The Economic Machine Behind Hip-Hop

by Ali Abidi 10/05/10 The Atlanta Post

Journalist Dan Charnas discusses his new book The Big Payback: The History of the Business of Hip-Hop.

It’s no secret that Hip-hop is now a multi-billion dollar industry and the predominant popular culture of global youth. It has birthed CEOs like Sean Carter, Damon Dash, Lyor Cohen, Steve Stout, Chris Lighty, Sean Combs and early pioneers like Charlie Stettler and Russel Simmons. Although hip-hop’s cultural influence has been documented twice over, there has never been a comprehensive look into the economic machine behind hip-hop from it’s earlier humble beginnings to its present day status as a musical juggernaut. The Atlanta Post sat down with Dan Charnas, author of The Big Payback: The History of the Business of Hip-Hop to discuss corporate America’s early flirtations with hip-hop, the evolution of the record deal, corporate appropriation of rap music, and hip-hop’s influence on corporate marketing.

Why did you think it was so important to chronicle the business acumen of rappers and the evolution of the rap industry?

The real reason is that nobody’s ever told that story of the people who work behind the scenes. For decades what was a street culture nobody even knew about and what is now the world’s predominant pop culture. Part of it comes from me having been part of the industry for about 15 years working for a record company and working with the Source [Magazine]. Another part comes from being a journalist and being really fond of the great writing that’s been done by hip-hop by writers like Jeff Chang, who wrote the best book ever on HipHop, focusing primarily on its cultural history.

Brian Coleman wrote a great musical history. But neither of them, except for ones that deal specifically with record companies like Ronin Ro’s book on DeathRow Records, “Have Gun Will Travel” and Stacey Gueraseva’s book “Def Jam, Inc. ‘, deal on the linear manner with which the evolution of the industry took place. I can tell you from personal experience that without the hard work of the people that worked at the record companies, the DJ’s at the radio stations, those who worked at the agencies, and worked in management, the artists couldn’t have broken through without the help of these people and that was the inspiration to tell the story. I just think it’s an important story to tell.

When did corporate America begin to take hip-hop seriously as a profitable venture?

Charlie Stettler was the first person to get corporate America to sponsor a hip-hop related event. [He organized a Rap & Breakdance] contest at the Radio City Music Hall. The mob basically, at the time, controlled the unions and didn’t want the event to happen. So they threatened Charlie and were like we don’t want those [racial epithet] at Radio City Music Hall. Charlie goes ahead and makes it happen anyway and brings security down from the Fever Night Club in the Bronx. They have this talent show at which Coca Cola is the corporate sponsor and this was the first time any corporation sponsored any hip hop related event. This was in 1983. And what happened at this event is that there was this group performing called the Disco 3, whom Charlie Stettler ends up managing and who later became the legendary Fat Boys. So that was the first corporate sponsorship of hip-hop.

Charlie Stettler went on to get Watch Watch to sponsor the Fresh Fest and from there we start to get people like Adidas, like Sprite and brands like those who begin to take interest in hip-hop Culture. In my book the brand that takes the award for really taking an active interest in understanding hip-hop culture would be Sprite. In the early 1990′s, Daryl Cobin helped them come up with the Obey Your Thirst campaign. That’s really a turning point in the relationship between corporate sponsors and hip-hop.

In the early days it seemed like the economic models that governed how records got released were very different region to region. An obvious example that’s always brought up is how the Southern Rappers taught East Coast rappers that they didn’t necessarily need a major to put out and push a record. Do you think hip-hop has taught corporate America something?

Absolutely, the example in my book is the street team. Obviously street promotions were the only way in the Bronx and Harlem in the 1980′s that news would spread about hip-hop gigs. You had to put flyers up. Russell Simmons got his start like that. He started putting up flyers for Rush Productions promoting college parties; street promotions is nothing new, it just got branded in the 1990′s.

Sometimes they would just call them college reps, sometimes they would call them local promoters who would team with the small labels to spread the word at the barbershops, corner stores, and just distribute sticker, flyers and things like that. Nobody’s really sure who came up the term street team first but I do recall using the term at Def Jam very early in the 1990′s.

On the east coast, hip-hop was pushed into the public eye by record companies like Def Jam and Profile. On the west coast there were no record companies, all they had were these pressing plants called Macola and individual artists would get custom pressings done and Macola would push it out to the record stores for them and swap meets and outlets like that.

The 90s seemed like the era of Soft Drinks. This past decade seems to be all about liquor. What do you think about rappers endorsing liquor? Do you think Diddy is playing Ciroc? Does he actually have that much leverage for them to give him such a hefty paycheck?

He’s not playing them because he has equity. For a guy in a situation like that to not have equity would be tragic. I devoted a lot of time to the story of Damon Dash, who’s first go-around was something like a tragedy. The tragedy of Dame’s first go around is that he really did have the most expansive vision of what hip-hop could be but that came from a sense of entitlement. Rocawear got started because Dame went to iceberg jeans to see if they could get an endorsement deal for Jay-Z. Iceberg said, well ‘we’re not really interested, we don’t think Jay-Z can help the brand.’ And Dame was like “Oh really??” Well I’m going to start my own company and put you out of business.

