Joey Bien-Kahn takes a revealing look at the interwoven business history of two modern day moguls: Jay-Z and Master P …
2013 was a bad year for Jay-Z the Rapper. Magna Carta … Holy Grail had none of the dark elegance of Reasonable Doubt, none of the club slaps of The Blueprint and not even any of the royal over-indulgence of Watch the Throne. It didn’t have a club hit, wasn’t committed to artistry, and some of the lyrics read like stroke-induced gibberish (“I’m in the ocean/I’m in heaven/Yacht!/”Ocean’s Eleven”).
But 2013 was a great year for Jay-Z the Mogul. Once again, Jay made money for himself and his friends, while remaining squarely in the public eye. He presold a million copies of Holy Grail for early download on Samsung smartphones and tablets (check out that promo below). He toured North America with Justin Timberlake, bringing in $69.75 million. And his protégées J. Cole and Kanye West put out two of the best studio albums of the year, while his wife won the Pop Star Wars with an unprecedentedly unexpected album drop that defied the Age of Internet Leaks.
Stadiums: sold. A million records: sold. Samsung smartphones: sold. Say what you want about Jay’s rap output since The Blueprint (2001); just don’t say a thing about his business savvy. Let’s be honest here—Jay-Z the Mogul has been the more impressive side of Shawn Carter for much of his career. Remember: He’s not a businessman; he’s a business, man.
This year also marked the beginning of a new career for Mr. Carter. After a short and mainly nominal run as a minority owner of the Nets , Jay-Z began a sports agency. And in classic Jay fashion, Roc Nation Sports splashed onto the scene, signing All-Star second baseman Robinson Cano, Pro-Bowl receiver Victor Cruz, and later Kevin Durant and CC Sabathia. But there was trouble in (financial) paradise: even with all his high-profiling signings, the public still viewed Jay-Z’s entry into the world of representing athletes as a joke.
The move from rapper to sports agent is not unprecedented. And the expectation for failure is not unfounded. In 1999, Master P launched No Limit Sports, signing NBA players Isaiah Rider, Derek Anderson, Ron Mercer, Sam Cassel, and Brian Shaw. He also represented the top running back prospect (and arguably the best college runner ever): Ricky Williams. The NBA players already had deals, which protected them from No Limits’ ineptitude. Williams—for whom Master P crafted arguably the worst contract in the history of pro sports—was not so lucky.
But the expectation that Jay-Z will fail as a sports agent because Master P did is quite simply and plainly wrong. It assumes that all rappers—or even all hip-hop moguls—are created equal. A look at the two men’s business careers shows that that’s just not the case. Both men built successful labels. Both men started clothing lines. And both men made millions. But throughout his time on the top, Master P chased paper; Jay-Z continues to chase the throne.
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In 1996, Jay-Z was a struggling rapper considered too soft and too old to succeed. After continually failing to get a deal with a major label, he and Damon Dash started their own label, Roc-A-Fella Records. The label was supposedly named after Rocafella, a famous Brooklyn drug dealer that Jay looked up to as a young hustler, but is also clearly a reference to oil tycoon John D. Rockefeller. And watching the way Jay has built his empire, his business strategy is much more reminiscent of the capitalist titan than the Marcy project’s top dealer.
Dash managed to get a $16,000 investment from a wealthy hustler named Kareem “Biggs” Burke and used all of the money to shoot Jay’s first video “In My Lifetime” (below). Even from the very beginning, Jay paid for quality. This would become his hallmark business strategy.
Conversely, at the height of No Limit’s prominence, a hallmark of their brand was their cardboard CD cases. The quality of the case shines a light on the vast schism between Master P and Jay-Z’s business tactics. No Limit’s covers were cheaply Photoshopped representations of excess; Watch the Throne’s cover was metallic gold leaf chiseled by an Italian designer. Master P was exploiting the No Limit name for short-term gains. As he explained in a 1998 New York Times profile, “I’m in it to make money. It’s work. It’s how I get paid.” Mr. Carter, as always, was continuing to build the brand that is Jay-Z.
