DailyFinance.com

Jay-Z Captures Hip-Hop's Cash Crown

Zack OMalley Greenburg — Tue, 17 Aug 2010 22:15:00 EST

Filed under: People

According to a report released by Forbes earlier Tuesday, rapper Jay-Z racked up $63 million over the past 12 months, earning the top spot in the publication's ranking of hip-hop's cash kings for the second year in a row.

Almost Double Last Year's Paycheck

Jay-Z's payday marked an 80% increase from last year, when he pulled in $35 million to top the Forbes hip-hop list. Diddy's $30 million was even with last year's figure. Third-ranked Akon edged up from $20 million in 2009 to $21 million in 2010 on the strength of his Kon Live record label and World Cup ad campaign for Pepsi (PEP), while fourth-ranked Lil Wayne toured his way to $20 million, up from $18 million, despite landing in jail last March.

On the whole, hip-hop's top 20 earners banked $300 million in 2010, same as last year, despite a creaky world economy and a floundering recording industry.

The majority of the top earners are the ones who've diversified their revenue streams beyond music, launching clothing lines (Jay-Z's Rocawear, Pharrell's Billionaire Boys Club, T.I.'s Akoo), alcoholic beverages (Diddy's Diageo (DEO) joint venture, Ciroc, as well as Lil Jon's liquid ventures, Little Jonathan wine and Crunk!!! Energy Drink) and electronics (Snoop Dogg's Skullcandy headphones and Dr. Dre's Beats by Dre ear buds).

Outside Investments

Forbes compiled its list by interviewing sources within the music industry, including lawyers, media buyers, record label executives and some of the artists themselves, and by gathering data from providers like Billboard, Pollstar, Nielsen SoundScan and the Recording Industry Association of America. (See the full list here.)

Jay-Z could have made even more this year on another of his own outside investments -- a stake in the New Jersey Nets basketball team -- had the LeBron James sweepstakes turned out differently. The rapper lost out on a windfall of about $5 million that would have occurred had James signed with the Nets. Perhaps Jay-Z can understand one reason James went to Miami: There's no personal state income tax in Florida.

Disclosure: Greenburg, a freelance writer, authored both the Forbes report and this DailyFinance article concerning it.

Permalink | Email this | Comments

Why LeBron's Choice Could Cost Jay-Z Over $5 Million

Zack OMalley Greenburg — Fri, 09 Jul 2010 00:10:00 EST

Filed under: Media, People

LeBron James' decision to sign with the Miami Heat means the Chicago Bulls will miss out on a franchise player to rival Michael Jordan, the New York Knicks will do without a partner for Amar'e Stoudamire, and the Cleveland Cavaliers will lose its brightest star since Jim Brown.

It will also cost music star Jay-Z (at right in the photo, with LeBron) about $5.25 million.

The hip-hop mogul owns a 1.5% share of the New Jersey Nets, one of the five teams spurned by James. Over the past few months, rumors swirled that James -- a close friend of Jay-Z -- was giving serious consideration to joining the Nets. There, he'd become the face of a franchise slated to move to Brooklyn in two years.

Nets Value Could Have Jumped

Russian billionaire Mikhail Prokhorov's recent purchase of an 80% share of the Nets puts the team's value at $250 million, which means Jay-Z's stake is worth $3.75 million. Had LeBron signed with the Nets, the franchise's value would have more than doubled -- taking Jay-Z's stake along for the ride.

"The Nets' value with LeBron could have exceeded $600 million in two years," says Marc Ganis, president of Chicago-based consultancy SportsCorp. "The key reasons are tremendous additional inventory -- lots of available seats -- the new Brooklyn arena, re-branding and positioning of the team, new international ownership, and the largest market in the country."

Instead, James will open the 2010-2011 season in Miami, flanked by Dwyane Wade and Chris Bosh. Forbes estimates that the signings will bump the value of the franchise from $364 million to $400 million. A nice jump for owner Mickey Arison, but nothing compared to the impact James could have had on the value of the Nets.

