By Daniel Gross
This is a superstar economy, in which A-listers live large while minor leaguers struggle. Hedge fund managers like John Paulson may rack up big returns, CEOs like Lloyd Blankfein of Goldman, Sachs bag huge compensation packages, and all-star baseball players like Alex Rodriguez ink nine-figure contracts. But few of them can match the combination of fame, public acclaim and monetary value that Shawn Corey Carter has racked up.
Amid the carnage of the music industry in the past decade, Jay-Z has managed to parlay artistic success into financial fortune valued at up to $450 million, according to Forbes. Jay-Z's many business successes (and few failures) are described in a new book by Forbes writer Zack O'Malley Greenburg, entitled Empire State of Mind: How Jay-Z Went from Street Corner to Corner Office.
In 2010 alone, he earned $63 million, more than all but seven CEOs of public companies, writes Greenburg. While the money came primarily from touring, Jay-Z has a business interests ranging from music to nightclubs, from restaurants to apparel, from sneakers to a chunk of the New Jersey Nets. As Greenburg and I discuss in the video, the Brooklyn native, who spent a chunk of his teens selling drugs before devoting himself full time to rap, has "a unique ability to set trends and profit from them, almost to an astronomical level."
Early on, Jay-Z displayed an acumen for business. In 1994, unable to find a company to produce his debut records, Jay-Z, Damon Dash and a silent partner founded their own label, Roc-A-Fella Records. And when a distributor agreed to take on the album, he negotiated a deal to retain ownership of the master recordings.
In the late 1990s, he discovered that sales of Iceberg apparel rose after he began including references to them in his songs. But when he went to Iceberg and asked for an endorsement deal, the company demurred. Instead, he started his own apparel company, Rocawear. In 2006, Rocawwear was sold to a brand licensing company for $204 million.
Jay-Z's career and business interests are vivid testimony to the mainstreaming of hip-hop culture. Deals come his way in part because he is, simply put, much cooler and culturally relevant than older guys in suits. It's not simply that he can attract a crowd, but that he lends a kind of legitimacy to all sorts of ventures — including the efforts to build a huge arena/ development to house the New Jersey Nets in Brooklyn. The New Jersey Nets, as Greenburg notes, had long been a second-tier team in the NBA, and an afterthought in New York. Facing political obstacles and community opposition, Nets owner Bruce Ratner offered Jay-Z a small ownership stake in exchange for becoming one of the public faces of the project. Another potential bonus: the other owners thought Jay-Z could help attract top talent like LeBron James to the Nets.
That hasn't quite worked out. And, of course, as is the case with most serial entrepreneurs, Jay-Z has had his share of business setbacks. He spent a fair amount of time last decade working on a Jay-Z Jeep, which fell apart due to issues at Chrysler. A GMC Yukon painted Jay-Z blue never got beyond the concept car stage. As Greenburg notes, the singer makes a strong effort not to highlight failures. "He doesn't want to be seen as anything other than victorious." Greenburg adds: "Even Jay-Z fails, but that doesn't make him any less of a businessman."
So what's next? Despite all his operations, music and performing remain at the core of his business, and of his brand. And here he faces something of a challenge. In rock and pop, it's not uncommon for groups and singers to fill big arenas well into their 60s — the Rolling Stones, Paul McCartney, even Neil Diamond (who is now 70!). But hip-hop is a much younger genre, and Jay-Z is already 41. "He's the first guy who is going to be out there and seeing what the market is for aging rappers," said Greenburg. "But if he wants to tour all the time like the Stones do, he could certainly do that."
Jay-Z has succeeded in part because of a tough-minded mentality that make him insist that he own a part of any operations he's involved with. And that explains in part why he and his team didn't cooperate with this book. When he signed his book contract, Greenburg went to Jay-Z's team, sought interviews, and explained the book as a business success story that "would put him up in the pantheon with Warren Buffett and Steve jobs." Came the response: "What's in it for us?" He didn't want to help with the production of a book that he wouldn't partially own. Besides, he was working on his own book. When it was published last November Decoded debuted as #3 on the New York Times best-seller list.
Interested in a free copy of Empire State of Mind? Send an e-mail to: email@example.com and we'll enter you in a drawing.
Daniel Gross is economics editor at Yahoo! Finance
e-mail him at: firstname.lastname@example.org; follow him on Twitter @grossdm
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