‘Take This Hammer’--Capitol Record’s New Tune?

Has the Hammer fallen at Capitol Records?

Apparently so.

Oakland rapper Hammer and the label are reportedly severing their relationship amid rumors of financial troubles for the artist and his management team.

According to insiders, Hammer (real name: Stanley Kirk Burrell) has been released from a contract negotiated and signed after his second album, 1990’s “Please Hammer Don’t Hurt ‘Em,” sold more than 15 million copies worldwide. The pact reportedly included advances of $7 million.

But sales of Hammer’s next album, 1991’s “Too Legit to Quit,” dropped by more than 60%. At the same time, sources say, the performer became financially drained through such investments as a huge Northern California home, racehorses, his Bust-It label and management firm and a lavishly expensive concert tour that was a box-office disappointment.

“He traveled bigger than U2,” says one insider who requested anonymity. “Hammer had an income stream of $40 to $50 million, and he believed it would always flow. Unfortunately, the river dried up. It was a matter of poor business decisions.”

Hammer refused to comment on either his split with Capitol or an impending new deal, but he did answer charges of financial mismanagement, particularly at Bust-It.

“It’s no secret that Bust-It wasn’t making money,” he told Pop Eye. “But for five years I’ve invested over $6 million in my community through employment. There were times I could have pulled out of that situation because it wasn’t making money, but I stayed in there because I understand that when I’m employing a mother and a father, I’m feeding a family. If I had to do it again, I would still choose the people over making money and the bottom line, because I’ll always make money.”

Though a Capitol spokesman had no comment on the matter, sources say new Capitol President Gary Gersh held a series of meetings with Hammer and his manager-brother Louis Burrell, with both parties agreeing that Hammer should begin shopping for a new home.

“Gary didn’t want Hammer and Hammer didn’t want Gary,” said a source close to the deal.

Louis Burrell also had no comment on the situation.

Industry executives speculate that Hammer is now a “restricted free agent,” meaning Capitol will receive a payout from any new deal the rapper strikes.

Sources say the rapper is looking for a three- or four-album deal in the $20-$25-million range, a price some see as too high for his current perceived market value. Many expect that asking price to drop as the shopping process continues, but at least one executive thinks some label will bite.

“He’s a talented artist who’s proven he can sell records,” the executive says. “Someone’s going to roll the dice.”