Jay and Dash’s initial investment paid off and they were able to sell Roc-A-Fella to Freeze Records in a savvy deal that allowed their label to maintain control of Jay-Z’s master recordings (his back catalogue continues to make millions). Freeze Records failed soon after the purchase and was bought up by Russell Simmons and Lyor Cohen’s Def Jam.
Now backed by the most powerful rap label in the industry, Jay put out his first full-length album Reasonable Doubt (1996). Widely considered his greatest album, Jay became a force in the industry, selling 420,000 copies in the first year and garnering lots of critical acclaim. Dash and Jay paid for expensive features (Mary J. Blige, Notorious BIG, etc.) and high-quality production (DJ Premier, Irv Gotti, DJ Ski) and, once again, the investment paid off. And Jay was his own boss, so all the profits were his.
At the same time, Master P was right near the top of the rap game. No Limit was cranking out albums at a torrential pace; between 1997 and 1998, No Limit released almost 50 records. None of them were hailed by critics—they were lowest-common-denominator hip-hop; all cheap beats, formulaic hooks and lyrics about chains, hos and fancy cars—but they sold. In 1998, Master P’s businesses generated more than $160 million in revenue.
1998 was a huge year for Jay as well. The murder of Biggy Smalls in 1997 opened a void at the top of the New York rap game. Jay and Nas both had legitimate claims to the New York crown after releasing timeless masterpieces (Illmatic and Reasonable Doubt, respectively) and well-received follow-ups. It Was Written (1996) was more impressive than Jay’s Vol. 1… In My Lifetime (1997), but neither album was remarkable enough to end the discussion of who ran New York.
Instead, it was the release of Hard Knock Life (above) in 1998 that began to separate Jay from the pack. The album received glowing reviews, sold 10.5 million copies (Reasonable Doubt and In My Lifetime have each sold right around 2 million) and won the Grammy for Best Rap Album. Jay had a legitimate claim to the title of “best rapper alive”—and right at that moment, his business empire was about to take off.
As always, Jay understood the market — Snoop Dogg wore a Tommy Hilfiger sweatshirt on SNL in 1994; it sold out of New York City stores the next day. Rappers, like athletes and actors, were now pop-culture icons—people wanted to wear what they wore, drink what they drank, live how they lived. So fifteen years after Michael Jordan signed with Nike, Jay and Dash bucked conventions and began their own clothing brand: Rocawear.
Jay was definitely not the only hip-hop mogul to see this opportunity — P Diddy launched Sean John, Russell Simmons created Phat Farm and Master P started No Limit Gear—but the move elevated him to the Top 1% of the rap game in terms of wealth and power. Rocawear brought in $50 million in 2000 and Armadale Vodka — which he and Dash also created in 1999 — brought in millions as well. Jay used his music videos as sales platforms, wearing Rocawear clothing and drinking Armadale Vodka, which in turn would stimulate sales.
In 1999, Jay was just beginning to lay claim to a seat at the rap mogul table. P Diddy, Russell Simmons and Master P were already there. But Hova was far from done.
It was right then, at the turn of the millennium, that Jay and Master P’s career paths began to diverge. While Jay-Z’s professional life can be read as an instruction manual on when and how to make your move, Master P’s empire began to crumble because he couldn’t stand still.
By 1999, Master P had a clothing line, a rap label, a sports management firm, a film production company, a phone sex line, a property management firm and a toy brand. He truly was a business mogul, but didn’t seem to understand the value of surrounding himself with capable associates.
When Jay-Z began Roc Nation Sports, he partnered with Creative Artists Agency (http://www.caatouring.com/Public/ArtistRoster.aspx?role=), one of the largest representation firms in the world. Cano’s direct agent, Brodie Van Wagenen, was part of a group of baseball agents that has secured more than $1.1 billion in MLB contracts since 2011. Jay understands the value of his brand, but also understands the value of expert knowledge in a field.