"No team would increase in value more than the Nets if LeBron had signed with them," says Ganis.

Though Jay-Z may have lost out on a chance to pick up an extra $5.25 million dollars, Prokhorov is the one who left more money on the table. His 80% stake in the Nets would have swelled to $480 million, by Ganis' math.

Biggest Impact on Cleveland

Individual losses aside, the most devastating impact of James' move to Miami will be felt by an entire city.

"His greatest financial impact to a team would have been on the Nets," say Ganis. "But his greatest financial impact on a community will be on Cleveland."

Permalink | Email this | Comments

What's in a Name: Former Drug Trafficker Ricky Ross Sues Rapper Rick Ross

Zack OMalley Greenburg — Sat, 26 Jun 2010 13:20:00 EST

Former cocaine kingpins have plenty to worry about: getting out of prison, finding gainful employment, dodging vengeful rivals from their previous lives. Apparently, brand protection is another.

Infamous drug trafficker Ricky "Freeway Rick" Ross is suing rapper William "Rick Ross" Roberts, Universal's Def Jam music label, and former Def Jam President Shawn "Jay-Z" Carter for alleged violations including trademark infringement, misappropriation, unfair competition, fraud and unjust enrichment, among others. The lawsuit demands $50 million in damages.

'Acted in Bad Faith'

"My client established the name for over 25 years, and William Roberts has and had no right to use the name, but he did, with the assistance of Def Jam, Universal and Jay-Z," says Melvin Sharpe, Jr., one of Ross's attorneys. "Since my client was in jail, they took unfair advantage and they all acted in bad faith and willfully violated my client's rights."

According to Sharpe, the U.S. Patent and Trademark Office refused Roberts's request to register "Rick Ross" as his rap moniker. When then-President Jay-Z signed Roberts to Def Jam, the label didn't clear the use of the name. Roberts' first two albums, Port of Miami (2006) and Trilla (2008), went on to sell over 500,000 copies apiece, and the rapper raked in $6 million last year, according to Forbes.

In addition to hefty financial considerations, Ricky Ross's lawsuit demands that Roberts's next album -- Teflon Don, scheduled for a July 20 release -- be put on hold until the case is decided.

Representatives for Roberts, Jay-Z and Def Jam/Universal Music declined to comment on the matter.

Building a Brand

Street credibility is a valuable asset, and Ricky Ross may be the first former drug trafficker to attempt to use the U.S. court system to assign it a price tag. Whether or not a name can be defended by the same set of laws broken to build it remains to be seen, especially in the case of such a prolific criminal.

Ross was the premier distributor of crack cocaine in Los Angeles and beyond during the 1980s, thanks largely to his connection with CIA-linked supplier Oscar Blandon. Ross claims he often moved $2 million to $3 million of crack per day. "Our biggest problem had got to be counting the money," Ross told the San Jose Mercury News in 1996. "We got to the point where it was like, man, we don't want to count no more money."

Ross landed in jail after Blandon allegedly set him up, and was initially sentenced to life without parole in 1996. The Federal Court of Appeals later reduced Ross's sentence to 20 years. He was released for good behavior in 2009.

Corrective Measures

While the real Ricky Ross was finishing up his sentence, rotund rapper Roberts was busy denying reports that he'd spent two years in the slammer -- as a corrections officer. After The Smoking Gun dug up proof, Roberts admitted that he had indeed spent two years as a prison guard. The episode sparked jeers from fellow rappers including Curtis "50 Cent" Jackson and U.K. artist Kareem "Lowkey" Dennis, who referred to Roberts as "the fat cop in fake glasses."

The authors of Ross's lawsuit are now contributing a few swipes of their own. "This case is a classic case of Roberts's art imitating Rick Ross's life," says Sharpe. "The defendants commercially benefited from it to the tune of millions of dollars, when the trademark office officially said they can't use the name."

Attorneys outside of the case remain skeptical, noting the "Son of Sam" laws established in New York to prevent serial killer David Berkowitz from landing a lucrative tell-all book deal in the late 1970s. Though the original law was eventually overturned on first amendment rights, similar statutes have been enacted in other states.

