Billboard announced last week that when it tallies the sales numbers of Jay-Z’s forthcoming Magna Carta Holy Grail album, it won’t count the 1 million copies Samsung (005930:KS) purchased as giveaways for users of its Galaxy smartphones. At first the news sounded like the kind of music industry minutiae that only record executives and hardcore music nerds care about. (“How can you compare so-and-so’s sales to Jay-Z? Don’t you know the charts are rigged!” someone is probably saying right now in a bar, whipping off Warby Parker glasses and slamming down a locally brewed beer in disgust.) But the sales spat between Jay-Z and Billboard actually typifies a larger problem for musicians and the record labels that sign them: What’s more important, the number of people who listen to music or the number of people who buy it?
“Billboard is making a big distinction here,” says Errol Kolosine, a former general manager of Astralwerks and Caroline Records who’s now an assistant professor at New York University’s Tisch School of the Arts. “It speaks to the question of consumption vs. purchase,” he says. “Is there a difference between paying for a product that gives you music and buying an album outright?”
Here’s the deal: Samsung purchased 1 million copies of Magna Carta Holy Grail for $5 each and plans to give them away to its customers three days before the album’s official July 4 release. Similar deals have been struck before. In 2007, for instance, Prince gave away 3 million copies of his Planet Earth album to people who purchased the $3 British tabloid Mail on Sunday. (Prince’s U.K. label, Sony BMG (SNE), was so upset at the time that it refused to release the album at all in Britain. According to Time, Prince was paid $500,000 more than what he would’ve gotten from traditional royalties, and the 3 million albums that he “sold” dwarfed the measly 80,000 copies that his previous album sold in the U.K. But unlike Planet Earth, Jay-Z’s album will still be sold in stores and on the usual online platforms. The $5 million in sales he gets from the Samsung deal will just be icing on whatever sized cake Magna Carta Holy Grail turns out to be.
It’s true that Samsung paid Jay-Z for its copies, so the album was technically sold. But the individual customers who will ultimately come to own it won’t have paid anything. “We don’t count free-to-consumers,” David Bakula, a Nielsen Entertainment (NLSN) analyst, explained to Reuters. (Billboard uses Nielsen SoundScan figures to create its charts.) While this still makes some sense—there has to be some way to stop artists from artificially boosting their sales—the increasing popularity of streaming services such as Pandora (P) and Spotify have made the consume-vs.-purchase distinction a difficult one to make. By the end of 2012, streaming music accounted for nearly a quarter of all music heard by people between the ages of 13 and 35, according to NPD Group. “Billboard‘s saying that value of that music is not the same as if someone had gone and bought it,” says Kolosine. “We’re moving into new waters here to some extent.”
What does this mean for Jay-Z? Not much. A million albums sold would almost definitely give him the No. 1 album on Billboard—the current No. 1 holder, Black Sabbath, got to the top with only 155,000 albums sold—but considering that his last four albums had No. 1 debuts without a Samsung boost, he’ll probably find himself at the top, anyway. And several million dollars richer, thanks to Samsung.
The better question: What does this mean for Billboard? The company regularly revises its charting methods to stay current. That’s why earlier this year it launched a Streaming Songs chart that tracks music’s popularity on subscription services; it also factors streams and digital downloads into its Hot 100 singles chart. In May, Spotify launched its own chart, which lets non-subscribers stream its 50 most popular songs of the week. For now, however, the Billboard 200 chart will focus only on actual album sales.
Even more interesting is the fact that Jay-Z’s Samsung deal means that Magna Carta Holy Grail is the first full-length album to be exclusively premiered by a brand. “If 1 Million records gets SOLD and [B]illboard doesn’t report it, did it happen?” Jay-Z tweeted on June 17 after Billboard announced its decision. “Ha. #Newrules.” New rules, indeed.