Hip Hop Sales Collapsing: "They can no longer fool the white kids."

When the political activist Al Sharpton pivoted from his war against bigmouth radio man Don Imus to a war on bad-mouth gangsta rap, the instinct among older music fans was to roll their eyes and yawn. Ten years ago, another activist, C. Delores Tucker, launched a very similar campaign to clean up rap music. She focused on Time Warner (parent of TIME), whose subsidiary Interscope was home to hard-core rappers Snoop Dogg and Tupac Shakur. In 1995 Tucker succeeded in forcing Time Warner to dump Interscope.

Her victory was Pyrrhic. Interscope flourished, launching artists like 50 Cent and Eminem and distributing the posthumous recordings of Shakur. And the genre exploded across the planet, with rappers emerging everywhere from Capetown to the banlieues of Paris. In the U.S. alone, sales reached $1.8 billion.

The lesson was Capitalism 101: rap music's market strength gave its artists permission to say what they pleased. And the rappers themselves exhibited an entrepreneurial bent unlike that of musicians before them. They understood the need to market and the benefits of line extensions. Theirs was capitalism with a beat.

Today that same market is telling rappers to please shut up. While music-industry sales have plummeted, no genre has fallen harder than rap. According to the music trade publication Billboard, rap sales have dropped 44% since 2000 and declined from 13% of all music sales to 10%. Artists who were once the tent poles at rap labels are posting disappointing numbers. Jay-Z's return album, Kingdom Come, for instance, sold a gaudy 680,000 units in its first week, according to Billboard. But by the second week, its sales had declined some 80%. This year rap sales are down 33% so far.

Longtime rap fans are doing the math and coming to the same conclusions as the music's voluminous critics. In February, the filmmaker Byron Hurt released Beyond Beats and Rhymes, a documentary notable not just for its hard critique but for the fact that most of the people doing the criticizing were not dowdy church ladies but members of the hip-hop generation who deplore rap's recent fixation on the sensational.

Both rappers and music execs are clamoring for solutions. Russell Simmons recently made a tepid call for rappers to self-censor the words nigger and bitch from their albums. But most insiders believe that a debate about profanity and misogyny obscures a much deeper problem: an artistic vacuum at major labels. "The music community has to get more creative," says Steve Rifkin, CEO of SRC Records. "We have to start betting on the new and the up-and-coming for us to grow as an industry. Right now, I don't think anyone is taking chances. It's a big-business culture."

It's the ultimate irony. Since the 1980s, when Run-DMC attracted sponsorship from Adidas, the rap community has aspired to be big business. By the '90s, those aspirations had become a reality. In a 1999 cover story, TIME reported that with 81 million CDs sold, rap was officially America's top-selling music genre. The boom produced enterprises like Roc-A-Fella, which straddled fashion, music and film and in 2001 was worth $300 million. It produced moguls like No Limit's Master P and Bad Boy's Puff Daddy, each of whom in 2001 made an appearance on FORTUNE's list of the richest 40 under 40. Along the way, the music influenced everything from advertising to fashion to sports.

The growth spurt was fueled by sensationalism.
Tupac Shakur shot at police, was convicted of sexual abuse and ultimately was murdered in Las Vegas. But Shakur both alive and dead has also sold more than 20 million records. Death Row Records, which released much of Shakur's material, was run by ex-con Suge Knight and dogged by rumors of money laundering. But between 1992 and 1998, the label churned out 11 multiplatinum albums. Gangsta rappers reveled in their outlaw mystique, crafting ultra-violent tales of drive-bys and stick-ups designed to shock and enthrall their primary audience--white suburban teenagers. "Hip-hop seemed dangerous; it seemed angry," says Richard Nickels, who manages the hip-hop band the Roots. "Kurt Cobain killed himself, and rock seemed weak. But then you had these black guys who came out and had guns. It was exciting to white kids."

Hip-hop now faces a generation that takes gangsta rap as just another mundane marker in the cultural scenery. "It's collapsing because they can no longer fool the white kids," says Nickels. "There's only so much redundancy anyone can take."

Artists who never jumped on the gangsta bandwagon point the finger at the boardroom. They accuse major labels of strip-mining the music, playing up its sensationalist aspects for easy sales. "In rock you have metal, alternative, emo, soft rock, pop-rock, you have all these different strains," says Q-Tip, front man for the defunct A Tribe Called Quest. "And there are different strains of hip-hop, but record companies aren't set up to sell these different strains. They aren't set up to do anything more of a mature sort of hip-hop."

Of course, gangsta rap isn't a record-company invention. Indeed, hip-hop's two most celebrated icons, Shakur and Notorious B.I.G., embraced the sort of lyrical content that today has opened hip-hop to criticism. And the music companies, under assault from file-sharing and other alternative distribution channels, are hardly in a position to do R&D. "When I first signed to Tommy Boy, [the A&R person] would take us to different shows and to art museums," says Q-Tip. "There was real mentorship. Today that's largely absent, and we see the results in the music and in the aesthetic." That result is a stale product, defined by cable channels like BET, now owned by Viacom, which seems to consist primarily of gun worship and underdressed women.

During the past decade, record labels have outsourced the business of kingmaking to other artists. Established stars Dr. Dre and Eminem brought 50 Cent to Interscope. Jay-Z founded his own label, cut a distribution deal and began developing his own roster. But most established artists do little development. That leaves the possibility that hip-hop is following the same path that soul and R&B traveled when they descended into disco, which died quickly.

No longer able to peddle sensation, rap's moguls are switching tactics. Simmons, while still something of a hip-hop ambassador, is hawking a new self-help book. Master P, whose estimated worth was once $661 million, watched his label, No Limit, sink into bankruptcy. He recently announced the formation of Take a Stand Records, a label catering to "clean" hip-hop music. "Personally, I have profited millions of dollars through explicit rap lyrics," Master P stated on his website. "I can honestly say that I was once part of the problem, and now it's time to be part of the solution."

Chris Lighty, CEO of Violator Entertainment, whose clients include 50 Cent and Busta Rhymes, is looking at ways that record companies can work with artists in one area where rappers have been innovative: endorsement and branding. Whether it's 50 Cent owning a stake in Vitamin Water or Jay-Z doing a commercial for HP, most of these deals have been brokered by the artists' own camp. But Lighty sees in hip-hop a chance for record labels to generate more sponsorship and endorsements. "Record companies are going to have to make even better records and participate in brand extension. It's the only way they can survive," says Lighty. "We need to change the format, and this is the only way. 50 Cent is a brand. Jay-Z is a brand."

But the current hubbub over indecency poses a direct challenge to that brand strength, as the artist
Akon recently discovered. While performing in Trinidad, Akon was videotaped dancing suggestively with a fan who was later revealed to be only 14. The video attracted the ire of conservatives like Bill O'Reilly. In the wake of the controversy, Akon's tour sponsor, Verizon, removed all ringtones featuring his work and retracted its sponsorship. The message was clear: Hip-hop needs a new and improved product.