Friday, October 29, 2010

Jay-Z's Empire 2010

The State of Jay-Z's Empire
He's worth an estimated $450 million and hobnobs with Bill Gates and Warren Buffett. How the Brooklyn-born performer has become the leading music impresario of his generation.

By JOHN JURGENSEN Wall Street Journal
OCTOBER 22, 2010

Jay-Z in a meeting at the offices of ad agency Droga5, the details of his book's elaborate, $1 million marketing campaign behind him.

Rolling through New York City in the back seat of his black Maybach, Jay-Z touches a button to let more light through the translucent roof, then tugs back a window curtain to peek out at the rainy streets of his hometown. The rapper went from a Brooklyn housing project to a top corner office near Times Square, a path traced in "Empire State of Mind," his anthem to the city that has taken a place next to Sinatra's.

At age 40 and still rapping, Jay-Z inhabits the rare zone where cultural cachet and corporate power meet. He's had partnerships with Hewlett-Packard, Coca-Cola, Budweiser, Reebok and Microsoft. Forbes magazine put him on the cover of its current 400 "Richest People in America" issue, even though at $450 million he was only "on his way" to cracking the list ($1 billion was required this year). He's posted more No. 1 albums on the Billboard 200 list than anybody but the Beatles, has won 10 Grammy awards and sold 45 million albums.

He's using his clout to rewrite some industry rules. His music company hedges the unpredictable business of music sales against steadier revenues from music publishing, artist management and touring. The company, Roc Nation, was created out of a $150 million, 10-year, profit-sharing deal with concert giant Live Nation, which has made bets on acts such as U2 and Madonna that are similar, though narrower in scope.

Jay-Z's ventures include an ownership stake in the New Jersey Nets; a sports-bar chain called the 40/40 Club and a Greenwich Village bistro, the Spotted Pig; creative and operational control of the Rocawear clothing line that he sold in 2007 for $204 million; and the Carol's Daughter beauty line he co-owns.

In the early days of his entrepreneurship, there were awkward exchanges with white-collar guys trying to relate. "In the beginning it was ' 'Sup, man!' " he says in his soft speaking voice. "But at this point, it's pretty much accepted that I walk both worlds naturally."

And yet, he chafes at the lack of respect for a genre that some people still dismiss wholesale because of ugly words and violent imagery. When he shares strawberry malts with Warren Buffett, confers with the president, or even vacations in St. Tropez, he does so on behalf of "the culture," he says, by which he means hip-hop.

Now, to state his case more clearly, the rapper born Shawn Carter has turned to prose. His first book, "Decoded," to be published Nov. 16, is a hybrid of music history, social commentary and memoir, with an emphasis on his transition from the crack trade to the music business. The 336-page book is structured around the lyrics to 36 Jay-Z songs, each footnoted to unpack his allusions, slang and double entendres. This couplet, "No lie, just know I chose my own fate/I drove by the fork in the road and went straight," is explained in footnote 16 to the song "Renegade": "I went straight—stopped selling drugs—but I also didn't accept the false choice between poverty and breaking the law." Microsoft put up about $1 million for the marketing of the book

He had rejected proposals to write a conventional business-strategy book. "Our ambition was never to just fit into the corporate mold, it was to take it over and remake that world in our image," he writes in a footnote to "Operation Corporate Takeover," a song that rhymes "reverse merger" with "no need to converse further."

The book deal follows his classic playbook. He maintains tight creative control of the project, but often connects with deep-pocketed corporate partners. Companies hope to borrow some of the rapper's glow, of course, but he has also used such deals to shape his own public image.

In 2005, Jay-Z completed an autobiography with writer Dream Hampton. But he felt that the memoir, tentatively titled "The Black Book," revealed too many personal details. "It was great, but I couldn't do it," he says. He shelved it, reimbursing publisher MTV Books for the advance paid to Ms. Hampton (who later helped with "Decoded").

