Jay-Z Out of Joint
A Biography (Sort Of)
by Rob Stiles
Chapter 2:
It’s the Roc… Holla!
“After 10:00 AM, the Chinese, me, and the roosters have all the money.”
– Sean “Puffy” Combs
Running a business is hard, apparently. Considering that my college loans have been bought and sold more times than a teenage girl in Thailand, I often thought business is easy because one’s success is often predicated on other people’s failures — in my case, the failure of banks that were once “too big to fail.”
That’s not to say teenage girls in Thailand who are trapped in underground sex trafficking rings are failures. It’s just that they “succeed” a lot less than the Marlboro executives who buy and sell Thai girls like pork bellies on the stock market.
That’s how business works, by design. Someone always gets the short end of the stick, and sometimes it’s in more ways than one.
During my youth, my Uncle Willy was an avid smoker of Marlboro Reds. He also collected the “Marlboro Miles” that came on the sides of each pack. The way Marlboro Miles worked was, they would mail you this big catalog of dumb shit that no sensible person would ever spend their hard-earned money on, and you could buy stuff by mailing in your miles along with an order form. The catch was that any given pack of Marlboro cigarettes only ever came with 1 or 2 miles, and like most mile programs, the exchange rate of miles to dollars was some fraction-of-a-cent bullshit.
Even if you smoked upwards of 1,000 packs of cigarettes, you’d still only be able to score some poster with a half-naked woman wearing a cowboy costume in a sexy pose (with a Marlboro Red in her mouth, naturally). It would have the words “Put the Spurs To Her” or something equally sexual at the bottom, in Miami Vice-style pastel colors. Obviously the poster wasn’t worth anywhere near the thousands of dollars you spent on packs of Marlboros, but Marlboro executives know damn well those teenage girls in Thailand don’t buy themselves.
Aside from promoting chain-smoking, the Marlboro Miles didn’t serve any real purpose, except to maybe help smokers feel like they were succeeding in some capacity by collecting them. Uncle Willy actually ended up getting enough miles (somewhere around 8,000, and that’s only slight exaggeration) to buy a faux leather jacket with the Marlboro logo on the back. It was then that I realized, despite my young naïveté, that he might actually be getting fucked over.
Looking like Fonzie at chemotherapy is great, but Marlboro smokers had no real recourse for when their lungs ultimately failed. Even if they did realize they were failing (not just at breathing, but life in general) and took Marlboro to court to try and get their precious miles back, Marlboro’s lawyers could just put a boombox on the witness stand and play Jay-Z’s “Takeover,” cueing it at the time in the song when he says, “we don’t believe you, you need more people.”
All this to say that when you’re running a successful business, it’s your prerogative to tell the exploited failures (read: other people) to go fuck themselves. Likewise, most people are unaware of the colossal shit-shows that are Jay-Z’s business ventures, in which literally all Jay-Z has ever done is tell people to go fuck themselves. Maintaining this veil of blissful ignorance over the public is what some industry leaders would call a masterful use of “public relations.”
In 1995, Dame Dash, Kareem “Biggs” Burke, and Jay-Z founded Roc-A-Fella Records, a record label whose sole purpose at the time was to release Jay’s debut album Reasonable Doubt. All of Jay’s albums would end up being released under the label, a shrewd business move that would allow Jay to retain his “intellectual” (air quotes) property.
To paraphrase the classic diss track “Linda Tripp” by El-P, Jay-Z owned all of his masters, lyrics, merchandise, mic, turntables, style, psychosis, pain and penis.
In hindsight, I wouldn’t be surprised if Roc-A-Fella was supposed to double as a way for Hov and his friends to launder money and avoid paying taxes, similar to how Irv Gotti founded Murder Inc. Records as a way to launder money from drugs and organized crime. Nothing of the sort has ever come to light—I’m just asking questions here. If it ever did, it might explain why Dame Dash and Kareem were so upset when Jay-Z ultimately sold Roc-A-Fella to Lyor Cohen (pronounced “Liar”) over at Def Jam, screwing everyone around Jay out of a lot of money.
It might also explain the prevailing notion in hip-hop that Lyor Cohen, the original “Tall Israeli” mentioned by Mos Def on “The Rapeover,” is the only Jewish person in history to ever be considered worse than Hitler. For those of you old enough to remember Freddie Foxxx, a.k.a. Bumpy Knuckles, he said in a 2003 interview that the biggest mistake he ever made in his rap career was, and I quote, “probably not breaking Lyor Cohen’s jaw when I had the opportunity.”