Rocawear eventually became the ascendant brand. In the early 2000′s, Sean Jean, Rocawear, and Phat Farm sent Nautica, Tommy Hilfiger and all those people running for the hills. So that led to Jay eventually saying I’m not going to sponsor somebody else’s vodka; if I’m going to be holding a vodka in a video it’s gonna be my own and that was the Armadale venture which they did with this distillery in Scotland.

Also, the Stride Rite (Pro-Keds) deal which did not end up well because Jay and Dame’s relationship did not end up well. Can you remember any other time in history where a hip-hop company bought an established mainstream [brand]? So Damon’s vision was very keen, he was like we can buy everything; we can become the new power broker.

Hip-hop can be a three hundred and sixty degree experience for this generation. Ultimately, its bigger than hip-hop…its about a generation of African-Americans carving out their own economic space in corporate America. The nationalist extreme hasn’t necessarily worked out for black America but the thing that does seem to be working is the joint venture [structure]. When Jay-Z wants to do business he doesn’t do it alone, he does a joint venture with an established corporation which he can sell and parlay into something. Hip-hop for this generation, particularly African Americans and people who work along side them and admire them and fought for the same things they fought for, is really about finding a kind of peace with America and a power in America .

How come the forefathers of Hip-hop didn’t become as lucrative? Of course the more you play the game, the more you learn in that sense the forefathers were martyrs for the younger generation..what are your thoughts on that?

When we talk about people getting “pimped out”, yes there were artists that were getting pimped out by the record companies but in many cases it was part of a very rough game the smaller labels had to play because they were fronting there money in an era when there weren’t hip-hop records being played on the radio and videos being played on MTV. They were betting and doing really ruthless business. For example, I talk about how Profile records was established, Run DMC being their main act, but after the third record they put out they almost went out of business and only at the very last minute when they were down to their last thousand dollars that they decide to a do a rap remake of Genius of Love. They spent their last thousand dollars on this record and they get Lonnie Love and his partner Andre Harell to do this record and it ends up being Dr. Jekyll and Mr. Hyde, Genius of Rap. The record deal that those two get is horrible, so in a way I do think they were Martyrs. But I don’t think it’s unique to hip hop. I think small record companies acted like that with artists across the board. I guess Big Daddy Kane was a martyr, he was signed to Cold Chillin, which was a small record label signed to a shitty production deal with Warner Brothers Records. Years later, Puffy walked into a major label and got a million dollar advance and another 1.5 million to have his own recording studio built. When Russell Simmons heard that Cash Money got there 30 million dollar production and development deal with a 3 million dollar advance, with no sales to show, he was happy for them but was like ‘I waited years just to get in the door.’ That was an incredible, incredible deal.

A person that played a big role in that deal was Wendy Day. She founded the Rap Coalition in 1992 to keep rappers from getting jerked and to get rappers out of these really shitty deals. What she realized as she started doing that was that it’s not enough to simply get them out of a shitty deal but what’s more important is to get them into good ones. So she started learning how to do that. Listen to what she played a role in?!She played a role in Master P’s deal with Priority, she consulted on Eminem getting his deal with Interscope, she got Twista’s deal with Atlantic, and she played a role in the Cash Money deal, which was the biggest deal of its kind for its day.

To answer your question a lot of those deals getting better also had to do with the economics of the entire industry getting better. Remember when you’re talking about the early days of hip-hop, you’re talking about an industry that was extremely compressed. At the time MTV was only playing rock videos and radio refused to play black artists at all. Shift that to 1998 when Cash Money gets its distribution deal, the record industry is flush; the labels didn’t care about making profits. What they cared about was market share. They gave these incredibly profitable production and development deals and didn’t have to worry so much about the bottom line and just worry about getting enough market share to drive their stock price up. Also in the late 90′s, radio station’s really started opening themselves up to hip-hop and stations that were openly saying “we don’t play no rap and no crap” were now saying “Where HipHop Lives”.

What are your Top 5 industry changing moments highlighted in your book?

First one would be the Sugar Hill gang getting on to American Pop Radio and Rapper’s Delight becoming a huge single. I don’t think you can really overlook that. The second would be Run DMC’s “Rock box” getting on to MTV. That was a huge, huge moment. Third would be Def Jam getting it’s deal with Columbia, which was owned by CBS. The next would be Yo MTV Raps!; through that you can really see what kind of influence MTV wielded at that time. I would say the cultivation of the “Where HipHop Lives” format on Emmis station would be the next one. The Wu Tang deal with Loud Records was also significant. It allowed the Wu Tang Clan not only have one record company working for them but every record company working for them. By 1997, every single major label had some sort of Wu deal. Basically what was so amazing about that deal is that it allowed Wu Tang to place it’s individual members all over the place, so they waived this leaving member clause, which allowed RZA to sign Old Dirty Bastard to Elektra and Method Man to Def Jam and so on. Other important deals include the sale of Def Jam to Universal Music group in 1999 for over $200 million. Next would be the orgy of hip-hop sales during the mid 2000′s which included the sale of Phat Farm; the sale of Vitamin Water to Coca-Cola, which involved 50 Cent gaining interest in the Coca Cola Company; the sale of Rocawear to ICONIX. All of these things are huge landmarks in terms of hip hops progression into the mainstream.



One Response to “The Economic Machine Behind Hip-Hop”

  1. DJ EASY B Says:


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