Last year Jay-Z signed with Random House. Editor Christopher Jackson had some initial doubts about the proposed concept, an annotated book of lyrics, but in their first meeting, he says, the rapper fleshed out a broader context of rap as poetry and "a story of choices made." (That format allowed Jay-Z to dip into memoir while guarding intimate details, such as his marriage to singer Beyoncé Knowles, who is barely mentioned in "Decoded.") In meetings, Jay-Z also specified what the project would not involve, including a celebrity book-signing at a Barnes & Noble. "It's a very efficient way to sell a lot of books and it would have been a huge event, but he was completely uninterested in that," Mr. Jackson says.

Jay-Z is careful not to overexpose himself. "He'll decline something based on his gut, then he'll tell me, 'If that play's big, watch the bigger play that comes because I said no,' " says Kevin Liles, a marketing executive and friend. Last year, when influential radio station Hot 97 had new Jay-Z songs in heavy rotation, Jay-Z declined an invitation to headline the station's high-profile Summer Jam concert. He was clearing the decks for his own Madison Square Garden concert (and TV simulcast) on Sept. 11, which benefited 9/11 charities.

On the cover of the book, the golden tentacles of a "Rorschach" print by Andy Warhol dwarf the rapper's name, tucked into a corner. He vetoed an early mock-up from his publisher that splashed "Jay-Z" across the cover in bold type. "It always starts like that," he says in the car, wearing jeans, a gold Rolex and loose-laced Timberlands. "I'm not trading on my name; I'm trading on the work."

The Microsoft-funded marketing campaign for "Decoded" is markedly ambitious. The company's Bing search engine is used in a kind of treasure hunt: Some 50 outside partners were recruited to help place book excerpts on everything from billboards to hamburger wrappers in about 300 locations cited in the text, including Miami and London.

Jay-Z has had an informal relationship with Microsoft going back to 2006, when he joined Bill Gates and Steve Ballmer at a conference, discussing the future direction of entertainment. Bing specifically has co-sponsored two of the most recent "Two Kings" dinners that Jay-Z hosts with LeBron James during the NBA's All-Star festivities.

Jay-Z's music career began in 1996, when no major labels wanted to sign the 26-year-old local rapper. He and two partners formed an independent label, Roc-A-Fella Records, by necessity. That move eventually strengthened his bargaining position. Mr. Liles, who was an executive at the iconic rap label Def Jam, recalls Jay-Z declining an offer of a traditional signing deal. "He looked at me and said 'I own the company I rap for.' " Instead, Roc-A-Fella entered a joint venture with Def Jam.

In 2005, Jay-Z took the job of president and CEO of Def Jam while rival labels courted him. What clinched the deal with the label—by then owned by Universal Music Group—was a contract clause giving the rapper full ownership of his past recordings for Def Jam. These rights revert to him starting in 2014.

"I'm happy about it," he says now. "But when I think about it, it's something I shouldn't even have to ask for. It's mine, I created it."

By the time he left Def Jam in 2007, he had begun quiet negotiations with Live Nation for his next move. To diversify its concert promotions business and compete more directly with record labels, the company had previously signed U2 and Madonna to long-term contracts that cut Live Nation in on revenue sources such as merchandise and music licensing, in addition to touring.

Jay-Z's deal goes further. With financing from Live Nation that included about $25 million up front and $5 million annually in overhead, the rapper started Roc Nation, an umbrella for his own output and an incubator for new talent. In exchange, Live Nation shares in all new business done by Roc Nation. That ranges from a percentage of potential "Decoded" earnings to publishing revenue from the songwriter Philip Lawrence, a Roc Nation signee who has had two No. 1 songs this year, including "Just the Way You Are" by Bruno Mars.