That’s really all you need to know about Lyor Cohen — his reputation precedes him. Bumpy Knuckles, who is an accomplished-enough rapper in his own right, would much rather go back in time to chin-check Lyor Cohen than do literally anything else to benefit his rap career. He could even go back in time to before Jay-Z started rapping and hand himself a copy of all the lyrics from Reasonable Doubt, and be worth half a billi today, easy.
No, blasting a Tall Israeli in the face is more important. #Priorities.
Think about this: by 2004 (around the time Roc-a-Fella was sold), Dame Dash already hadn’t been paying his taxes for a hot decade, and he ultimately got hit with a $2.8 million tax lien from the Feds in 2012. 2012 was also the year Kareem got busted for distributing a reported “100 kilos of marijuana” and was sentenced to a 5-year stretch in the pokey.
Isn’t it possible that if Dame and Kareem had still been able to funnel money through Roc-A-Fella and hide their shady activities, they could still to this day be enjoying the same lavish lifestyles as certain Marlboro executives who visit Thailand? No wonder they were so sour after Jay-Z told them to go fuck themselves and put the company in the hands of Lyor Cohen and Def Jam.
I guess that in Dame’s case, his sourness most likely stemmed from that fact that working with Jay-Z was his original meal ticket. Dame’s problem wasn’t that he was inclined to get involved in shady dealings, but rather that he tended to blow through all of his money in stupid ways. Unfortunately there’s no legal precedent of someone getting their tax delinquincy pardoned because they‘re terrible at handling their money. However, if you’re a Black athlete and suck at handling money (as is often the case), you can still get a check from ESPN to be interviewed in one of their documentaries. Hip-hop moguls have no such luck.
There’s a now-classic episode of MTV’s Cribs in which Dame revealed he never wore the same pair of socks twice — not for any good reason, he just had that kind of money. More recently, Dame has been photographed on Instagram doing hand-to-hand sales of Cam’ron’s line of pink Nike gym socks with Cam’s face on them for $150 a pair. Going from wearing fresh socks everyday to hustling another rapper’s line of socks so you can afford to put food on your family is quite a fall from grace, if Dame Dash was ever graceful.
Most people are inclined to think that Dame’s fall from grace and lack of free money is what fueled the underlying beef between Dame and Jay-Z, but I’d say they’re mistaken. If anything, Dame doesn’t get enough credit for seeing the writing on the wall when it came to Lyor Cohen. After Roc-A-Fella was sold to Def Jam, Cohen took his money and jumped ship to Warner Music Group. Warner was already in the process of reviving a defunct country music label called Asylum Records, with the intention of turning it into a hip-hop label. Cohen appointed his lawyer friend and fellow Israeli, Todd Moscowitz, as head of the new and improved Asylum.
I tried searching for a picture of Lyor Cohen and Todd Moscowitz standing next to each other, to see if Moscowitz was also in fact a Tall Israeli compared to Cohen. Cohen is about 6-foot five inches tall.
I couldn’t find a single picture of them together, which strikes me as mighty suspect. Then again, Lyor Cohen is in cahoots with Google now for his latest business venture called “300 Entertainment”, so I guess I shouldn’t be surprised. From what comparisons I can make, I’m forced to relegate Moscowitz to the role of “Slightly Chubbier Israeli.”
To hear Dame Dash tell it on one of his thousand VladTV interviews, sometime during the rebirth of Asylum is when the idea of “360 deals” was born. At the turn of the 21st century, the bottom was starting to fall out of the entire music industry, so record label execs like Cohen and Moscowitz needed a new way to make money aside from royalties. Necessity is the mother of invention, as they say.
As a result, Asylum came up with this special 360-degree deal in which the label would give rappers a huge cash advance for promotion, recording, food, weed, literally whatever they wanted. The catch was that the label took a huge percent of the rapper’s income until he paid back the advance money, or until the universe ended — whichever happened first, but most likely the latter. Thus, the only way a rapper could make money was by touring and selling merchandise hand-to-hand at the show, much like Dame Dash hustling Cam’ron socks. Even then, the label execs would take a chunk of the touring revenue, too. They’ve got a family to feed!
The 360 deal explains why rappers like Lil Boosie don’t have the careers they deserved, much less a well-invested 401(k) portfolio to fall back on. Boosie might be a bad example, because he’s likely spent more time in the pokey than having an actual rap career as a free man. I’ve also watched enough episodes of MSNBC’s Lockup to know that almost everyone in prison is a rapper, though not necessarily a good one. Even if they’re talented, they don’t have much of a rap career to speak of — they’re in prison.
I recall one particularly excellent rap performed by a couple of inmates in Oakland’s Santa Rita Jail, entitled “Alligators and Horses.” It was about alligators and horses. The real genius of the song is that the chorus ended up being about Lamborghinis and Porsches. It all ultimately led me to believe that rhyming dictionaries aren’t sold at the commissary.
