In the '80s, it was the leveraged buyout; in the '90s,
technology. But at the beginning of a new century, it's the selling of "cool"
that is building empires and making moguls.
Russell Simmons, Sean "P. Diddy" Combs, Damon Dash, Jay-Z and Percy "Master
P." Miller have yet to achieve the stupendous wealth of Bill Gates or Warren
Buffett, but they're shaking up the business world and corporate America by
making millions with what is surely the coolest widget around: hip-hop.
Hip-hop, which sprang out of America's black ghettos 30 years ago, was a
fringe youth culture that realized itself in rap music, DJ-ing, baggy street
fashion, break- dancing and graffiti. The so-called fad never was expected to
become America's pop culture, and it definitely wasn't supposed to yield
But in the past two decades a handful of visionary black entrepreneurs have
been able to leverage the lifestyle into a multibillion-dollar industry that
has spread to fashion, film, personal finance and even politics.
Today's hip-hop moguls are a cadre of high-profile, jet-setting businessmen
who exercise considerable control of the hip-hop industry through myriad
business ventures, political campaigns and philanthropic initiatives.
"Most entrepreneurs are singularly focused on one thing," top American
designer Tommy Hilfiger said. "But these guys have pushed the boundaries of
entrepreneurship when it comes to hip-hop."
Making it big
Indeed. Simmons, who started off as a promoter of rap concerts in the '70s,
went on to co-found Def Jam Records in 1984 and later built Rush
Communications, a multimillion- dollar media company that hawks the hip-hop
lifestyle through clothes, sneakers, cell phones and an energy drink.
Combs, who throws million-dollar bashes in the Hamptons every year, heads
up Bad Boy Worldwide Entertainment Group, a $315 million company that houses an
award-winning clothing line, a record label, restaurants, a film subsidiary
and now a 3,800-square-foot retail store in Manhattan.
Damon Dash and rapper and producer Jay-Z preside over the $450 million
Roc-a-Fella Records, which they cobbled together in nine years. Subsidiaries
include a clothing line, a film division, a vodka distiller and a fledging
Although his original label went bankrupt, Master P., who started afresh
with new label The New No Limit Records, continues to oversee a clothing line,
and steers the music and television career of his superstar son, Lil' Romeo.
"It's not surprising that hip-hop has created moguls," said Shawn Prez, who
heads up 32 Power Moves Inc., a Manhattan marketing company. "Hip- hop exudes
competitiveness. It's about excess, bling and bravado."
To be sure. All of hip-hop's chief executives run their empires as if they
are the eye in the proverbial storm. Their offices are often jammed with
corporate executives, marketing agents, music artists, fashion experts and a
swirl of personal assistants who attend to their every need. And as cell phones
trill, public-relations people pitch and the television blares the latest
video, they are usually hammering out another multimillion-dollar deal on the
It wasn't always like that. For decades, black entrepreneurship in the
entertainment industry has been spotty and short- lived. Stories of
chart-topping black artists who died penniless because they didn't have the
financial wherewithal to own their own product or the ability to compete with
mainstream record labels are legion.
Institutional racism, lack of resources and political clout were also at
fault, industry experts said.
"But then a lot of those barriers came down," said Clarence Avant, who
founded Sussex Records in the 1970s. "Simmons and these other guys also had
what some people didn't have: great business acumen. They were able to take
their businesses to another level."
The rise of hip-hop's chief executives occurred just as racial and class
barriers in youth culture began to melt away. And an increasing global economy
broke down similar divisions in the business world, experts said. "The only
color anybody was thinking of was green," said Tru Pettigrew, who leads
marketing company AMPDi.
Diversify and multiply
Simmons took his cues from self-made entertainment billionaire David
Geffen, who built record labels and movie studios, opened nightclubs and
produced Broadway musicals. Simmons realized early on that he would have to
diversify away from the cyclical record industry and align himself with large
corporate entities to branch out in other areas. He also made sure to cut deals
in which he still had a sizable stake in the alliance and was able to reap
fees or royalties.
"This," Geffen said, "is what made Simmons an excellent businessman. He
didn't need hip-hop to build an empire. He could have done it with anything."
Combs, Dash, Jay-Z and Miller would later emulate and build on Simmons'
Such moves have put them and Simmons at the top of hip-hop's $10 billion
industry, which includes CDs, DVDs and clothes, according to a Forbes magazine
And others are scrambling on the bandwagon.
Moguls-in-the-making include rap star Nelly, who has his own clothing line,
an energy drink and a stake in the NBA's Charlotte Bobcats.
Pharrell Williams, half of the producing team the Neptunes and chief
executive of the Star Trak recording label, has a new fashion line, Billionaire
Boys Club, and a high-priced sneaker called Ice Cream.
Eminem is putting out his own clothing line, Shady Ltd.