Like many in the industry, Jay-Z is trying to wean himself off a reliance on selling recorded music. His company has released only one album, his own "The Blueprint 3" in 2009. "It's been two years since the Live Nation deal and I haven't put out one artist," he says. "But right now Roc Nation is profitable because we manage [artists] and we have a publishing company." He says such ancillaries buy the company to time to shape the musicians on its roster, including rapper J. Cole and singer Willow Smith (the 9-year-old daughter of actors Will and Jada Pinkett Smith). "We don't have to rush out records that don't work for the sake of making money," he says.

Even as he represents hip-hop, his Live Nation deal compels him to move beyond that genre. In the last two years, he crossed over to headlining major rock festivals, including England's Glastonbury and Coachella in Southern California. Among the artists that Roc Nation manages are U.K. rock band the Ting Tings, producer Mark Ronson and, as of this week, Rihanna.

Many of Jay-Z's brand partnerships, including with Reebok and H-P, have been funneled through the marketing firm he co-owns, Translation. "It allows him to circumvent the agency process in most instances with someone he can trust," says Translation founder Steve Stoute.

Jay-Z typically bargains for a degree of creative control and long-term partnerships rather than one-offs: his deal with Reebok, when he became the first non-athlete to have a sneaker line with the company, lasted about four years. He has used such deals to shape his own public image. In 2006, he was hired to star in and help craft the campaign for Budweiser Select. Earlier that year he had lashed out at the makers of Cristal Champagne after an executive made remarks about rappers drinking Cristal that Jay-Z interpreted as racist. Through the Budweiser deal, he was "shattering that Champagne myth." He says it wasn't uncommon for radio stations to serve him chilled bottles of bubbly during morning promotional visits. "It's 10 in the morning! I don't drink champagne all day, every day." Looking back, however, he says Budweiser might not have been the best match. "A beer commercial? That was pretty much on the line for me."

In his office, by a coffee table stacked with art books (Damien Hirst, Ed Ruscha), his Forbes magazine and a humidor, he perches on the edge of a chair with his fingers tucked into his pockets. He says he'll always rap about variations on the same themes: drug hustling, business boasts, luxury hopscotching from Gucci to Louis Vuitton to the new Dior suit he says is a perfect fit. They're all narrative devices:

"I'm just describing a scene, but the crux of the story is the message. Almost like a movie. Setting: South of France. This is what's happening. This guy from out the projects who didn't graduate from high school is now living this sort of life. And this is how he got here."


Just Asking: Decoding Jay-Z
In a new book, the rapper and entrepreneur breaks down his breaks.

By JOHN JURGENSEN Wall Street Journal
OCTOBER 21, 2010, 7:39 P.M. ET.

With music, clothing, advertising and other ventures already under his belt, rapper Jay-Z is about to release his first book.

"Decoded," co-written with Dream Hampton, looks at his life and the evolution of hip-hop culture through the lens of his lyrics. More than 30 of his songs, parsed and footnoted, frame the chapters on everything from his peers, including Notorious B.I.G., to the crack-dealing he left behind for music.

Among other businesses, the rapper, born Shawn Carter, operates Roc Nation, a company that encompasses recording, music publishing and artist management. Roc Nation is a byproduct of a 10-year, $150 million, profit-sharing deal Jay-Z struck with concert giant Live Nation. Here are excerpts from an interview with Jay-Z in his office.

WSJ: A lot of musicians claim to never go back and listen to their old material, but you obviously took some joy in digging back into your archives for "Decoded."

Jay-Z: I believe that it's necessary. Especially for rap music, where the words are fast and for the most part there's not a consistent melody that people can sing along to. So a lot gets lost in translation. Because rap music is poetry, I thought it was important to describe it as such.

WSJ: You're famous for not writing your lyrics down as you compose them. What changes about them when you see them on the page like this?

Jay-Z: Some [lyrics] become really profound when you see them in writing. Not "Big Pimpin." That's the exception. It was like, I can't believe I said that. And kept saying it. What kind of animal would say this sort of thing? Reading it is really harsh.