The 360 deal was basically Lyor Cohen’s way of becoming exceedingly efficient as a “culture vulture,” taking money from hip-hop and using it for his own nefarious plans. The question few people (other than Dame) have ever asked is, why does a Tall Israeli need to poach money off of Black culture and funnel it into his own culture? Cohen could be using the money to stockpile yellowcake uranium, for all we know. What’s more, Dame felt really hurt, as he described the predatory nature of Lyor Cohen in a VladTV interview:
“When they rob you, they don’t come as the enemy, they come as a friend… Pause.”
That’s not to say Jay-Z’s hands are clean. He sold off Dame and Kareem’s baby, but in some ways he sold his own baby as well. It’s a bit like the eponymous Jewish dude who started Papa John’s Pizza. Sometimes on their pizza boxes they print this story about how John sold his 1976 Oldsmobile Cutlass or whatever hoopty he owned at the time, so he could get money to start up a pizza joint. At least Papa John eventually bought his car back, and he even put the car and its story on his pizza boxes, he loved it so much.
On the other hand, Jay-Z owns his masters, but Roc-a-Fella is dead to him for all “intensive purposes.” He still puts the Roc-a-Fella logo on his and Kanye’s albums, if only to remind people that he once owned a label. We’ve all had that one annoying coworker who constantly reminds you they have children by showing you pictures over and over. In Jay-Z’s case, he sold his baby off to some stranger, but he’s still trying to show the picture to everybody as if the baby were still his.
Imagine, if you will, the abject horror I felt after discovering that I went to the same university as Lyor Cohen — the University of Miami. It seems highly appropriate that Cohen went there, because much like DMC of Run DMC’s nickname for Cohen, the place is basically “Little Israel.”
That’s not to say I was opposed to the large Jewish presence on campus — that would make me an anti-Semite. I’m only anti-Semitic to the extent that I hate how many extra paid holidays Jewish people get each calendar year. It makes the prospect of converting and setting a dinner plate out once a year for the ghost of The Prophet Elijah that much more attractive.
I’m also surprised that my university, at some point in time, had a curriculum that could equip Cohen with the know-how to eventually create the 360-degree deal. Nothing I learned in class was remotely as useful, as evidenced by my lucrative career in pushing pencils from 9 to 5 daily.
So what made Lyor Cohen so special?
Alex Ogg, author of the excellent historical review The Men Behind Def Jam, discovered that Cohen travelled to Ecuador after graduating in 1980 and attempted to start up his own shrimp-farming business, which ended in complete failure.
Lyor Cohen’s shrimp farm is the only thing I’ve ever learned about him that can truly explain why he is so good at fucking rappers over: he once exhibited the same impulsive and poorly thought-out behavior as 99% of rappers. Thus, Cohen is acutely aware of how rappers can blow through their cash advances once they sign with a label, by doing increasingly stupid shit like starting a shrimp farm. Record labels can then extort rappers when the rappers inevitably ask for more money. A rapper would then have to pay back the advance money plus the extra money, while the label would continue to take some royalties, touring income, merchandise, income, ad infinitum. The trick is that the label tells the rapper “Yeah, we’re still not in the black yet” while constantly pushing the goal-line further and further away.
Basically, by starting a shrimp farm for no reason, Cohen realized that hip-hop is a game of cents, in which the executives can nickel-and-dime artists to death.
They are tearing the little shrimp legs off this rap shit.
Jay-Z, on the other hand, seems to follow a 25-year-long business plan in which he attempts to start up a shrimp farm, over and over, except with more money each time.
One example of this is…
In 1997, Jay-Z released his sophomore album, In My Lifetime, Vol. 1. It was around this time that Jay started wearing a lot of Iceberg jeans and jackets at his shows. Iceberg is an “Italian luxury fashion design house” according to the Wikipedia, but a quick Google search shows that they also sell Batman T-shirts at $150 a pop.
Biggie also makes reference to Iceberg apparel in the song “Nasty Boy” on his posthumous album Life After Death, which was released the same year as Jay’s album. Members of the Mafia don’t typically wear jeans, so I’m not sure why Biggie and Jay were so obsessed with jeans during the genesis of the Mafioso Rap era. The only seemingly relevant thing about Iceberg jeans is that they’re Italian jeans.
By that logic, Jay and Biggie should’ve also been reppin’ Iceberg’s $150 Batman T-shirts in their music videos. This will forever remain to be seen from Biggie, because he was murdered in a way that somehow involves Suge Knight. Jay-Z, on the other hand, is both alive and getting to the age where he’s old enough to not give a fuck about what he’s wearing in public, so it may be just a matter of time.
