…Returns, risks, new opportunities
In the high-risk world of music label investments in Nigeria, executives often quietly complain about pouring billions of naira into artists without receiving much in return.
These expenses cover everything from branding and buying of apartments, cars, and clothes to even payment for family expenses so artists can focus purely on their creativity.
Recently, a music label signed three new artists after its big names had left earlier this year. An inside source told BusinessDay that billions of naira went into these artists but returns were slim, and the label boss is now considering cutting back on spending.
Still, it raises questions about how many artists actually land decent deals. In 2023, Mavin Records shelled out around N103.6 million ($225,000) just on song releases for its artists in the first quarter (Q1). Data from various Nigerian labels shows that the average cost of promoting a single track is N16.1 million ($35,000), including radio play, TV spots, digital ads, influencer pushes on social media, and nightclub promotions.
But not every label strikes gold like Mavin records, which has turned even lesser-known artists into success stories. But overall, the Nigerian music scene is tough when it comes to recouping costs.
There is an ongoing debate regarding whether Mavin Records got its money back from investing in Boy Spyce?
Boy Spyce, whose real name is Ugbekile David Osemeke, joined Mavin in April 2022 after being mentored by Don Jazzy from 2020. As an up-and-coming Afrobeats artist, he has seen some solid traction through streams, guest spots, and live gigs. Looking at the numbers, it seems Mavin has probably broken even or is pretty close, thanks to revenue from his 178 million Spotify streams alone—enough to offset conservative estimates of what the label spent.
Add other earnings, and it’s looking positive.
The music label industry is valued at $1.8 billion to $3 billion, yet returns on investment are low, industry players say.
Dynamics of returns
Ibukun Aibee Abidoye, executive vice president at Chocolate City Music, which has worked with artists such as M.I, Young Jonn, and Blaqbonez, explained typical upfront costs.
“Depending on the type of deal you have, it can range anywhere from $5,000 or $15,000 for marketing in a distribution deal to $1 million and above in advances alone for more established artists with a catalogue,” she said. “Returns depend on how you are able to commercialise the catalogue. Music is dynamic in the sense that returns may not be immediate but one viral moment brings back all the money invested. It’s all a risk.”
Abidoye noted that the success or failure of music investments depends on several factors, including the length of the contract with the artist and the genre he/she produces – whether Afrobeats or a more niche style Hip hop.
She said that while some genres allow investors to recoup funds faster, all types of music continue to generate revenue in the long term.
Contract structures play a big role in breaking even. “It depends on some things. There are people that allow the artist to get some percentage on shows, Abidoye said, stressing that greed and miscommunications can sometimes lead to fallouts.
She also highlighted regulation gaps. “There are regulations in our business. We just need some areas of the business better regulated and certain infrastructure in place to capture the value in the industry. For example, the collection management and publishing or neighbouring rights. With better systems and infrastructures in place, we can generate more.”
Streaming economics hurt labels too. Abidoye said the local industry should be getting more value, given the percentage of streams that come from Nigeria. She pointed out that the revenues generated by the platforms from advertisers in this region are too low, “and that inadvertently affects what we get. We need better models.”
Read also: TikTok For Artists: Game changer or just hype for music stars
Artists overestimating their worth is common, Abidoye explained, leading to losses. “Labels don’t sign artists they don’t believe in. Especially in Nigeria, we have an emotional connection with our talent in such a way that we really want to make sure they cross to that global stage,” Abidoye said.
Anthony Osunde, better known as Dr T, founder of Reedamae Records, leads the ARB music band with talents such as R&B soul singer Odenose. He described the industry’s ups and downs.
“It is a very volatile industry. So, when you bring in an artist, first of all, you have to make sure that that chemistry is there. You’ve got to manage your expectations, because they need a bit of time,” he said.
He compared labels to pharma companies, which invest in many products to find just one hit.
Osunde focuses on infrastructure to cut costs. “So, what I try to do is focus on infrastructure. As you know, you have a studio in maybe different locations that can help the artist incubate their sound. You have an investment in sound equipment, an investment in visual equipment in a photo studio. And then you can bring some of those long-term costs down.”
Osunde further said that attitude is critical, noting that when an artist that comes in with a lot of expectations and demands without understanding that success is a marathon, the label must tread carefully and may even have to withdraw from such deals.
On contracts and returns, using his experience with his top-performing artists, he said: “So for me, the returns come also in the live shows and the live performances. It’s not just about streams.”
To avoid overestimating the pitfalls, Osunde said: “You have to spend time with the artists. They must understand and appreciate the infrastructure that you’re building. If they don’t get it, then you fall into that gap. If they don’t, then it’s better to walk away.”
Henry Ezikeoha, an entertainment lawyer, emphasised how hype inflates perceptions in the Nigerian music scene, with artists and labels exaggerating deal values to drive up future negotiations—such as claiming a $50,000 signing was $150,000.
He pointed out that artists often overestimate their worth by treating advances as free money rather than recoupable debt, demanding more funds without offsetting initial investments through performances or catalogue value.
To manage the risks, labels must evaluate long-term recoupment potential via streaming, sync licensing, or catalogue sales before providing additional advances, while staying realistic in an industry crowded with inexperienced investors who pump money without proper due diligence, experts say.
If losses mount, Ezikeoha foresees a shift away from traditional 360 deals toward shorter arrangements such as singles or EP deals. In this model, investors fund and promote limited releases, retain ownership of masters, and partner with publishing companies for placements, focusing on established artists with communities rather than developing raw talent from scratch. This trial approach—starting with a few singles and scaling to EPs if they succeed—could reduce risks while traditional labels dwindle in number.
Damilola ‘Dapper’ Akinwunmi, founder and CEO of Dapper Music and Entertainment, sees the industry maturing. “We’re able to agree on budgets, which I believe is the same thing that goes on everywhere,” he said, likening it to football team planning.
On transparency in contracts and IP Akinwunmi said, “People don’t have accountants. People don’t understand splits, understand contracts,” he noted, pointing to low financial literacy in Nigeria—and even in the West.
