nation and Roc Nation Sports. Though this branch of the company is
relatively new, Roc Nation Sports made their first major signing, the Yankees All-Star, Robinson
Canó.
Roc Nation Moving from Sony Music Entertainment to Universal Music Group
Rapper Shawn Carter, otherwise known as Jay-Z, has just signed a deal with Universal
Music Group bringing the famous record label Roc Nation over from Sony Music Entertainment.
Roc Nation’s move to Universal happened just days after Jay-Z announced the company was
going to branch off into the sports agency business. The deal with Universal is described to be a
multiyear deal. Roc Nation was with Sony Music Entertainment for four years before the switch.
Not only will this have an effect on the artists signed to Roc Nation, but also Jay-Z as an artist
himself. With the new deal, Universal now has the rights to sell Jay-Z’s records. This just adds
more control for Universal in the music industry.
The details of the deal have yet to be disclosed, but a report claimed that the negotiations
between Sony Music Entertainment and Universal Music Group to sign Roc Nation have been
one of the more competitive label auctions in years (Sisario). Sony and Universal are in constant
competition with each other to sign top artists and independent labels. These two companies
make up most of the music industry, the other major company being Warner Music Group.
The Music Industry
One of the major jobs of the record labels that make up the music industry is to make
money by creating and selling music. The three major corporate labels in the industry are Sony
Music Entertainment, Universal Music Group, and Warner Music Group. Since the digital
distribution of music, the music industry has gone through drastic changes. Ever since the year
2000, the way people listened to music has changed. The largest music retailer in the world is
currently Apple Inc.’s iTunes store (Churchill) and purchases of physical records have
plummeted (Segall). Live music’s importance has increased over the years (Seabrook). This
trend should remain constant in the future, increasing the influence of ticket companies of
TicketMaster and Live Nation.
Over the past decade, the music industry has completely changed when it comes to
control and power. According to an IFPI report, in 2004 independent labels had the most sales in
the music industry with 28.3%, followed by Universal Music Group, 25.5%, Sony Music
Entertainment, 21.5%, and EMI, which was still operated independently, with 13.4%. In total the
“big four” accounted for about 71.7% of retail music sales. In the latest Nielson Soundscan
report, the “big four,” now down to three companies, controls about 88% of the market.
Independent labels, which had the most sales back in 2004, now have the least amount of sales
with 11.42%. Universal Music Group controversially merged with EMI and now has the largest
share of the music industry with 39.91%, closely followed by Sony Music Entertainment,
30.25%.
A report from IFPI stated that 95% of the total revenue from music in 2003 was from 30
major countries, including Japan, the United States, and the United Kingdom. Another report
from IFPI shows the global trade revenue of music has steadily declined from the years 20052011 (Smirke).
Universal Music Group’s Merger with EMI
There were many components that factored into the Universal Music Group and EMI
merger. From one perspective, the merger seemed unfair to the music industry since Universal
Music Group’s control would drastically increase. The possibility of a merger was first
mentioned on June 20, 2011 when EMI’s CEO, Roger Faxon, sent out a memo to his staff
claiming their might be a “possible sale.” This marked the beginning of a long and debated
merger that is still looked at in a skeptical light. Over the next five months, the major music
corporations were in a bidding war to obtain EMI and bring the company under their corporate
umbrella. In the end, Universal won the EMI label while Sony gained EMI’s publishing. Though
Universal Music Group purchased most of EMI, it still had to go through a series of obstacles.
Some of the obstacles included necessary approval from the Federal Trade Commission and the
European Union.
November 11, 2011 was the official date Universal Music Group bought EMI. No sooner
than a month after the purchase, the Federal Trade Commission called for an investigation to
review the sale. The European Commission Investigation also launched an investigation of
Universal’s purchase of EMI. A little under a year after the investigations were initiated, both the
European Union and the Federal Trade Commission approved the merger. Many were outraged
with the decision made. Numerous critics said that Universal Music Group obtained too much
power in the music industry now. Casey Rae-Hunter, head of Future of Music Coalition, said
“And the Universal-EMI merger gives them even more leverage to do really scary things,”
(Carter). The merger with EMI and now the signing of Roc Nation, many are starting to get
concerned about amount of power Universal Music Group is gaining.