Jay’s use of Iceberg clothing in his music and public appearances established him as a tastemaker in hip-hop, as he noticed people starting to show up at his concerts wearing Iceberg jeans. Jay talked to Dame Dash and threw around the idea of starting a line of rapper-endorsed clothing with Iceberg, as if clothing companies needed the endorsement of rappers to sell clothing. The fact of the matter was that Jay-Z’s mention of Iceberg on “Who You Wit II” (also a reference to Iceberg Slim, the pimp) boosted the company’s sales dramatically. Jay was just mad because in hindsight, he wasn’t smart enough to get some endorsement fees from Iceberg upfront before mentioning them on his album. As I documented in Chapter 1 of this book, Jay-Z tends to stab or shoot people whenever he’s upset, because he has the emotional intelligence of an 8-month-old. It’s a miracle no one was killed when Jay realized he gave a clothing company free money for no apparent reason.
Jay-Z and Dame eventually managed to get penciled in for a meeting with the top executives at Iceberg, where they tried to convince the company to start a line of rapper-endorsed clothing. The pitch failed, most likely because the Iceberg execs listened to Jay’s first two albums and realized Jay doesn’t know from good fashion, given the fact that he raps about being a Mafioso who wears jeans. If anyone knew about Mafioso fashion, it was probably the Iceberg executives in Italy.
It brings to mind the time when Chris Brown, America’s foremost shoe-putter, donated a bunch of Reebok sneakers to kids in Compton, after it came out that he had previously put a shoe on Rihanna. In Reebok’s case, they were creating what marketing people call “brand synergy.” However, it just didn’t make any business sense for Iceberg to associate with Mafioso rappers who can’t dress themselves, if Iceberg could help it.
Jay took this rejection the same way a child does when some other kids form a club and he’s not allowed to join. Jay and Dame bought some sewing machines and set up shop inside the Roc-a-Fella Records offices, and started their own, way cooler fashion line called Rocawear.
Jay and Dame soon realized that sewing machines don’t magically crap out fashionable clothing, so they started talking to Russell “Uncle Rush” Simmons for some guidance. Aside from helping found Def Jam and doing unhealthy amounts of yoga, Rush also founded clothing company Phat Farm in 1992, best known for “pairing argyle sweaters with baggy jeans” according to the Wikipedia.
Russell Simmons is also the mastermind behind the RushCard. At some point in the early 2000s, a few smart business people figured out that it costs mega-corporations like McDonald’s a lot of money to physically give employees a paycheck. For example, it might cost a company $0.50 to print and mail a paycheck every week, but if they have 100,000 employees then the company would lose $50,000 a week.
With the RushCard, a company can give every employee a pre-paid debit card and load the paycheck money onto it every week, and employees can use it like a regular debit card or deposit their own money onto it. The catch is that there’s all sorts of hidden fees, including a fee for every time you withdraw any of your hard-earned money. The RushCard actually has a $10 monthly fee just for having it, which the company probably takes out of the employee’s paycheck, for tax purposes. RushCard also does nothing to improve your credit, and overall is just a really shitty, somewhat unethical idea designed to keep poor people poor.
Given his experience in unethical dumb shit, Rush was a natural fit for Jay and Dame’s clothing line. None of the three men knew what to do with the sewing machines they bought, but Rush came through with the hookup and introduced Jay and Dame to some Russian investors who knew about manufacturing clothes. Since the Cold War was already over, the Russians presumably didn’t feel conflicted about investing in a hip-hop clothing company owned by Americans. They also probably figured that because Jay-Z and Dame are Black, they weren’t exactly Americans in the traditional sense, despite the fact that Jay still loved blue jeans.
Jay-Z’s Russian investors, to name names, were Alex Bize and Norton Cher. The Russians hooked Jay up with a Honduran sweatshop that paid children 8 to 15 cents an hour to sew all the Rocawear clothing.
The way the business world worked at that point was, you couldn’t compete against giant clothing companies like Ralph Lauren or Tommy Hilfiger unless you exploited the same child labor forces that they did. Children are also naturally better at the type of intricate sewing required to make clothing, because of their smaller hands. This is the often-understated reason why small children are so popular in sweatshops. Pregnant women sometimes suffice because they have dainty hands, although not as small.
In 2003, the Institute for Global Labor and Human Rights found that the factory producing clothes for Rocawear in Honduras was violating basic human rights, firing workers who tried to unionize, and firing pregnant women because their hands weren’t small enough. Jay-Z has never publicly commented on it, but I would imagine he privately told each Honduran worker to go fuck themselves.