In what would prove to be an absolute disaster, Master P and his cronies ran the day-to-day operations at No Limit Sports. No Limit Sports Management’s website explains Master P’s qualifications as an agent: “He plays basketball, his clients play basketball- therefore he can relate to them more.” (http://www.angelfire.com/mo/nolimitparty/nolimitsports.html) It’s not surprising that a group of men lacking experience and devoid of basic knowledge of the industry would negotiate a bad contract for their premier client, Ricky Williams. Instead, they crafted what is widely considered the absolute worst contract in the Free Agency Era.
While Jay was beginning to branch out slowly, using his rap as a tool to sell clothes and liquor, Master P was deciding that being a rapper/realtor/sports agent/designer/toy maker was not enough. In 1999, he signed with World Championship Wrestling—the WCW hoped to widen their fan-base among rap listeners, while Master P’s aspirations were less clear. The move didn’t work and the contract was not renewed for the next year.
But even that was not enough for P. The No Limit Sports Management website explains, “Besides wrestling and sports management, P would also like to fulfill his ultimate dream, becoming a pro basketball player.” During the 1998 and 1999 seasons, Master P did try out for two NBA teams, the Charlotte Hornets and the Toronto Raptors. He never made the regular season roster, but played in the preseason for the Raptors.
Obviously, No Limit Sports was about Master P, not his clients. While Jay-Z used his minority ownership to get his foot into the world of representing athletes, Master P was using the agency to get his foot into the league. As a result, the agency crumbled.
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Even while Jay was building a business empire with Rocawear and Armadale, he never got away from what he did best. Roc-A-Fella Records was the root of Jay’s power and he understood that he needed to tend to the roots. The Blueprint solidified his legacy; it was now time to solidify his kingdom.
In 2003, Jay opened the first of his 40/40 clubs in New York City. A relatively simple business venture—a high-class sports bar—Jay managed to use his brand to make it a place to be for the New York entertainment elite. And in an ingenious marketing ploy, Jay announced that he was working on his final record The Black Album (2003) at the club’s opening.
Let’s be clear: The Black Album — Jay’s alleged swan song — is not a great rap record. There are clever lines and some impressive singles, and Jay did not skimp on the cost of production (producers include Kanye West, Rick Rubin, Timbaland, 9th Wonder, Eminem and The Neptunes). But it feels like the producers are trying too hard and that Jay might not be trying hard enough.
But Jay, always the innovator, made the savvy choice to release an a cappella version of the album as well. The move allowed for endless remixes and mashups that gave the record a second life: The Grey Album brought Shawn Carter and John Lennon together, Kno vs HOV is a favorite in the underground scene, and The Purple Album gives us Prince and Jay together, which can’t be a bad thing. Obviously, no idea is flawless and the a cappella version birthed the ludicrous Linkin Park and Jay collaboration Collision Course, but even that was a win for Jay-Z the Mogul.
The pinnacle of the Roc-A-Fella Empire was also the moment it dissolved. In November 2003, Roc-A-Fella Records released the Black Album, and months later, it released Kanye West’s first solo album The College Dropout, both of which dominated the Billboard charts. Right when both were up for multiple Grammys (Kanye received 10 nominations), the Roc-A-Fella founders sold the company for $10 million to Def Jam.
Each founding partner received a third of the buy-out, but Jay-Z managed to come out on top: he was promoted to President of Def Jam after the sale. In that same year, Jay pressured Dash to sell him his share of Rocawear for $7 million (he sold the rights to the brand in 2007 for $204 million). Jay had built an empire on rap, but now had put himself in a position where he could print money without ever spitting another verse.
In the Hova and Dash split, Roc-A-Fella artists had the choice to stay with Jay or to join Dash’s new label. The majority, including Kanye, chose Jay. The same was not true for Master P. While he over-stretched his business empire, more and more of his artists left the label. By 2000, only C-Murder, Silkk, Magic and Mia X remained a part of No Limit Records. In 2003, due to various lawsuits, the label filed for bankruptcy.
