Published on July 10th, 2013 | by Lydia Brooks0
5 Biggest Business Deals in Hip-Hop History
Ever since Run-DMC inked their first endorsement deal with Adidas back in 1986, hip-hop artists have become major players in the business world. Today, thanks to trailblazers like Russell Simmons and Jay-Z, rappers are setting the bar higher than ever before by starting their own companies and signing profit sharing deals with multinational corporations. Here’s a run-down of the five deals that have had the biggest impact on the world of hip-hop to date.
#5 – 50 Cent’s $100 million Vitamin Water Acquisition
Beverages are big business in the world of hip-hop these days.
In addition to Diddy’s deals with Cîroc and AQUAhydrate, hip-hop’s roster of drinks moguls also includes the likes of Jay-Z, Lil Wayne, and Beyoncé.
In 2006, Jay-Z became co-brand director for Budweiser Select when he signed a deal with their distributor Anheuser-Busch. Later, in 2012, his wife Beyoncé signed a $50 million contract with Pepsi, which includes a “fund to support the singer’s chosen creative projects.” That same year, Lil Wayne also landed a multi-million dollar endorsement deal with Pepsi as a spokesperson for Mountain Dew.
But before these deals were even on the table, 50 Cent paved the way with his Vitamin Water investment.
In 2004, 50 Cent became the first rapper to break into the bottled water business when he became a partial owner of Glacéau, the company that makes Vitamin Water.
Three years later, Coca-Cola bought Glacéau for $4.1 billion.
As a major shareholder, 50 Cent was entitled to a major payout. Estimates of his take-home have ranged from $60 to $400 million, although business experts have now pinpointed his earnings at somewhere around the $100 million mark after taxes.
#4 – Diddy’s Multi-Million Dollar Drink Deals
Diddy just might be the world’s biggest dealer of clear liquids.
His first major beverage deal came in 2007, when he took over the Cîroc vodka brand from British drinks giant Diageo. The deal set a new standard for hip-hop endorsements as, rather than simply agreeing to hawk the brand for a pre-determined payout, Diddy signed a 50-50 profit sharing deal with Digeo. This meant that the more vodka Diddy sold, the more money he would make.
So far, Diddy has not disappointed. In 2007, Cîroc was a failing brand that was losing out to competitors like Absolut and Grey Goose. But since Diddy took over, the brand’s sales have grown by over 600%, and Cîroc has become one of the biggest vodka brands in the world today.
Diddy’s bank account has also fared well thanks to this deal. Because the deal involves profit sharing, Diddy’s share of the pot continues to grow as the brand does. Today, Forbes estimates that Cîroc sales account for the largest single portion of Diddy’s annual income.
And if that wasn’t enough, Diddy decided to take on another transparent liquid deal, this time in the form of bottled water. In 2013, Diddy agreed to lead promotions for the new bottled water brand AQUAhydrate along with Mark Whalberg and AQUAhydrate CEO John Cochran.
There’s no word yet on what this new deal has netted him, but Diddy is reported to be a major shareholder of AQUAhydrate, which means that this deal could turn into another huge moneymaker for him.
#3 – Russell Simmons Sells Phat Farm for $140 million
The story of Phat Farm is a story that almost never was.
When Def Jam co-founder Russell Simmons started Phat Farm in 1992, no one wanted to buy his clothing. It took years of pumping his own money into the brand to finally bring Simmons any success.
Ironically, it was not Simmons’ business sense, but his wife’s, that saved Phat Farm.
In the early 00′s, Kimora Lee transformed the Baby Phat line of infant clothing into a full-fledged young women’s brand, including accessories, eyewear, and fragrances. Soon afterwards, sales began to skyrocket for the whole Phat Farm family, and Simmons was quick to profit.
In 2004, Simmons capitalized on Phat Farm’s newfound success by selling the brand to the Kellwood Company for $140 million.
This was a huge payout for Simmons, and also a huge landmark in the hip-hop business world. Not only was it the biggest sale of a single hip-hop asset to date, it also marked the beginning of a new era in hip-hop, where private business ventures surpassed record sales as the biggest way to make money.
#2 – Jay-Z Sells Roca Wear rights for $204 million
The sale of Jay-Z’s Roca Wear fashion empire involved many big winners and only one big loser.
The biggest winners in this case were Jay-Z and his Roc Nation partners, who took home $204 million in 2007 for the sale of Roca Wear. The loser was the man who helped to build Roca Wear into the brand it is today – Jay-Z’s former business partner and Roc-A-Fella Records co-founder Damon Dash.
Dash and Jay-Z founded Roca Wear in 1999, and it soon became one of the leading urban street wear brands of the early ’00s. And while it was Jay-Z who initially put the brand on the map, it was Dash who was ultimately responsible for its mainstream success.
Throughout the first decade of the 21st Century, Dash built up the Roca Wear brand by bringing in celebrity endorsement deals and pushing the clothing line through major retailers. Eventually, Roca Wear was taking in upwards of $700 million annually.
But when the relationship between the two Roc-A-Fella founders turned sour, Jay-Z ended up with the upper hand. Although he gave Dash a $30 million payout for the sale of Roca Wear and Roc-A-Fella, Jay-Z won out in the end by holding on to the ownership rights of both companies.
A few years later, Jay-Z’s perseverance paid off when the Iconix Brand Group paid him $204 for Roca Wear. The $30 million payout to Dash was now no more than a drop in the hat compared to the sum Jay-Z ultimately took in.
#1 – Dr. Dre’s $300 million Beats Deal With HTC
In 2006, Dr. Dre made a daring decision. He agreed to partner with Interscope CEO Jimmy Iovine to promote a new line of headphones built by a no-name electronics company called Monster. Little did he know that this would be the best business decision he would ever make.
The technology behind Beats was invented by Monster, but when Dre and Iovine came on board, the product line was rebranded with Dre as the lead spokesperson.
In a twist of fate, Monster eventually lost control of their own brand, but held on to the task of developing and manufacturing all Beats products. This was good news for Dre and Iovine, who became the majority owners of Beats, with a small stake reportedly belonging to Universal Music Group.
Over the next five years, Dre and Iovine made Beats the biggest headphone brand in the music business, thanks to endorsement deals that included signature products from big-time rappers like Lil Wayne, Drake, Nicki Minaj, and Swiss Beatz.
Many have speculated that Dr. Dre now takes in more annual income from headphones than he does in record sales.
In 2011, with Monster almost completely out of the picture, HTC paid out $300 million in exchange for 51% ownership of Beats.
This made HTC the majority shareholder, but let Dre and Iovine each hold on to a stake in the company. Experts have estimated that the amount from the deal going into Dre’s personal coffers could have been as much as $120 million.