It’s worth noting that the Rocawear factory also produced clothing for Puff Daddy/Diddy/P. Daddy’s clothing line, Sean John, which is a testament to how unoriginal rapper-endorsed clothing is. You could probably take a Sean John tracksuit and put the Rocawear logo on it, and nobody would ever really know the difference.
It occurred to me that I never really saw anyone wearing Rocawear clothing back in the day, which could be attributed to my living in the what’s technically the South. The only time I’ve ever seen clothes from Sean John or Rocawear has been at Marshall’s, because Hispanic people (myself included) would only ever buy rapper-endorsed clothing at a steep discount when it’s “out of season,” or if it somehow “fell off the back of a truck.”
I’ve also seen all types of South American people at the airport who come to Miami with empty suitcases, so they can buy lots of fancy American clothes to take back to their autocratic homelands where blue jeans cost $1,000. I have a feeling they don’t come to America to buy Rocawear.
Like he did with Roc-A-Fella Records, Jay-Z eventually sold Rocawear off to Iconix Brand Group in March 2007, for $204 million. Jay (or rather, his Israeli accountant) was clever enough to retain some equity in the company, such that he could still pull in a yearly salary of $1.5 million from the company.
Dame Dash wasn’t as fortunate, because he didn’t have any say in the sale of Rocawear — Jay-Z had bought out his stake in the company. One can only assume that Dame went home that night and started writing a list of music executives to kill while putting on lipstick, a la Steve Buscemi in Billy Madison.
2007 was also the year when the Humane Society discovered that the “faux” fur used in a $265 jacket sold by Rocawear was actually dog fur. The story came out a couple of months before Jay-Z sold off his ownership of Rocawear. I could only come up with three reasons beyond the obvious ones as to why Jay sold Rocawear with a quickness after it was revealed his clothing line was made from dead pets.
- One possibility is that Jay-Z had some sort of moral epiphany and realized that you can’t just do whatever the fuck you want in business and get away with it. This seems highly unlikely, because Jay once shot his cocaine-addled brother and then acted like he was the victim afterward. His moral compass works, but in the sense that it only ever points due south.
- Another possibility is that Jay-Z realized Rocawear sells a jacket for $265, and it was so grossly overpriced that he could no longer associate himself with the company. It’s not as if Jay couldn’t tell it was dog hair instead of faux fur. Jay knows real Gucci when he sees it, as it were.
- I’d speculate what actually motivated Jay-Z to sell Rocawear was his own paranoia. In all likelihood, Jay started thinking that the children down in the Honduran Rocawear sweatshops were killing their own pets, and then sewing their dead pets’ skins into Rocawear clothing as a way to send Jay-Z a message.
It’s like an industrialized version of that one scene in The Godfather, when Jack Woltz wakes up to find his prized racehorse’s severed head in his bed. Francis Ford Coppola said he got the horse head used in the film from a dog food company, probably the only type of company more nebulous when it comes to ethics than clothing companies. Regardless, I’m sure kids who work in sweatshops have probably seen and done worse things.
When Jay-Z sold off Rocawear, The New York Post reported that he had a contractual obligation to promote Rocawear’s products for some number of years after the sale. From what I can tell, the terms of Jay-Z’s Rocawear contract expired sometime in 2012.
Around November 2011, when college kids in America realized that people like Jay-Z own 99% of the country’s wealth, Jay officially announced his support for the “Occupy Wall Street” movement. Coincidentally, Rocawear began selling T-shirts with the words “Occupy All Streets” on the front at $22 a pop, as a show of support for the Occupiers. Jay himself wore the shirt at one of his New York shows during the “Watch the Throne” tour.
Rocawear announced the sale of the T-shirt on their website by asking customers, “What better way to show your support for the Occupy Wall Street Movement than with a dope tee?” The problem was, none of the money actually went to the Occupy Wall Street movement — it just went straight to Rocawear, which was still lining Jay-Z’s pockets.
It was a bit of a slap in the face to America, because it was so blatantly obvious Jay-Z was trying to get money on both sides of the table as a member of the 1%. But to his credit, he’s the only person who figured out a way of “supporting” the 99% by taking their $22 so he could add on a special room to his house, in which he could roll around on his big piles of money, Scrooge McDuck style.
The whole T-shirt debacle was going down while Beyoncé was knocked up with Jay-Z’s first-born daughter and future Bosley Hair Replacement spokesperson, Blue Ivy Carter. Just 3 days before the “Occupy All Streets” T-shirt was put up for sale, Media TakeOut and a bunch of other gossip blogs reported that Beyoncé had received a $5,200 baby bathtub covered in Swarovski crystals as a gift. It was an excellent example of how fucked up the minds of rich people are, in that they honestly think a newborn baby can tell Swarovski crystals from cubic zirconia, much less have the motor skills to bathe itself.