The end result of EMI merging with Universal Music Group came with a lot of positives
and negatives. Universal walked away with the better side of the negotiations. They acquired
most of EMI’s assets and gained greater control in the music industry. The merger for EMI,
though, came with many negatives. Once the European Union and Free Trade Commission
confirmed the merger, reports that about 326 former EMI workers that now work for Universal
would be laid off over the next two years (Putrino). There was also an immediate effect on the
music industry as a whole: less competition.
Roc Nation’s Impact on Universal
There is an immediate impact for Universal Music Group with the signing of Roc Nation.
Before the record label signed with Universal Music Group, Roc Nation was very successful
with Sony Music Entertainment. Many acclaimed singers were being signed to Roc Nation and
the company is also managing popular artists’ tours. Jay-Z’s company has flourished over the
past four years and is looking to keep that trend constant with the signing with Universal. They
will work as an independent label within the company.
According to PayWizard.com, singer Rihanna earned $53,000,000 in 2012 while Shakira
earned $53,200,000. The amount of money these two artists earned last year is astronomical and
Roc Nation can be credited for their success. The company brings more money making artists
that will be sure to help increase revenue for Universal as a whole.
Roc Nation has primarily operated as a successful record label, but in early April 2013,
Jay-Z announced that Roc Nation would branch off into a sports management division. The new
branch would be called Roc Nation Sports. Typically, agents who work for sports management
companies can receive anywhere between 4-10% off the players’ contracts who they represent.
The can also make as much as 10-20% on sports endorsements that the players receive. The
players that were represented by Scott Boras earned a total of $701 million in 2010. The amount
Scott Boras earned that year was $36 million (Dozier). At the moment Roc Nation Sports has
only signed Robinson Canó but it’s a strong start for a young company and demonstrates
potential to bring in highly touted players from all sports. Roc Nation Sports has the potential to
make Universal an enormous amount of money in the years to come.
Roc Nation and Skullcandy Partnership
Roc Nation’s contract with Sony Music Entertainment was not the only company that
they have worked with. In 2010, Roc Nation decided to partner up with Skullcandy. Once the
announcement was official that Skullcandy and Roc Nation were going to become partners, a
new headphone design was put into the works. The Roc Nation + Skullcandy Aviators promised
to give a parallel blend of music, fashion, and high performance. Roc Nation proved to
significantly help Skullcandy in the year the Roc Nation + Skullcandy Aviators premiered. In
2009, Skullcandy earned a total of $118.31 million. The next year after Roc Nation’s partnership,
the headphone and audio equipment producing company made $160.58 million, a 35% increase
in revenue from the previous year (Skullcandy Inc., Press Release). Roc Nation proved to be a
huge asset to the company.
The Effect Roc Nation Signing with Universal Has on the Music Industry
With Roc Nation moving from Sony Music Entertainment to Universal Music Group, the
amount of market share Universal earned makes a big difference. A generally accepted school of
thought is that the greater market share a company has in an industry, the more profit the
company will earn. According to an article by Harvard Business Review,
“It is now widely recognized that one of the main determinants of business profitability is
market share. Under most circumstances, enterprises that have achieved a high share of
the markets they serve are considerably more profitable than their smaller-share rivals,”
(Buzzell).
Based on the article, it can be reasonably assumed that with the increased market share from Roc
Nation, Universal Music Group will bring in more sales and revenue.
Works Cited
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Future Of Music." The Huffington Post. TheHuffingtonPost.com, 20 Sept. 2012. Web.
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2012. Web. 15 Apr. 2013.
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