Music masters: a new generation of rap moguls is making the industry dance to a different beat: ownership - The hip-hop economy part 3 of a series - Industry Overview

Black Enterprise, August, 2002 by Shawn E. Rhea

SO SO DEF RECORDINGS CEO JERMAINE DUPRI has been cranking out chart-toppers from his Atlanta-based music factory for more than a decade now. The rap and R&B mogul was just 19 when he discovered the preteen rap duo Kris Kross and put his machinery in motion. He groomed the two, landed them a deal with Ruffhouse Records, and wrote and produced their debut album, Totally Krossed Out, which featured the hip-hop hit "Jump." The album sold seven million copies--a major success by any standard. That was back in 1993 when it was rare for a rap album to garner that type of pop music success.

"Jump" enabled Dupri to strike a joint venture label deal with Columbia Records to the tune of $10 million. Under the deal, Dupri, 29, formed the So So Def label, home to artists such as the teen sensation Lil' Bow Wow, R&B group Jagged Edge, and female rapper Da Brat. In fact, Dupri, who is also a rapper, producer, and songwriter, is one of his label's top acts. He has recorded two successful albums: 1998's Life in 1472 and his current release, Instructions, which includes the hard-driving southern anthem "Welcome to Atlanta."

The rap impresario's hit-making abilities have made him one of the music industry's most respected entrepreneurs and positioned him among the vanguard that is pushing the boundaries of hip-hop. In the process, he has helped redefine popular music. Dupri's jack-of-all-trades approach to music is hardly atypical in hip-hop circles. He keeps company with the likes of Percy "Master P" Miller, Sean "P. Diddy" Combs, Jay-Z, RZA of the Wu-Tang Clan, and the eclectic rap duo Outkast (Big Boi and Andre) among others. All wear multiple hats as producers, performers, and independent label executives. And their efforts have made significant contributions to major record labels' profit margins.

Says Elektra Entertainment CEO Sylvia Rhone, whose joint venture with rapper-cum-entrepreneur Missy Elliott has resulted in multiplatinum sales: "An association with the right independent label or production company can provide an important cachet to us. They can help us reach a community that it might take longer to connect with."

In this third installment of BLACK ENTERPRISE's series on the Hip-Hop Economy, you will discover how rap is creating a bevy of entrepreneurial and financial opportunities for the artists who produce and perform the music. While joint ventures have furnished this new generation of music entrepreneurs with huge financial rewards--can you say "bling-bling"--the true prize is ownership of their music. Can they use their influence to secure the type of decision-making power that they seek? That's the next big step for Dupri and his peers.

WRITING A NEW TUNE FOR THE INDUSTRY

The music created by producers such as Dupri has long been the primary voice of hip-hop culture, and that voice has gained substantial economic influence on both domestic and international fronts over the last 10 years. It comes as no surprise then that major record companies need hip-hop artists as a part of their roster of talent. The music has become one of America's most visible and vital exports.

Today, hip-hop music is the second best-selling genre behind country, having racked up close to $2 billion in U.S. sales in 2000. It is one of only two music genres continuing to grow in earnings even as overall industry revenues slip. Hip-hop artists are now outselling many international music icons. This year already, sales of the new release from rapper DMX have eclipsed those of Michael Jackson, while R&B newcomer Ashanti, with her hit "Foolish," beat out, among others, pop veteran Celine Dion. And the music continues to influence other parts of the Hip-Hop Economy. For example, more than 10 years ago, some radio stations refused to play hip-hop on their airwaves--especially the rude and raw gangsta rap tunes. Now, radio stations with hip-hop formats dominate major markets. Moreover, the production of hip-hop music videos, with their bold styling and million-dollar budgets, has created an industry and propelled lucrative movie careers for its' directors. And hip-hop music has given birth to a score of national and local publications, led by The Source, one of the top-selling magazines in the nation. (See sidebar, "The Voice of a Generation.")

Sales performance has given this generation of music entrepreneurs more leverage to negotiate favorable deals from major record companies and distributors such as Sony, BMG, Universal, and WEA. For instance, recent reports show that rap moguls now rank among the industry's heavyweights in pay and clout. Dr. Dre, the pioneering gangsta rapper who created the Aftermath label, ranked No. 2 among the top 50 music star earners for 2002. According to Rolling Stone magazine, Dre's net income--earnings that include touring, recording, and publishing royalties--was $51.9 million, beating out the Beatles and Madonna. Dre reportedly received as much as $35 million from Vivendi Universal SA's Interscope Records to increase its stake in Aftermath--which boasts the hot white rapper Eminem among its stable of artists--from 50% to 80%. Another rapper took the sixth spot on the list: rap honcho Master P, who earned $36 million, surpassing such artists as Carlos Santana, N'Sync, Aerosmith, and Sting. Rap music has also been the launching pad for the development of burgeoning hip-hop empires. Take Sean Combs, the artist formerly known as Puff Daddy. He turned his 1997 album, No Way Out, which went platinum seven times on the strength of such tunes as "It's All About the Benjamins" and "I'll Be Missing You," into a $300 million empire that includes apparel and restaurants. Says Russell Simmons, the hip-hop veteran who founded Def Jam Records: "We were the guinea pigs for the corporate music business to build a new kind of relationship with entrepreneurs who wanted to fight for a bigger share of profits. These young guys have way more power, control, and access than I ever had."