Then it came out that Jay-Z’s trying to fuck America over via T-shirt, and obviously the Occupy folks were none too pleased. It was insult to injury.
True to form, Jay-Z only made things worse during an interview with People magazine. The interviewer asked him how spoiled Blue Ivy was going to be, and if her diapers were going to be made of gold. Jay jokingly insisted they were going to be made of leather, but it came across in a way that you sensed he was only half-joking, and that after the interview some of America’s finest cattle might’ve been slaughtered inside the Rocawear offices to craft Blue Ivy’s diapers.
I could easily imagine Jay-Z walking around the Rocawear offices like Anton Chigurh in No Country for Old Men, taking an air-powered bolt gun to cows’ foreheads and indiscriminately scrambling their brains to make fine leather diapers for his daughter. He has the moral fiber to do it.
In the People interview, Jay-Z went on to talk about how much better he is than his deadbeat father, saying “I’m just a different kind of guy … I’m a highly principled person.” The copy of the interview that I found didn’t include any pictures, but I can only imagine that Jay was wearing an “Occupy All Streets” T-shirt the entire time.
Later on in 2012, the day before Blue Ivy was born, Jay-Z fired 28 of the 56 people dumb enough to still be working at Rocawear, for what was officially reported as “economic reasons.” It was more likely due to the fact that Rocawear’s sales were dropping by the double-digits since 2007, and Jay’s idea to rip off the Occupiers didn’t “move the needle” enough, to use business jargon. Or, perhaps Jay had received one too many shipments of dead pets from Honduran children, and the sale of Rocawear prevented the nervous breakdown of an otherwise worn-down “business, man.”
Either way, Jay-Z washed his hands clean of that Rocawear shit. At least he made some money from it. But was it enough money? Was there even such a thing for Jay?
No. To hold Jay-Z back, it would require millions in the form of a…
To quote another T-shirt that Rocawear sells, “Rappers lie, numbers don’t.”
Back in 2004, after selling Roc-a-Fella Records to Def Jam, the Tall Israelis appointed Jay-Z as president of Def Jam. Jay eventually stepped down in December 2007 because Universal Music Group, Def Jam’s corporate parent, was unable to offer Jay a “more lucrative contract,” according to one New York Times report.
Never mind the fact that Jay-Z is the guy who was trying to “retire” from the rap game around the start of 2004 and sold Roc-a-Fella for $10 million. He’s also the same guy who made a good chunk of $204 million from selling off a shitty rapper-endorsed clothing line, not even 3 months after stepping down as president of Def Jam. It stands to reason that Jay-Z commands a salary only the biggest investment banks can offer. A key difference, however, is that Jay-Z isn’t too big to fail, and his failures are much quieter and rarely noticed.
Since Jay-Z basically told Universal/Def Jam to go fuck themselves, he began courting new suitors to throw money at him. One of those potential suitors was Live Nation, which aside from being a legal monopoly that sells concert tickets is essentially a big venture capital firm.
The way venture capital works is, you go to a bunch of investors and tell them you have this amazing business that you’re ultimately going to sell off. A venture capital investor wouldn’t sweat spending a couple thousand to own 50% of a startup that sells repackaged versions of Cup Noodles with cocaine sprinkled in it, if he thought he could make at least $1 in profit from it. That’s because venture capital is predicated on the assumption that when investors put their money behind a business in exchange for an equity stake, the business will increase in value over time.
When a business gets sold, the investors get a cut of the money in proportion to their percentage of ownership/equity in the company. Since the business is presumably worth more than it was when they originally invested, an investor makes back his original investment and anything extra becomes sweet, sweet profit.
The problems with venture capital are that A) investors don’t really give a shit whether a given business does anyone any actual good; and B) accepting venture capital money means a business is whoring itself out from the jump, because its only reason for existing is so that it can sell itself later on.
Live Nation, aside from not knowing how to run a ticket-selling business that’s worth a damn, doesn’t know how venture capital works, either. This came to light around 2008, when Live Nation ended up trying to sign Jay-Z to the world’s weirdest record deal and formed a new venture called Roc Nation. All of this consisted of giving Jay $150 million, while Jay-Z had to split all profit from Roc Nation with Live Nation.
The New York Times had an article breaking down the accounting of the $150 million deal, but didn’t really offer any in-depth analysis. What follows is how the deal breaks down, along with my hard-hitting financial speculation. If you want actual facts, I suggest reading Zach O’Malley Greenburg’s book instead.
$25 Million: Upfront fee
A.K.A. the fair market price of Jay-Z. When you think about it, Live Nation valued Jay-Z as being worth a little over 4 Chief Keefs, which doesn’t say much about Jay-Z.
