Black Owned: The Dilemma of 100% Ownership
The last few weeks have been pretty busy for Black-owned businesses. Timbaland and Swizz Beatz sold Verzuz to Triller, Jay-Z sold half of Arman de Brignac (Ace of Spades) to LVMH, and he also sold a majority stake of Tidal to Square. These deals were met with some approval and excitement, but also with some levels of criticism. The criticisms had to do with Black-owned businesses and the need for 100% ownership. "Why can't we own anything?" "Why are they selling out the culture?" These are interesting questions that this article will ruminate on. This isn't a vindication of these business decisions or an endorsement. We just believe there needs to be a larger conversation about the narrative that if something isn't 100% owned, it can't be a win, and if it is 100% owned it's automatically a win.
Let's start with Timbaland and Swizz. When we begin to examine Verzuz and how it started, it is a unique concept that developed at a unique time. 2 artists or songwriters on Instagram live going song for song in a battle format. The concept of a battle isn't unique, but doing it on IG live with the uncertainty of the internet connectivity and the sound quality was a risk.
Why was it successful? Possibly because we already trust Timbaland and Swizz. They are Grammy award-winning producers who have provided soundtracks to most of our lives at one point or another. Another reason is that we were all stuck in the house during the quarantine. This factor cannot be ignored. The fact that we had nothing better to do is major. Most of the places we'd normally be at night were closed during quarantine, no live concerts, and no large crowd gatherings. Timbaland and Swizz saw an opening and took it. The comment section of the IG live became the crowd and company we all missed. Comments quickly became screen-shots and posted on Twitter. Everyone from deep music heads to the everyday listener could join and hear a song they liked or even just be in the conversation. The unpredictable nature of the internet led to some of the most memorable memes because of connection issues. The personalities of some of the different architects of the music we love created a familial environment. We heard great stories, and for a few hours we forgot we were on lockdown.
Why is all that significant? The world is opening back up. Verzuz, as a platform, has not been tested in a fully open world. We don't know how it will evolve in a world where we have options. In a world where we can simply go to a concert, or out with friends, we don't know what comes next. Also, they've gone through a lot of artists. The next echelon of artists left that can do 20 hits each is a slim crowd. So they'd have to reduce the song count or try other genres. But these are real questions that get asked when looking at selling or not. When you really think about it, Verzuz may be past its prime. What did they gain though?
Timbaland and Swizz became shareholders of Triller and were able to allocate part of their equity to every performer who participated. Now they have access to the Triller Network machine. This may be able to expand Verzuz in a way that Timbaland and Swizz couldn't do alone. This may be more of a strategic move on their part than simply giving up a piece of the company for some cash.
When thinking about 100% ownership and the decision to sell, one of the most important questions is "Why?" What are your goals as a company and what is the long-term plan? For Timbaland and Swizz, if the plan is to reach as many people as possible and scale as well as make some money, they've killed two birds with one stone by selling. A step further is this: If we never hear about Verzuz again, and it dies out because the world is opening up, they already got the cash and equity in Triller. The other performers also have equity. It's a win-win.
That brings us to Jay-Z who made 2 big deals that apparently caused his net worth to jump 40%. He sold half of Ace of Spades to LVMH and also sold a majority stake of Tidal to Square.
Jay-Z has made a number of business moves over the last few years, but this one is one of the more interesting ones. Starting at the LVMH deal, we know how much entertainers have been running to the wine and spirit space over the last few years. Everyone has one or is sponsored by one. It's a lot. When deciding to sell and how much to sell, who you're selling to may or may not matter. If you're going to sell 100%, brand longevity doesn’t matter as much if you just want the cash. You may only care if the other party can pay up. If you're selling a percentage you'd hope that whoever you're going into business with is knowledgeable and will add some sort of value to what you're doing and vice versa.
LVMH is one of the largest luxury conglomerates in the world. It's a French company that has subsidiaries such as the fashion houses of Givenchy, Louis Vuitton, and Christian Dior. Most importantly, they own Hennessey, Dom Perignon, Moet, and Belvedere, amongst others. LVMH is in a great position to take Ace of Spades to the next level. When Jay-Z and his team are examining and considering this deal, this is one of the things to take into account. LVMH has done this before. They know luxury. If the goal is to scale Ace of Spades, this isn't the worse gamble. He retains 50% and get's a chance to learn the ins and outs of LVMH and possibly propel Ace further than he could have on his own.
For Square, he got a bit more. He sold Tidal and was given a board seat on Square. This is an interesting move because Square isn't a media or music company. It's a finance company. Yes. the CEO of Square, Jack Dorsey, owns Twitter which is a media company. But Twitter didn't buy Tidal. Square did. This is an interesting point because of the recurring conversation about artists and how they are compensated for their music. Artists aren't compensated in the most convenient time frames and also aren't compensated a whole lot. It's possible that Square may attempt to bridge some of the gaps between artists and the money they should be getting from streaming. It is worth noting that Tidal already pays more than Apple Music and Spotify, but doesn't have as wide a user base as the bigger platforms.
What about these bigger platforms? Maybe Tidal shouldn't have sold and competed. Maybe. Apple Music is backed by one of the most profitable companies in recent history. Their war chest is immense and they can afford to fail. Spotify's user base is insane and they've recently ventured into Podcasts with the acquisition of Joe Rogan, partnerships with people like the Obama's, and even Prince Harry and Meghan. Another reason competing may have been risky is that streaming isn't as profitable as it seems. The road for Tidal to dominate market share is tedious, but not impossible.
Now Tidal has a machine behind it in Square. This is an opportunity to think outside the box with a larger war chest and hopefully, take that next step in the music streaming service wars.
In both instances, both Black business owners maintained some sort of equity and also took some cash. In both instances, they partnered or were bought by companies that could expand brand awareness. To the crowd that preaches 100% ownership, this is a loss. But an argument can be made that sometimes selling a piece or the whole is the right move. Victoria's Secret sold too much and too soon. A Cautionary tale with a tragic ending. Yahoo sold for too little too late. A cautionary tale that didn't end as tragic as Victoria's Secret’s, but a lesson nonetheless. The conclusion? Look at all the angles, zoom out, and do what's best for you and the company. Generational wealth can still be accomplished with cash if you set up trusts, but 5% of something is better than the 100% of the nothing you'll have if you try to do it all alone and aren't honest about your strengths and weaknesses.