Koch Finds Success With New Artists

From clothes to kicks to the liquor they sip, rappers are label connoisseurs. With their attention to trends in both play and work, it's no surprise that they are record label conscious, too.

When Koch Records launched in 1999, it struck deals with seasoned acts like KRS-One, B. Legit and RZA — earning a lasting rep as the resting place for older rappers past their prime. Last year, megastar 50 Cent — who calls the A-list Interscope Records his home — famously dissed rival Fat Joe, threatening, "He'll be on Koch when I'm done."

But at a time when record sales have plummeted, making a living in hip-hop has gotten tough. Now, Koch's image is shifting as its business models tempt artists who prioritize pocketing a profit over becoming a megastar. And recently, Koch has been successfully breaking new, hot artists such as Jim Jones ("We Fly High") and Unk ("Walk It Out").

"Before there was a stigma to signing with Koch, because it seemed like you had no other option," says Miss Info, a radio personality on New York City hip-hop station Hot 97. "But hip-hop in its essence is about a hustle. It's all about the dollar at the end of the day. Nowadays, because people are more savvy about the business of hip-hop, people realize that they would rather be first in line in priority at a small label than 10th in priority at a fancy schmancy label.

"It's like, do I want to look like I have money or do I actually want to have money? (Koch) is not like a graveyard, but more like a retirement pension."

Artists on Koch usually sign hybrid-model deals that mix label services such as marketing and production with distribution through sister company Koch Entertainment. Often artists can negotiate to keep the masters of their work— a rarity in the recording industry for any genre — and a higher profit on each album sold. Those are especially ideal conditions for those who arrive at the label with a core audience in place.

"The old model of business with majors is out of date like dinosaurs," says music and MTV personality Xzibit, who left Columbia Records to release his sixth album, "Full Circle," in October through his Koch imprint Open Bar Entertainment.

"Majors set it up so that you make money off your advances," he says. "Even if you sell records and they've made their money back, you're still in the hole. It's difficult to get the mathematics right on a major. You get the popularity, but popularity don't keep the lights on. Koch lets the artist participate in creative control and on the financial side."

Eighty percent of the company's sales stem from their hip-hop division; last year rap sales topped $40 million, Koch says.

"More established artists tend to lean toward the hybrid distribution proceeds model," says Koch Records president Bob Frank. "For artists who had success in the past and may not be a platinum artist any more, there is a business for these guys if they can still sell one, two hundred thousand pieces."

In September, Grammy-award winning group Bone Thugs-N-Harmony released their first album in four years through Koch. "Thug Stories" reached the No. 1 spot on Billboard's top independent albums chart and No. 7 on the top R&B/hip-Hop charts.

"I done got rich on Koch Records," says member Layzie Bone. "The whole thing was very profitable. As opposed to being an artist making two dollars a record, we were making five dollars a record."

Despite that, Bone Thugs signed with industry giant Interscope, a division of the conglomerate Universal Music Group, for the release of their next album.

"We gotta take that (financial) hit being on the major," says Layzie. But there are benefits other than cash. Interscope "sits you on the couch at (BET's) '106 & Park,"' he says. "Another perk is you get everybody on your album: Three 6 Mafia, Kanye West. Dr. Dre. Will.i.am. It's tremendous."

Layzie emphasizes, though, that he has no intention of abandoning Koch for good. He plans to use his Interscope-generated hype to amp sales of his solo work through Koch. He insists, "Koch is always my home."

Cash Money's B.G. also made the switch from Koch to a major. Though his 2005 and 2006 Koch releases "The Heart of Tha Streetz" vols. 1 and 2 hit the top slot on the independent charts, he signed to Atlantic Records, a division of Warner Music Group, in April. His camp claimed they were happy with his paycheck at Koch, but wanted to get him back in the limelight as he prepares to release an album next year.

Cross promotion is key. B.G. is piggybacking on the success of fellow labelmate T.I. with a rap on the platinum-rapper's remix for the song "Top Back." Atlantic's golden boy is also executive producing B.G.'s album. Atlantic also boasts an aggressive digital campaign.

"The physical CD is, on average, not doing as well as it did previously," says product manager James Lopez. "We don't just only think about the physical space. We have to think about the digital space and move forward. (This includes endeavors) with YouTube, MySpace, and cellular carriers."

Expanding into digital marketplaces isn't as much of a priority at Koch, offering a glimpse into their low-frills strategy for putting music out and money in the pockets of their artists.

"I still think it's all about radio and video," says Alan Grunblatt, Koch's executive vice president and general manager. He admits that there are limitations on even doing that, due to the smaller budgets of an independent.

"We're basically self-financed and we have to be very smart and careful," says Grunblatt. "For example, on a recording budget, instead of spending $50,000 a track, we are going to try to get it done for five or ten (thousand). We're going to spend a lot more time doing research on the top new producers instead of going to the hot producers we can't afford."

Koch doesn't necessarily see this as a liability. Keeping an ear to the ground for new talent, Koch executives say, means the label is continually connected to the fresh voices of the street. And as a smaller label, they can take more risks, allowing the artists' creativity to run wild.

"(Sometimes major labels) just A&R these records to death," says Grunblatt, of how images, sounds and visions are often tinkered and toyed with by executives at majors. "We go for real, hard-core street artists. Everybody wants to find the next Tupac."