Even though Chief Keef has a more severe motor/speech disorder than Jay does, Live Nation’s upfront fee shows that they hold Jay in great esteem, but only up to a point. If all Jay-Z ever received from Live Nation was $25 million, the implication would be that Chief Keef is basically the Sam’s Club “Member’s Mark” version of Jay-Z. At least Interscope reserved the right to eventually drop Chief Keef like a bad habit in 2014 — it’s unclear whether Live Nation did the same.
$25 Million: Overhead for 5 years
Most businesses keep extra money in the bank for random expenses that come up, or in case they make some terrible screw-ups. This extra $25 million, though likely intended for such purposes, was probably just offered in good faith by Live Nation. There’s simply never been a good business case for giving a rapper more than $6 million outright, much less a living wage.
Live Nation already overpaid $25 million upfront for Jay-Z, so why all this extra money? I can only speculate. Maybe a White executive from Live Nation made a comment along the lines of Jay-Z’s breath smelling like catfish, and they were willing to do anything to salvage the deal at that point.
And who’s kidding who: the operating expenses for Jay-Z as a musician is likely in the tens of thousands of dollars. It’s not like paying for beats and studio time is all that expensive, if the horde of amateur rappers who struggle to make compelling music on the Internet is any indication.
Towards the end of 2014, it came out in a New York Times interview that RZA was going to end up losing $500,000 out of his own pocket from all the expenses involved in making the latest Wu-Tang Clan album, A Better Tomorrow. Given how shitty A Better Tomorrow ended up being, and the fact that way better rap albums had been recorded for substantially less money, it makes you wonder… There must come a point in rich rappers’ lives when they start spending larger and larger sums of money that they rationalize as some sort of “artistic sacrifice,” but that argument falls apart when the art they spent shedloads of money to make is unlistenable horseshit.
It’s almost as if some rappers think they’re obligated to spend every single cent of their advance money, despite the fact that the rap music business model has always been predicated on labels giving huge advances to hugely untalented rappers, then garnishing all the money the rapper makes in perpetuity.
It could be that producers are marking up their prices anytime Jay comes around shopping for beats, simply because they know he has the money. Really, how many times can Pharrell repackage what are basically the same beats he made for The Clipse all those years ago, but at a marked-up price?
And if Jay and Kanye recorded much of Watch the Throne in hotel rooms, how much time would Jay really be expected to spend in studios nowadays? Perhaps more importantly, should he even be allowed to spend time in studios?
$30 Million: $10 million-per-album advance, for 3 albums over 10 years
A bit more than the $20 million that RCA Records paid Diana Ross in 1981 which, when adjusted for inflation, is about $52 million in today’s dollars. The only reason she got such a big advance from RCA on the downslope of her career was because Motown would only give her $3 million, which was ostensibly the fair market price of a hit-or-miss Diana Ross.
With such a big advance per album, Live Nation is like RCA and is betting that each of Jay’s albums are going to sell well enough to recover the advance money and turn a profit — notwithstanding a marked decline in the quality of Jay-Z’s music, or the fact that more people stream music for fractions of a penny than actually buy albums.
Fun fact: streaming music service Pandora paid rapper/singer Aloe Blacc about $4,000 for 168 million song plays. I did the math, and that’s about $0.0000238 (.00238 cents) per song streamed.
Jay-Z would need to have his songs streamed about 42 billion times to make just $1,000,000.
And Jay wouldn’t even get a decent cut of that money, because it would all go towards paying back his advance first.
Put another way, if every person on Earth streamed just 6 Jay-Z songs, Jay would only have paid back 1/10th of his advance for a given album.
Nevermind that more recently, the only way Hov could make his album go Platinum was by working out some under-the-table deal to have Magna Carta Holy Grail pre-installed or available for download for “free” on Samsung phones. How it worked was, anytime someone got the album on their Samsung phone via free download or started up the album’s dedicated app, it somehow counted as a new unit being “shipped” as far as the RIAA was concerned.
Jay-Z might be better off pressing up a million CDs of his next album and including them in boxes of Honey Nut Cheerios so he can keep padding those “units shipped” numbers, lest he end up having his Social Security checks garnished to pay Live Nation back once he retires.
$25 Million: Advance money for “Heart of the City Tour” with Mary J. Blige
Since Live Nation paid so much money up-front to support Jay-Z’s tour in 2008, I’m guessing that’s why they had to charge $200 a seat on this tour to try to make their money back. It put Jay’s fans in a compromising position, because $200 could also get you a sweet pair of sneakers or a decent amount of drugs.