WSJ: This book puts a frame around your career. When did you really start thinking about how you wanted to present your legacy?

Jay-Z: You think about legacy before you even start. When a kid is practicing on the basketball court, it's "5-4-3-2-1 and the crowd goes crazy!"

As you start realizing your dreams and it's tangible, you think about it in a real way. But I think that emotion happens from the beginning, from record one.

The legacy, I think about that as I make the music, all the time. How can I make the best album of all time? You always fail. But every time I go up to bat, I'm thinking how can I make an album better than "Thriller."

WSJ: I've talked to some of your friends who say that when you guys make personal career decisions, you're taking into account how the decisions will move hip-hop culture forward overall. Can you give me an example?

Jay-Z: For us, this is the music that saved a generation. So there's a big responsibility for those who it saved to make sure that thing is intact for the next generation. We're the first generation that really took advantage of it, starting with Puff [Daddy] and Master P, guys who really made a name and became successful as entrepreneurs.

Even more than that, when you're under attack so much as a genre [as hip hop is], you're forced to come together. But probably the last time we really came together on something was working for Obama, lending our voice and the people we had toward that campaign. Whether he does a great job or not is almost secondary to what it did for the dreams and the hopes of an entire race. Just based on that alone, it's a success, the biggest we've had. Period. To date. It's Martin Luther King's dream realized. Tangible. In the flesh. You can shake his hand.

WSJ: What would you change about hip-hop if you could?

Jay-Z: We have to find our way back to true emotion. This is going to sound so sappy, but love is the only thing that stands the test of time. "The Miseducation of Lauryn Hill" was all about love. Andre 3000, "The Love Below." Even NWA, at its core, that was about love for a neighborhood.

We're chasing a lot of sounds now, but I'm not hearing anyone's real voice. The emotion of where you are in your life. The mortgage scandal. People losing their jobs. I want to hear about that.

WSJ: How did the conversation begin with Live Nation to do a profit-sharing deal?

Jay-Z: It happened at a time when I was looking for a different approach to what the music business was going to look like in 10 years. There's a big variable on the equation. I was at the end of Def Jam and I was already preaching that idea to them. [I said] why don't you give me a fund? Let me go out and acquire things. It would take the relief off of having to have a hit [song]. These things could help generate revenue while we found and developed great artists, which is the model I'm doing now.

It's been two years since the Live Nation deal and I haven't put out one artist. But right now Roc Nation is profitable, because we manage and we have a publishing company.

WSJ: What were your own priorities going into that partnership?

Jay-Z: Records are covered, we can make records in our sleep. Live Nation's specialty is touring. So we came up with a plan to put together a touring schedule that would make this thing profitable. We really concentrated on building that profile. Playing [rock music festivals like] Glastonbury, Coachella.

There are certain posts I've always had on the bulletin board: Madison Square Garden. Yankee Stadium. Central Park is the next one. If we walked up to the Yankees cold, without Glastonbury, without Coachella, without those things under our portfolio, I don't know if Yankee stadium gets done.

WSJ: What's the most important decision you made along the way to help keep your career in your own hands?

Jay-Z: We got lucky. In the beginning we couldn't get a deal. We had to work our own records in the beginning. It gave us a different way to negotiate when we came to the table. Most people get excited and take the first deal they're offered. We had a little bit of success already, so we were stubborn enough to think that we could really do it at that point. They offered us a deal and we asked for a co-venture. That pretty much ensured that we'd have control from the beginning, from album one.

WSJ: Will the artists on your record label own the music you release?

Jay-Z: I'll give them the chance to get it back. That's only fair.

WSJ: You don't hand out awards. Are there other things you say no to automatically?

Jay-Z: That doesn't have anything to do with building the myth. I'm just uncomfortable speaking. I can do a stadium show for two hours and I'm in my comfort zone. But if you look at any of my acceptance speeches they're maybe seven seconds. I want to get off the stage.

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