Still, the pioneers continue to have considerable market. Here's a glimpse
inside their businesses:
Title: chief executive, also known as the "Godfather of Hip-Hop"
Company: Rush Communications
Annual revenue: NA
Number of employees: 75
Called the Godfather of Hip-Hop because of his pioneering efforts in
building the hip-hop market, Simmons, 47, is one of the few CEOs who will
answer tough business questions with spiritual answers or explain corporate
strategy by referring to the Bhagavad Gita, a Hindu religious text.
"The universe says there is plenty of wealth to go around for everyone,"
Simmons says after being asked about the increasing competition to Rush
Simmons performs a spiritual ritual every morning, practices yoga every day
and is a vegan. But make no mistake, he's a hard-nosed businessman.
Simmons created the blueprint for hip-hop moguls, which is: Partner with
corporate giants, maintain partial ownership in the venture, get royalties or
fees, and expand into new markets.
Earlier this year, he sold Phat Fashions, his hip-hop clothing line, for
$140 million to apparel giant Kellwood, and continues to oversee the subsidiary
as its chairman.
He later moved into television ("Def Comedy Jam"), theater ("Def Poetry
Jam"), movie producing ("The Nutty Professor") and finance (the Rush Card and
Baby Phat debit cards). He also puts out an energy drink, a line of snazzy pink
cell phones and luxury watches.
His philanthropic arm gives away millions each year and his Hip Hop Summit
Network is registering voters in droves.
Simmons helped create the $10 billion hip-hop industry when he began
promoting rap acts in the 1970s. In 1984, he partnered with Rick Rubin, a rich,
white college student who was running a record label out of his dorm room at
New York University. Their collaboration created Def Jam Records, which
produced some of the biggest rap acts, including Run-D.M.C., LL Cool J and
In 1990, a lucrative deal with Sony Records - in which Sony and Def Jam
split the earnings down the middle - provided enough capital to fund Rush
Communications and enabled Simmons to move into other venues. In 1999, he
pocketed $100 million after he sold his stake in Def Jam to Seagram Universal
"Russell was one of the first people in the business to realize the
importance of ownership and the power of the joint venture," said Brett Wright,
who leads marketing firm Nu America. "People who didn't own their stuff got
left by the wayside; those who did got rich."
"I really don't know that much," said Simmons. "But I surround myself with
people who do. I would never go into a new business without first hooking up
with an expert in that field."
SEAN "P. DIDDY" COMBS
Title: chief executive
Company: Bad Boy Worldwide Entertainment Group
Annual revenue: $315 million
If Russell Simmons is the "Godfather of Hip-Hop," Sean Combs, 34, also
known as "P. Diddy," is its fashion tycoon. His clothing line, Sean John, which
is upscale and chic, recently bagged the top fashion award from the Council of
Fashion Designers and is one of the top-selling urban clothing lines,
according to the NPD Group, a research company. It also is the crown jewel of
Other subsidiaries include Bad Boy Records, which oversees the careers of
artists Mase, Faith Evans and Black Rob; Bad Boy Films, and two restaurants
called Justin (named after his oldest son) in New York and Atlanta. His
marketing company, Blue Flame Marketing and Advertising, has clients such as
Pepsi, Microsoft and Calvin Klein.
Combs is perhaps the savviest at leveraging his personal celebrity into a
brand. His annual Hamptons shindigs, gossip-page social life, last year's
charity marathon run, acting stint on Broadway and globetrotting to
star-studded getaways such as St. Tropez have kept consumers rapt and
constantly buying. Jameel Spencer, chief marketing officer at Bad Boy Worldwide
Entertainment Group, said Combs is focused, driven and "not one to take 'no'
"In fact, 'no' makes him want to do it more," Spencer added.
In 1991, 19-year-old Combs got into the business after begging Andre
Harrell, then president of Uptown Records, for a job as an unpaid intern. He
rose to A&R director in two years, but was eventually fired by Harrell. He
rebounded by launching Bad Boy Records, which quickly made a name for itself
after former crack dealer- turned-rapper Notorious B.I.G. began churning out
By 1996, Combs had hammered out a 50-50 partnership with Clive Davis'
Arista, which kept him in charge and gave him the right to buy Bad Boy's master
recordings. Ownership of master recordings, which few artists have, is a boon
for any entrepreneur who continues to reap royalties and fees whenever a song
In 1998, he started the Sean John clothing line. And last month he opened a
3,800- square-foot retail store in Manhattan, which sells $495 leather
jackets, $200 jeans and rhinestone-studded dog collars that go for $65 a pop.
He plans to open stores across the country and later in Europe.
DAMON DASH and SHAWN "JAY-Z" CARTER
Title: chief executive and major partner
Company: Roc-A-Fella Records
Annual revenue: $450 million
Damon Dash is striding through a spacious townhouse with a cell phone glued
to his ear and reading Kanye West the riot act. West, a Roc-A-Fella rapper who
has his own clothing line, thanks to Dash, is trying to conduct business from
his cell phone as opposed to coming into the office to attend to details. "Yo,
man, you can't do business like that, man," Dash says heatedly on the phone.