The tour actually kicked off in my hometown of Miami, but I was still in college making $8.00 an hour, so the concert ticket was a bit outside of my budget. At the time, I also had to consider that Jay’s most recent album was American Gangster, a concept album/pseudo-soundtrack nobody asked for based on the Denzel Washington film of the same name, and why would I want to hear that at a concert?
Jay-Z did 5 shows across the country as part of the “American Gangster Live” tour, in which he only performed music off of the American Gangster album. I’m not sure if the tickets for those shows cost any more than tickets for the “Heart of the City” tour, but I have a feeling they might’ve been an even bigger waste of money. Really, why would anyone in his right mind pay money to see Jay perform just 1 album in its entirety, if they can listen to it at home for free?
This question becomes even more pertinent when you consider that American Gangster is pretty much a repackaged version of Reasonable Doubt in a narrative format, and that it covers all of the same topics as before. Had Jay-Z perhaps warned me on the album about the upcoming 2008 financial collapse, that the banking industry is run by a bunch of cunts, and that I’d be earning $8.00 an hour for the rest of my college career, I would’ve been more willing to hear it all from him in person.
I’m not sure why Mary J. Blige was part of the “Heart of the City” tour, given that she and Jay only recorded 2 songs together over a 10-year period. I think Mary has gone on record as having done shedloads of cocaine, and Jay-Z would probably be the best person to tour with if you wanted to learn the best ways to score cocaine, so I guess it kinda makes sense.
The “Heart of the City” tour ended up grossing a reported $34.2 million, which is more than the $25 million Live Nation originally invested. I’m willing to bet that this figure was reported before taxes and didn’t include the cost of marketing the tour or dishing money out to a bunch of stagehand unions.
Also, Live Nation’s net profit margins have historically been kinda shitty, such that by 2014 the margins were around -1%. It might be because selling concert tickets is a business with incredibly shitty profit margins to begin with. Regardless, it’s likely that Live Nation actually lost money on this tour.
$20 Million: “Certain publishing, licensing and other rights”
Basically, Live Nation has to pray that Jay-Z’s music will make at least $2 million every year in royalties and licensing fees, for all 10 years that Live Nation has him making albums. This assumes that Jay can continue to write music that is compelling enough to be included in a movie or TV commercial. Since American Gangster went Platinum somehow, he can probably just co-opt a couple more movies to use as the “concept” for future albums.
$25 Million: Financing Jay-Z’s acquisitions and investments
This is probably the most dangerous amount of money that Live Nation gave Jay-Z. He’s bought and sold a small stake in the Brooklyn Nets just so he could design their uniforms, launched the Roc Nation Sports agency, and invested in the Barclays Center Arena. He tried to start up a hotel in New York, but he ended up having to give the land back because his development partner was intellectually challenged.
Jay-Z, prior to Roc Nation, had even tried to set up a deal where he’d get a royalty check for every Jeep Commander that was sold. It’s a testament to Jay’s business acumen — he’s such a good negotiator, he almost got a check for doing nothing. It’s not as if he fucking built the car, he just held a patent on some specific paint color that was used. In a similar vein, Roc Nation Sports is a subsidiary of Roc Nation that lets Jay-Z take a tiny percentage cut from athletes’ 8-figure contracts, in exchange for Jay doing… something, one assumes.
In sum, Live Nation bet $150 million that Jay-Z would make more than $150 million by 2018. As of this writing it appears that he has, because his net worth is about $510 million. The thing is, Jay’s net worth isn’t increasing in response to some spike in his music revenue—he’s just gotten better at investing.
I think it’s fair to say that Jay-Z’s embodiment of the American dream, going from rags to riches, is a major reason for his celebrity. It’d be one thing if people today were celebrating Jay-Z under the pretense that his music is still compelling. It’s another when people celebrate him for being stupid rich now and having a discography that was great for its time, and then buy $200 concert tickets to see him, because it tacitly supports his current mediocre musical output.
I’m just saying, Jay-Z has literally nothing left to prove musically, but he still has the opportunity to fuck more people out of their money and become exceedingly great at it. For all the struggling cocaine entrepreneurs that it empowers, rap music still needs at least 1 rapper who’s an actual “business, man,” to the extent that he doesn’t end up living off of dog food after his music career ends. Jay-Z might be that rapper.
Jay-Z Out of Joint is a serialized, unauthorized biography of Jay-Z. Chapters are published monthly.
Rob Stiles is the editor of HoobityBlah.com, a site dedicated to rambling commentary on hip-hop music, politics, and the plethora of amazing videos on the Internets. A person who hates his job, he spends time at work editing the Medium publication Strictly for the Heads, a collection of hip-hop music criticism, interviews and essays.
Keep up-to-date by following HoobityBlah.com on Twitter.
