Hip-hop entrepreneurs have successfully maneuvered the genre’s appeal into multimillion-dollar enterprises, but now they are at a crossroads. Will they continue to simply feed America’s obsession with material goods, or will they leverage their enormous influence on people’s lifestyles to achieve true financial and political clout?
Take pacesetters Rush Communications, FUBU the Collection and Bad Boy Worldwide Entertainment Group, which rank third, fourth and fifth, respectively, on Crain’s New York Business’s list of the New York area’s 24 largest minority-owned companies. These companies are in the second decade of their existence, but the jury is still out on their staying power. “What has made these companies successful is their grassroots marketing schemes and hip-hop’s broad appeal. But their longevity will depend upon their ability to keep their brands in demand,” says Troy Ewing, president of the Innerfocus Group, a New York City company that trains individuals to be wealth advisers.
Part of their winning strategy to date has been their commitment to learning the market, treating it as a real business and surrounding themselves with strong, supportive teams. Add to that their ability to diversify and increase the visibility of their products while keeping abreast of consumers’ needs. “As long as the urban market stays influential to the people that are buying the products, there will always be a market for them,” Ewing notes.
Strong brand marketing and product association with celebrities have helped. Taking advantage of America’s love affair with celebrities and their endorsement of products is a big part of business, although it becomes tricky when the celebrity has legal or personal problems or is no longer the newest face. “Russell Simmons for example is no longer the freshest of faces in hip-hop, but he is moving into other areas that have proven his fans will follow,” says Ewing. “At the same time he is also benefiting from the times,” he adds. He notes that early hip-hop clothing lines Cross Colours and Karl Kani were not as successful because “although they had great press, whites were not buying Black music or Black clothes.”
Simmons was manager of his brother’s music group, Run DMC, before he co-founded Def Jam Records, the Def Comedy Jam Series and Def Poetry Jam on HBO, the Hip-hop Summit Action Network, the Phat Farm, and Phat clothing lines, as well as publishing, beverage, Internet and financial services. Sean “Diddy” Combs, a former intern with MCA Records, was instrumental in the success of Uptown Records before he launched his own label, Bad Boy. Today, his Bad Boy Worldwide comprises Blue Flame Marketing, Bad Boy Films, Justin Restaurants, Bad Boys of Comedy (HBO) and the Sean John clothing line.
While none of the FUBU partners were directly involved in the music industry, they are still part of the hip-hop movement and its vision to communicate the urban experience. Daymond John mortgaged his home for $100,000 and recruited partners Keith Perrin, Carl Brown and J. Alexander Martin to launch their signature hats and T-shirts under the FUBU logo (For Us By Us). FUBU the Collection has now branched into men’s suits and tuxedos, footwear, ladies’ and children’s lines, home accessories (bedding and bath), music and film. It also has freestanding stores in Poland, Saudi Arabia, South Africa, Japan and New Zealand.
Not only has hip-hop become an economic engine, creating nontraditional jobs for many, but it also serves as a voice for the disenfranchised and urban communities. “These companies built on hip-hop are a way out [of poverty] for many people,” says Charles L. Sessoms, community marketing manager, external affairs, Coca-Cola Enterprises. “It is the only legal hustle that allows you to put down the gun and pick up the mic and create your own American dream.”
Those accomplishments are not enough, says Boyce Watkins, Ph.D., an assistant professor of finance at Syracuse University. “Hip-hop’s ability to influence the mind, heart and spirit of people must now be transformed into financial value,” he says. “Most of these entrepreneurs who are now millionaires had negative bank accounts 10 years ago. We are still in the beginning stages of this revolutionary cycle.”
Unlike its predecessors—jazz, rock ’n’ roll and R&B—hip-hop is making a mark on American business. “It was only a matter of time before hip-hop-influenced companies would penetrate mainstream business ratings,” says Kevin Powell, a writer, activist and hip-hop historian. The challenge now, he says, is to create wealth and business opportunities that will sustain future generations. “Chris Rock said it best when he said ‘There is a major difference between being wealthy and being rich’,” Powell says. “Paris Hilton is wealthy because of the empire that her family built and passed on to her and that she will pass on to her children. In terms of hip-hop, we are still in the first generation of rich folks. Will there be a Rush Communications or Sean John when their children are adults?”
Among African-American legacies, Ebony magazine’s John Johnson created a publishing, fashion and cosmetics empire that, after his recent passing, remains in the hands of his daughter.
Selling a business may make good business sense at the moment but does not necessarily assure financial independence for future generations, some contend. Johnson, for example, never sold an inch of his empire. The same cannot be said of Black Entertainment Television (BET) founder Robert L. Johnson, now owner of the NBA franchise Charlotte Bobcats, who sold BET to Viacom in 2000; Ed Lewis, who sold the remaining 51 percent of Essence Communications to Time Warner in January; Simmons, who sold Phat Farm, Phat and Baby Phat clothing lines to Kellwood in 2004; and Evan Davis, Lando Felix and Tony Shellman, who founded Enyce in 1996 and sold it to Liz Claiborne in 2003.
“[By selling] we might get millions of dollars now, but we are essentially saying we are living for the moment, for these times, that we have no long-term vision for ourselves, for our companies, for Black people, for people of color, for the hip-hop community that has so much spending power,” Powell says.
Instead of selling their companies outright, Black business owners may sell equity in their companies through public offerings on the stock exchanges. This would pump cash into the companies, but still keep them Black owned. “Being a public company opens doors. It requires a lot of discipline, dealing with a board, earnings reports, but it doesn’t always lead to endless riches,” says Arthur Thompson, first vice president of investment, senior portfolio manager, Smith Barney. “Selling (equity in) your company can be an exciting financial opportunity. Not only does it offer you more liquidity, it also means more money to do other things and even lifestyle changes.”
The 2004 presidential campaign saw an unprecedented number of young African-Americans taking part in the political process, thanks, in part, to the political activism of Simmons’ Hip-Hop Summit Action Network and Combs’ “Vote or Die” campaign. “This past election gave hip-hop icons an opportunity to branch out into the political arena,” says Watkins. “One day you will see a hip-hop person run for office and, as their businesses continue to grow through diversification, and [as] they mature and think globally, they must be able to connect with the youth, unlike the civil rights generation.”
But for Powell, true political empowerment will come with the support of those who have dedicated their lives to community activism. “Folks like Russell and P. Diddy did important work last year, but there was too much of a reliance on them to be voices or leaders,” says Powell. “They are businessmen who should be supporting candidates not the other way around.” Hip-hop celebrities are just celebrities, not necessarily community leaders, Powell insists.
When African-Americans become sophisticated enough to lend monetary and moral support to the real leaders of the generation, that will be proof of real political power taking shape.
By Inés Bebea