The Economic Machine Behind Hip-Hop

October 5, 2010  |  

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

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

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

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

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

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

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