Last August, a business-school-101 discount technique sparked a fight between rap royalty. With help from a generous assortment of album-merchandise bundles — sell a fan a T-shirt, hat or hoodie, throw in an album download — Travis Scott’s Astroworld beat Nicki Minaj’s Queen to Number One. Minaj wasted little time in condemning the gimmick, even though she used it too: “What we’re not gonna do is have this fucking Auto-Tune man [Scott] come up in here selling fucking sweaters and telling y’all he sold half a million fucking albums,” she said. “‘Cause he didn’t.”
Bundling has become increasingly pervasive, even on a modest scale. The goal is to boost both chart position — Billboard counts bundled sales in many cases — and revenue: In the streaming era, the margin on selling music has shrunk, but there is still profit to be made from selling clothing.
But some artists are bundling albums with merchandise at such low prices that it’s hard to see how they’re making any money at all. Minaj, for example, was selling a T-shirt and album bundle for $15. “Let’s say for $15, you’re selling the album for the lowest retail price of $6.99 and then the T-shirt — at cost — is what, $5?” asks Amir Kashani, co-founder of media and strategy consultancy Salt + Vinegar, which has advised artists on their merch programs. “So you’re making a $3 or $4 margin when they should be selling the whole thing for $30, at least — what fans would pay if they bought the album for $9.99 and a $20 T-shirt. This math is bonkers.”
Artists bundle for two reasons. The first is to replace income that used to come from selling music. Artists “need to figure out different ways to make more money,” says Malcolm Manswell, who works with the rapper Yo Gotti. Gavin McNeill, who runs YG’s brand 4Hunnid Clothing, sees bundling as a way to “raise the value of each transaction:” “Might as well get them to pay $40 [by adding merchandise], rather than just $10 for the album.”
But charts matter almost as much as finances. Bundles have been helping to enhance sales numbers at least since Prince gave away copies of Musicology with concert tickets in 2004. A merch-album bundle still helps chart position if it’s a physically shipped copy or if a fan redeems a download code.
Who cares about chart position, you ask? “If you talk to any artist or label president ever, even with all of the changes in the way that people discover and listen to music, being Number One is still really important not just to the labels, but to the artists themselves,” says Larry Miller, Director of the Music Business Program at NYU Steinhardt.
In a streaming-centric landscape, physical sales and album downloads have perversely taken on more weight. That’s because, under the latest Billboard accounting rules, it requires 1,250 subscription streams to yield the equivalent of one sale — a fan with a Spotify subscription needs to listen to A Boogie wit da Hoodie’s new album more than 60 times during release week to achieve the same impact as one purchase. This is unlikely.
Bundles serve “to trick people back into buying full albums,” says Matt McNeal, a veteran manager and A&R for J. Cole’s Dreamville Records. “Fans are probably already listening to the album [on a streaming service], but because I sold them this T-shirt, I also get a CD sale within it.”
The odd thing about merch bundle prices is that they often seem to heavily downplay the first justification for bundling (“raising the value of each transaction”) in the hopes of achieving the second (better chart position). Matt Young, EVP of Warner Music Artist Services, suggests that a good average price for a T-shirt/album bundle is $25. But rappers like Minaj, Russ and Brockhampton all sold T-shirt/album bundles for $15 in recent album campaigns. California rapper Phora bundled his new album with a T-shirt for “$10.99 to $11.99” or a hoodie for “$17.99 to $18.99.”
Take that hoodie bundle. 4Hunnid’s McNeill pegs the average cost of making a not-fancy hoodie around $12 – $18, a range that was confirmed by multiple people in the music-merchandise business. To sell just the hoodie alone for $17.99 would already be low-margin. Then artists throw in the music as well.
How much does music cost to make? More than you would think, even in the laptop-producer era. “If you’re recording in a real recording studio, it takes about a good half a million dollars to put an album together at least,” Dreamville’s McNeal says. And it still costs something to make a CD — Miller says, “between a dollar and two dollars including all royalties.” That’s why fans who are only buying a CD or an album download from Brockhampton are paying $9.99.
But those album prices are being steeply discounted in the bundles. An album has to be priced above $3.49 to count on the Billboard charts. In the case of Phora’s T-shirt bundles, he prices the CD not much higher than that — $5. The rapper is clearing a few bucks on the cost of the disc, but that means the shirt is $6, so he’s roughly breaking even — or making very low quality T-shirts. (That’s a related concern in the music-merch industry: “A lot of artists aren’t really going for quality,” 4Hunnid’s McNeill says.)
Phora cheerfully disputes this math: He says it costs him $3 – $4 to make a T-shirt and $8 – $9 for a hoodie, so “$9 or $10 is pretty average to bundle it up.” “Over the past few years we’ve done well over 100,000 individual orders and over 200,000 pieces,” he adds. (Brockhampton declined to comment on their merch operations. A representative for Russ did not respond to emails.)
There’s another factor that cuts into the artist’s income from bundles: the label. The idea behind “360 deals” is that the label dips into all of the artist’s revenue streams. “A lot of labels now won’t do an active 360 [where they make an artist’s merch], but they’ll do a passive one, so if you signed to Warner but did your merch with one of the other companies, you would pay a piece of that revenue back to Warner,” Young explains.
When asked how some low-priced merch-album bundles yield profits, 4Hunnid’s McNeill responds simply, “I don’t know.”
For some artists, this won’t matter: Minaj probably makes enough on high-end merch and all her other endeavours that a dangerously low margin on cheap T-shirt album bundles won’t hurt her. But for other, less secure acts, this type of cut-rate bundling may have negative consequences. “It sends a message to the public that the sweatshirt’s not worth that much and the record’s not worth that much,” Young says. “We wouldn’t want to be doing the cheap bundles as a regular practice.”
For what Salt + Vineger’s Kashani calls “tier-two acts,” the artificial inflation of first-week numbers through bundling may create “misperception out the gate about financial expectations.” “Then the campaign might fizzle over time and the artist and team that thought they would have a successful cycle start to see that they’re losing steam,” he says. “The artist gets frustrated, and the anticipated streaming receipts aren’t realized.”
But artists — or their labels — seem primarily focused on short-term gain and content to bundle anyway. “If [artists] can move the numbers up, that will get them more attention,” says Michael Cherman, founder of the Chinatown Market brand, who has designed merchandise for A$AP Rocky and Lil Wayne. “It’s just a marketing game: The more you can trend, be the album that’s talked about, the more people are going to go and see what’s happening.”
“You’re losing [with low-priced bundles], but you’re not,” McNeal adds. “‘Cause at the end of the day, I think all the artist cares about is we still wanna be able to say, ‘I sold a million records.'” At least until they start handing out plaques for merch sales.