Copycat Lawsuits Ahead?

"Setting aside the trademark ramifications of [Ricky Ross's] lawsuit, which could go either way, the equities of this case do not, in my opinion, tilt in [his] favor," says Bernard Resnick, a veteran entertainment lawyer. "Whether or not the judge agrees that singer Rick Ross and his record company have infringed the convicted drug kingpin's alleged trademark, I expect the judge to be hesitant to order millions of dollars be paid because it would embolden all kinds of inmates with ample time on their hands to bring copycat lawsuits."

Kevon Glickman, an attorney who once worked with Roberts, agrees that Ross's lawsuit will be a tough sell. "A critical element in determining whether one name infringes on another name is whether the public would be confused as to the source of the competing goods or services," says Glickman. "I don't think that the public is, or would be, confused as to which Ross is the rapper and which one is the rehabilitated convicted felon."

If Ricky Ross does win his case, it could also spur more lawsuits against artists who've taken the names of underworld celebrities. First in line might be rapper Leslie "Freeway" Pridgen, whose moniker was also inspired by Ross.

The aforementioned 50 Cent, who cribbed his nickname from Bronx-born stick-up artist Kelvin "50 Cent" Martin, needn't worry: The original 50 Cent met a grisly demise in a New York stairwell nearly 15 years ago.

Permalink | Email this | Comments

The Crunk Life: Rapper Lil Jon on How He's Creating a Diversified Portfolio

Zack OMalley Greenburg — Fri, 14 May 2010 18:45:00 EST

Filed under: Small Business, People

Rapper-producer Jonathan "Lil Jon" Smith is best known for turning everyday words like "yeah" and "okay" into bloodcurdling sonic extravaganzas. He's crafted hits for the likes of Usher and Ludacris; his first solo effort, Crunk Rock, will hit stores on June 8. But given the state of the recording industry, he's focusing more on a concept that doesn't lend itself to his trademark exhortations: diversification.

Lil Jon's non-music revenue streams include a line of Oakley sunglasses, an energy drink and a wine label. On a recent visit to the DailyFinance studios, Jon estimated that these ventures account for nearly a third of his annual earnings, which total an estimated $11 million, by Forbes' last count.

"The products start to really take off when I have an album out because I'm on TV more," he says. "Definitely [the non-music revenues] will come up a little more in this album cycle. Who knows, maybe it will get to 50-50."

There's never been a better time to diversify. Last year, album sales fell 12.7% across the music industry and 20.9% in the rap category, according to in Nielsen SoundScan. This decade, industry-wide album sales have plummeted from 800 million in 2000 to 400 million in 2009.

Building a Beverage Empire

Lil Jon's most successful business venture is his Crunk!!! Energy Drink, which allowed him to tap into a familiar lifestyle niche. "Crunk is a word we've been using in the South forever-it basically means energy," he explains. "Crunk is past tense for crank. Once you crank it, it's crunk ... it's off the hook, it's crazy."

Jon launched the beverage in 2002 with the help of late liquor baron Sidney Frank, the father of Grey Goose vodka. The two connected while Grey Goose was sponsoring concerts for Jon's group, Lil Jon & the Eastside Boyz. After Frank passed away in 2006, Kimberley Clark veteran Tom Mahlke came in to run Crunk, and these days the energy drink pulls in a reported $15 million per year. Jon won't reveal how much of that sum comes his way, but given the structure of comparable celebrity ventures, his annual take may well approach seven figures.

Jon's next venture took him to a different side of the beverage business. In 2008, he started a wine label, Little Jonathan. The idea stemmed from a small run of private label wine that he'd commissioned for a party earlier that year. When he saw how easy it was to enter the wine business on a permanent basis, he brought in Alison Crowe -- a California winemaker who has worked at Chalone Vineyard, Curtis Winery, Bonny Doon Vineyards and others -- to create a merlot, a cabernet and a chardonnay. Bottles can be had for $15.99 online; sales figures aren't available. But the chardonnay won a silver medal at the 2009 Los Angeles Wine and Spirits Competition.

