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It’s rare that an unsigned rapper would attract the attention of Forbes Magazine for his business sense. But that’s just what happened when Nipsey Hussle began selling copies of his newest mixtape, Crenshaw, for $100. Nipsey, who owns a 25% equity stake in the independent record label he co-founded, is a self-described “book junkie.” This is how he first came across the idea to set such a high price for Crenshaw.

It began when one of hisNipsey_Hussle_Crenshaw mentors suggested that he read Contagious by Jonah Berger. In the book, he learned of a restaurant that sold a $100 Philly Cheesesteak sandwich. “It set off all types of conversations,” Nipsey explained on Power 105.1′s The Breakfast Club. “Influential people came through to check out why it was $100. Oprah came through and bought one. David Letterman bought one. [The restaurant owner] got all type of exposure and publicity.”

Nipsey saw potential in this idea and decided to apply it to his next music release. He offered the tape as a free digital download through Daftpiff.com. But the hard copies were sold exclusively through Iamproud2pay.com for $100. Those who bought the CD received a hand-signed copy and special access to a concert exclusively for them. Normally record labels want to sell as many CD’s as the public will buy. But Nipsey Hussle took a different approach. He decided to offer only 1,000 physical copies for sale. This decision created artificial scarcity.

Scarcity exists because humans have unlimited wants in a society of limited resources. The world can’t meet everyone’s wants and needs all of the time. Something is scarce if it is hard to get, hard to create or both. The air that we breathe is not scarce. There is plenty of it and everyone can have it at the same time. On the other hand, gold is scarce. It has to be found, dug out of the earth and processed. And even then, it can only be used for one purpose at a time. One piece of gold can’t be a grill and a Cuban link chain!

Artificial scarcity is created by the maker of a product. Something is artificially scarce when more of it can be made but the producer just chooses not to. An example is when a product is released as a “Limited Edition.” They could release more if they wanted to. But they decide to release a smaller amount for business reasons.

Most artists give mixtapes away for free as promotion. What Nipsey did was out of the ordinary. This gave Crenshaw‘s release a lot of media attention (just like the restaurant mentioned above). Jay Z even bought 100 copies through Roc Nation. So what was the result? In only 24 hours Nipsey sold all 1,000 copies. His record label walked away with $100 x 1,000 = $100,000 in revenue.

Nipsey set his mixtape apart by using pricing and scarcity. Now other artists are following in his footsteps. Eminem’s latest album will be sold as deluxe editions from $45.00 to $300.00 (pricing). And the Wu-Tang Clan announced plans to auction off only one CD of original tunes like a piece of art (scarcity).

“It’s time we acknowledge what we all know: the music is free. We shouldn’t force people to buy it, what we should do is create different methods to monetize the connection.” – Nipsey Hussle to Forbes

Nipsey plans to reuse the strategy for his next project, The Victory Lap. He will release the album in three formats: a free edition, a regularly priced version on iTunes and a $100 album through Proud 2 Pay.

It looks  like Nipsey’s victory lap has already started. Check out his sharp business sense in the video below.

What do you think of how Nipsey executed his plan? Could he have done anything better? Or did he hit it out of the park?

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