Economically, Master P is doing just fine. He’s not a story of rags to riches back to rags. He made a fortune and filed for bankruptcy in order to keep that fortune. But, the final few years of No Limit forever tarnished the Master P brand. Russell Simmons, P Diddy and Jay-Z are looked up to as business moguls; Master P is the tank-riding, contract-bungling father of Lil’ Romeo in the collective consciousness.
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Still, nothing demonstrates the two men’s divergent business models better than their first big dips into the representation of athletes.
When Jay-Z’s move to the world of sports agent was announced, experts and fans alike started chiding him. When he said that his experience selling drugs would come in handy as a sports agent, he was mocked. And when he stepped in at the eleventh hour and seemed to destroy the deal between Robinson Cano and the Mariners by asking for a tenth year, sports writers celebrated his apparent failure.
But then the Mariners came back to the negotiating table and did give Cano that tenth year. And then everyone started to realize that Jay really can do it all.
Master P’s first big negotiation was not so inspiring. In a deal that will live in infamy, the New Orleans Saints agreed to pay the Ricky Williams a maximum of $68 million over seven years. That figure sounds fine in theory, but the contract was set up to pay the league minimum every year, with Williams only earning like a first round pick if he reached astronomical statistical markers—the easiest incentive in the contract was 1,600 yards in a season, a mark only 15 players in history had ever reached at the time.
The contract was a coup for the Saints, who would gladly have paid $10 million per season for the greatest running back of all-time (the deal included a $3 million bonus each time he broke the all-time single season rushing record). Instead, Williams received $11.1 million over the entirety of the deal—running back Edgerrin James, taken a pick before Williams, made $14.8 million in his rookie year.
Master P came into the negotiations with all the leverage. Understand: the Saints traded an unprecedented eight draft picks to acquire the right to select Williams. They hemorrhaged their future to make Williams their running back—they had no choice but to sign him to whatever terms he wanted. And yet, they locked him in well under market value.
Jay-Z entered Cano’s negotiations in the opposite position. Sure, Cano was the most talented free-agent on the market—but no other team was willing to pay close to Roc Nation Sports’ demands. And still, Jay managed to get the Mariners to pay Cano $70 million more than the next highest offer. The Mariners were bidding against themselves and they went that exorbitantly above the market. And the wildest part—Cano may still be underpaid .
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Ricky Williams was a star-in-the-making when Master P crafted his disastrous deal. He was a good-looking kid who’d run Austin in his time at the University of Texas. He possessed a remarkable combination of power and finesse on the field that was hard not to watch. And the Saints believed he was the ticket out of the cellar of the NFL. Somehow, Master P did not grasp his value.
Robinson Cano was the best player on the most famous team in America when he signed with Roc Nation. And yet, he was not close to the biggest star in American sport. A baseball insider, critical of Roc Nation, was upset that Jay was “selling him as Michael Jordan, not as a baseball player. As a guy that’s going to be a big rock star and bring all these fans in. Last year, that wasn’t the case”.
Cano is not Jordan; MLB players have struggled to capture the cultural imagination in the same way as basketball players over the last couple decades. Realistically, Cano is not even Derek Jeter in terms of his drawing power. But Jay-Z can clearly envision a market in which a baseball player can become an MJ-level pop culture icon. And, honestly, just the fact that Cano is connected to Jay instantly makes him a bigger star.
Jay is a man who has always understood the power of a brand. He built Roc-A-Fella, he built Rocawear, and now he has built Roc Nation Sports. But really, the greatest brand Shawn Carter’s ever built is the brand of Jay-Z. And he knows that. And so do these athletes.
Unlike Master P, whose No Limit screamed of tasteless riches, the Jay-Z brand radiates gold-plated elegance. It speaks to athletes and rappers, but also to entrepreneurs and executives. Which is why Roc Nation Sports will succeed.
It’s easy to expect history to repeat itself. It’s easy to believe that if Master P failed, so will Jay. But it’s getting near the point where we all just have to admit it: Jay-Z isn’t a rap mogul; he’s a business mogul. It’s bigger than hip-hop.