"People tried to act like it was Boone's Farm or something," Jon says. "But when people tasted it, they saw that this was real and not anything ghetto at all."

Planning for Retirement: Lil Jon Diversifies

Jon's other ventures include a line of Oakley sunglasses ($100 per pair) and an Apple (AAPL) iPhone application ($0.99 per download) that features recordings of all his most popular sayings. He won't disclose how much he earns from either, but he admits they're part of his retirement plan.

"I want to have something to fall back on, so that's a reason you create these different business ventures," he explains. "I don't want to rap forever."

For now, he'll use music to raise the profile of his other products, even though Crunk Rock's singles are unlikely to enjoy the success of 2004's smash hit, Yeah. That song spent 12 weeks atop Billboard's Hot 100 list and ranks 11th on Billboard's all-time list, thanks in part to Lil Jon's unique ululations.

"If I had $20 for every time someone asked me to go 'Yeah!' or 'What!' or 'Okay!" he says, "I wouldn't need to [win] the Lotto."

Permalink | Email this | Comments

The Roots Grow Their New Hip-Hop Business Model, a Year Into NBC's 'Late Night'

Zack OMalley Greenburg — Thu, 04 Feb 2010 12:14:00 EST

Filed under: Media

Last weekend, just 24 hours before the Grammys' pop and circumstance, the industry got busy with a night of pre-party schmoozing and posturing. But the hardest-working band in hip-hop was preparing to do something unusual: playing a live gig.

Continue reading The Roots Grow Their New Hip-Hop Business Model, a Year Into NBC's 'Late Night'

Permalink | Email this | Comments

A Grammy-Winning Producer Explains How an Award Turns into Cash

Zack OMalley Greenburg — Mon, 01 Feb 2010 10:57:00 EST

Filed under: Media, People

On the eve of the 52nd annual Grammy Awards, producer Jim Jonsin (pictured) sits at a swank rooftop lounge high above Hollywood, sipping a lime-garnished glass of water. Nominated for his work on Beyoncé's album I Am...Sasha Fierce, Jonsin exudes tranquility from beneath the brim of his gray fedora, despite the long odds of winning in a crowded field.

Continue reading A Grammy-Winning Producer Explains How an Award Turns into Cash

Permalink | Email this | Comments

Ditching the Dollar: The World's Best Currency Bets

Zack OMalley Greenburg — Mon, 21 Dec 2009 08:38:00 EST

Filed under: ETFs, China, Investing

Investors are jittery about the declining U.S. dollar, and rightfully so, but where's the best place to park your money?

Though the greenback had a brief resurgence last winter, 2009 has seen the dollar drop against the British pound (8%), the Canadian dollar (12%) and even more against emerging-market currencies like the Brazilian real (23%). With America's economy facing a ballooning trade deficit and ultralow short-term interest rates for the foreseeable future, a rowdy recovery isn't likely.

Continue reading Ditching the Dollar: The World's Best Currency Bets

Permalink | Email this | Comments

Easy money: Deducting your tax losses could save you up to $1,000 this year

Zack OMalley Greenburg — Tue, 15 Dec 2009 13:30:00 EST

Filed under: Retirement, Investing

The autumn's juicy apples and fresh squash will soon give way to the stale processed foods of winter. And just as people like to pick what produce remains as the agricultural season ends, investors may want to "harvest" their stock market losses as the calendar year closes.

Here's the deal: Any taxpayer in any tax bracket may deduct stock market losses of up to $3,000 against his or her ordinary income. In other words, if you've sold stocks at a loss of $3,000 this year, that same amount of your total earnings becomes exempt from taxation. The higher your tax bracket, the more money you save by harvesting losses. Someone taxed at 33% would save $1,000 while someone taxed at 25% would save $750.

Continue reading Easy money: Deducting your tax losses could save you up to $1,000 this year

Permalink | Email this | Comments