Sunday, October 31, 2004

Jay-Z/R. Kelly Conflict

So Jay-Z decided that The Black Album would not truly be his final album. Only a few days after his second album with R. Kelly called “Unfinished Business” came out, Jay-Z kicked R. Kelly off of their tour.

Putting my personal feelings about R. Kelly aside, I think that this decision will both hurt the sales of their new album, overall ticket sales, and R. Kelly will rightfully sue Jay-Z for what he would have earned from the tour.

The first thing to look at is the fact that their new album “Unfinished Business” was made to make up for the disappointing sales of “Best of Both Worlds”, which tanked due to R. Kelly’s legal troubles. R. Kelly supposedly was involved with a very young girl in a video which I have not seen. For unclear reasons the case against him is two years-old and it does not seem that prosecutors will be bringing him to court anytime soon. But at the time of that album, Jay-Z seemed to avoid being associated with R. Kelly. What happened after that was unprecedented. R. Kelly’s following album and compilations have brought him more popularity than he had ever had prior to 2002. The album “Unfinished Business” was supposed to bring back the Jay-Z/R. Kelly duo at their all time popularity.

Several days ago at their concert R. Kelly walked off stage due to his fear of two audience members who allegedly had pointed guns at him. While offstage, R. Kelly and two of his bodyguards were shot with pepper spray by a member of Jay-Z’s entourage. Then Jay-Z had kicked R. Kelly off of the concert tour.

Looking at this situation, I strongly believe that R. Kelly will have a legal case against Jay-Z that would allow him to collect the entire amount that he would have earned on the tour. If R. Kelly ran off the stage without having been threatened by guns in the audience, then he should not be paid for that one concert. But after a member of Jay-Z’s entourage assaulted R. Kelly with pepper spray, it is unfair of Jay-Z to fire R. Kelly from the tour. If in this case R. Kelly is considered to be employed by Jay-Z for the tour, this would be comparable to a boss firing an employee when one of the boss’ thugs had assaulted that employee. R. Kelly may have the possibility of two lawsuits against Jay-Z. R. Kelly would have one lawsuit for breaking the contract, a second lawsuit for being assaulted by an employee of Jay-Z, and a third lawsuit against that employee.

Putting the allegation against R. Kelly aside, the unfair treatment that he has received during and after the concert will allow him to easily collect financial damages against Jay-Z. What R. Kelly cannot sue for are the damages caused by the possible decline in sales of their new album. In this situation, however, Jay-Z will lose more money on the album than R. Kelly because it is being released under Jay-Z’s label Roc-A-Fella Records. As a businessman, Jay-Z is going to have to learn how to deal with subordinates, including R. Kelly and the thug who hurt him, or face huge financial losses.

Thursday, October 21, 2004

Howard Stern

Howard Stern will be departing from public radio and working for Sirius satellite radio starting in 2006 after signing a 5-year contract that will cost Sirius about $500 million in Howard Stern’s salary and expenses in running his radio show. Considering that the cost of his show cannot exceed $20 million per year (doubtfully that high), Stern could make $80-$95 million per year.

The first question is whether this is a win for Stern or the FCC. In my view it would be a loss to Howard Stern if his change from public radio to private radio would give him a financial loss, but his new contract is clearly a raise and will make him only second to Oprah Winfrey in earnings for a show.

Howard Stern is clearly going to earn a significant amount more, be given freedom from FCC restrictions, and can make his show more raunchy than he ever could on public radio. Howard Stern’s show was fined for him asking Rick Solomon questions about his involvement with Paris Hilton. If sex was discussed on the Howard Stern show, the FCC could interpret the offensive on a loose, subjective basis.

Now Howard Stern has a financial raise and the artistic freedom needed to run his show without the fear of FCC fines.

Is pay radio worth it?

For me to listen to Howard Stern in 2006, I will need to buy a Sirius radio for $99.99 and subscribe at the rate of $12.95 per month. I personally plan to subscribe to get the opportunity to listen to Howard Stern uncensored and finally in the way in which I believe he will be the most entertaining. Sirius is willing to pay $100 million per year to have his show on their satellite network because they believe that they will increase the number of subscribers by one million members. I believe that they will have an even larger number of subscribers and keep them if they take these important steps.

First, have Howard Stern’s show on reruns throughout the day. Many people do not wake up at 6 am and would prefer to listen to him later in the day. Besides, if they are paying $100 million per year for his show, they might as well play it often enough for the subscribers to hear him when they want.

Second, weekend reruns. Normally Howard Stern is not on the radio during the weekends. Owning the rights to his show, Sirius customers will be more satisfied if they are able to listen to Howard Stern reruns on the weekends. Many people would listen to his show on weekdays, but the have to start work early on weekdays. Considering that Sirius believes that the number of subscribers will increase from 600,000 to over 1,600,000 users, most of those new subscribers will clearly want to get the opportunity to listen to Howard Stern.

This decision also allows people who live in areas in which Howard Stern’s show is not currently being played, like my dorm in Charlottesville (UVA), to get to listen to him and anywhere subscribers wish to throughout the U.S. Those who lose out are the listeners who do not wish to spend money to listen to Stern. Yet those who do listen to him, like myself, are sure to have a better experience enjoying his show.
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