"You don't make demands on the phone and expect business to happen. It doesn't
work that way."
A pugnacious sort, Dash is not good at sugarcoating. But when it comes to
nailing a sweet deal, he's a pro. The 33-year-old, along with star rapper Jay-Z
and Kareem "Biggs" Burke, head Roc-A-Fella Records Enterprises, which has
ventures in music, fashion, film and publishing. The company's biggest money
maker is Rocawear, a 5-year-old company that Dash decided to start after
becoming frustrated with the flagging profits in the record industry.
Still, it was the music that got him started in hip-hop moguldom. Dash
started Roc-A-Fella Records when he couldn't find a record label willing to
sign a tall, gangly, unknown rapper from Brooklyn named Shawn Carter. The move
was a smart one. Jay-Z, 34, exploded eventually, selling 17 million albums and
making millions for the label.
Later Dash was able to move into other venues, including Roc-a-Fella Films,
started in 1999, production company Dash Films in 2001 and Armandale Vodka in
2002. This year he launched America magazine, which focuses on fashion and
culture; a jewelry line in which the Tiret watches cost as much as $130,000;
and he's acquired the licensing to sneaker line Pro Keds.
A cigar line, a European cable TV channel, and a sports and boxing
promotion company are also in the works.
Known for his brash and aggressive style, Dash doesn't get high marks for
being a great boss or a great partner, some say. His manner reportedly has
strained his relationship with Jay-Z, fueling rumors that the rapper - who
announced his retirement last year - will leave to start his own company.
"Those are just rumors," Dash told Newsday. "But if Jay-Z leaves, he
If the rapper does leave, he will have plenty of fodder to start his own
"Jay-Z has such a loyal following he can start anything and people will
follow," said Emil Wilbekin, vice president of brand development for fashion
designer Marc Ecko and former editor of Vibe magazine.
Jay-Z's other ventures include an upscale sports club called 40/40 in
Manhattan and a stake in an arena for the Nets basketball team near downtown
Brooklyn. He has also collaborated with Reebok to put out the "S. Carter"
sneaker line, which has become the company's fastest-selling shoe. The deal
marks the first time a major sneaker company has signed an artist rather than
an athlete to market its product.
PERCY "MASTER P." MILLER
Title: chief executive
Company: New No Limit Records
Annual revenue: NA
Out of all the hip-hop moguls, Master P., 34, is the one most likely to be
overlooked, primarily because he is from the South and his once-thriving
enterprise is the first of all the hip-hop empires to face serious financial
But just a year ago, Master P., born Percy Miller, was the wealthiest
hip-hop mogul, eclipsing at one point even Simmons, the industry's pioneer. He
has made several appearances on Fortune's "40 Richest Under 40" list, his most
recent in 2003, which estimated that he had $361 million in holdings.
And in 1998, the Guinness Book of World Records listed him as the richest
music producer, who at the time had a net worth of $56.5 million.
Ten years ago, Master P., who grew up in the drug-infested projects of New
Orleans, took a $10,000 inheritance and opened a record store. Early on, he
displayed the business acumen that would soon turn him into a hip-hop mogul.
The store later evolved into No Limit Records and Miller kept the rights to all
of his master recordings. In the past eight years, No Limit sold 50 million
albums, 12 multiplatinum, 10 platinum and 12 gold records. Some of its artists
have included Snoop Dogg and now Mystikal, Silkk the Shocker and C-Murder.
Later, Miller expanded into clothing with his subsidiary No Limit Sports;
No Limit Films has put out a line of profitable direct-to-video movies and
feature films. He has since managed the career of his son Lil' Romeo, who has
sold 2 million CDs and has a series on Nickelodeon called "Romeo!"
He is also wrapping up two film deals with Walt Disney.
But the past year has been full of challenges for Miller, who tried out
twice for the NBA. His brother, rap star C-Murder, is embroiled in a high
profile murder trial. Earlier in the year, Miller pleaded guilty to tax fraud
charges, and in December, his original label, No Limit Records, filed for
In February he emerged again touting a new company, The New NoLimit
Records, and switched distributors, leaving Universal for Koch.
"Yeah, I shut down No Limit because it made good business sense," Miller
told ESPN. But "how can Master P. be broke? We've got our own television show
on Nickelodeon, we've got our own clothing company, our own jewelry company,
property, real estate - so what if one thing doesn't work; we work on another?"
Go to www.newsday.com/hiphop to:
Meet Russell Simmons, rap mogul
See a video of Jeff Pearlman's lessons at DJ school
Go inside the hip-hop 'hood of Roosevelt, home of Public Enemy
Listen to audio clips of Public Enemy
Find out what's fashionable in hip-hop with video and photos