Decades ago, Ray Charles, as the biopic of the musical genius showed, knew that if he couldn’t control the business of his music he couldn’t control his income. Today hip-hop moguls use mother wit, experience, creativity and obsessive drive to influence the buying decisions of roughly 100 million members of hip-hop America who possess billions of dollars in disposable income.

That may offend rap purists who believe that in the late 20th century, Afrika Bambaataa, a hip-hop godfather, was more about the party than the money he got after it. But the reality is that hip-hop as lifestyle and business is a seamless fused entity.

Hip-hop entrepreneurs like Russell Simmons and Sean “P. Diddy” Combs, are a new type of businessman. They know that historically black entertainers, who were unable to control the value of their talent, were underpaid or robbed.

But they live in a crossover world where the primary color is green. Consequently they get business opportunities that their entertainment forebears could never conceive.

The Johnny (R)appleseed of hip-hop lifestyle, who spread its influence from cities to suburbs to exurbs, of course, is Russell Simmons. He laid out a business plan that younger hip-hop chieftains follow while adapting it to their particular strengths.

The goal is to use one’s skills to gain power and build capital -- not just an income -- in the $10 billion hip-hop industry. First, you must own or control the music you or your employees create. Then, only cut deals or accept partners if you hold a decisive stake in the deal, receive fees or earn royalties from it.

Finally you must: exploit the desire of corporations to use the hip-hop lifestyle to sell a million products and services; forge strategic business alliances but never give up your stake until you are ready to sell it dearly; and use that cash for your next venture.

Simmons’ story set the pattern. In the mid-1980s he co-founded the superstar label Def Jam Records. Its value skyrocketed after he cut a 50-50 revenue deal with Sony, and in 1999 he made $100 million selling his part to Seagram Universal Music Group. In the intervening years, Simmons delved into television and film, and he founded Phat Fashion, from which he earned $140 million when he sold it in 2004.

Simmons, 47, the head of Rush Communications, which has music, film and fashion units, also has other passions including politics and civil rights. And in May, he unveils a video series blending yoga and hip-hop. Before you scoff, recall that this man united Run DMC and Aerosmith in the megahit, ‘Walk This Way.’

Meanwhile, although saying so will start arguments, Sean “P. Diddy” Combs is Simmons’ most logical successor. (Fans of multi-talented Damon Dash, CEO of Roc-A-Fella, who I will write about another time, will strongly disagree.) It is true that P. Diddy, the 35-year-old hip-hop dervish, isn’t admired for his rapping and critics note that his musical stable is pretty bare of hits.

But the CEO of Bad Boy Worldwide Entertainment Group, which has $315 million in annual revenues, uses the hip-hop lifestyle to reap mainstream riches masterfully. Most of the cash flows from his Sean Jean clothing line but smaller income streams come from the music arm, his restaurants, films, and a marketing company.

Combs, who began his career at 19 with Uptown Records, has a knack for picking what sells. Recently he spoke his involvement in two totally different businesses that are linked by hip-hop. One is a line of custom-made, aluminum spinning car rims retailing between $2,800 and $12,000 for a set of four. The second, for folks with slimmer wallets, is a deal to provide music to their cell phones wirelessly.

And Diddy being Diddy, he plans to charge more than $1 a song and expects to get the lion’s share of any revenue split with cell phone firms. The tricky part for Bad Boy, of course, will be making music that folks are willing to pay for.

About the Author
Frank McCoy is a business writer living in the Washington, D.C area.