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Hey! I don’t have a hot take on the Will Smith - Chris Rock - Jada Pinkett Smith incident. Honestly, I’m sad it happened. Will Smith winning his award was the main thing I was looking forward to seeing at the Oscars. That’s not a main takeaway from the night, and that’s a shame. That’s all I got.

Today we’ll continue our countdown on hip-hop’s most revolutionary business deals of all time along with Zack O’Malley Greenburg. We will also host a Twitter Spaces tomorrow 3/29 at 2pm ET. Join us here! And on the Trapital Podcast, I interviewed Brittany Luse and Eric Eddings from the For Colored Nerds Podcast. Let’s dive in.

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New pod: Brittany Luse + Eric Eddings

It was great to be joined by For Colored Nerds hosts Brittany and Eric. On their podcast, they peel back the layers of Black culture. We talked about media trends, hip-hop, and had a hilarious chat about Tyler Perry.

We also talked about their journey in podcasting. Brittany and Eric have been open about their struggles with both Gimlet and Spotify regarding their previous podcast, The Nod. It’s a great discussion about ownership and IP. If you create content—in any form—this is a must listen.

Listen to the Trapital Podcast here:

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hip-hop's most revolutionary deals: 4-3

Last week, Zack O’Malley Greenburg and I kicked off our countdown. We ranked these deals on three metrics: impact, payout, and originality. You can read deals 10 - 8 here, 7 - 6 here, and 5 here. Today, you’ll read my breakdown on deals #4 and #3. You should sign up for Zack’s free newsletter to read #2 and #1 tomorrow. Let’s get started!

4. The Deal that Helped Jay-Z Become “International Hov”

The 360 deal is one of the polarizing contracts in business. These exclusive contracts were designed to help record labels offset their revenue loss during the dark days of the music industry. Most artists who signed 360 deals have publicly regretted that the label gets a share of their numerous revenue streams.

But most artists weren’t in Jay-Z’s position. His 360 deal accelerated his journey to billionaire status.

In 2007, Jay was nearing the end of his tenure as President of Def Jam. He had signed big-name artists like Rihanna and Young Jeezy, but he felt constrained by the label’s old school approach. Jay wanted money for Def Jam to get into headphones, clothing lines, and other products, but those ideas scared them off. Much like his time at Roc-a-Fella Records, the potential was limited again by his disagreements with his business partners.

The following year, Jay-Z got the opportunity to do all that and more by teaming up with events promoter, Live Nation. The live entertainment and ticketing company had nine-figure deals with Madonna and U2 but had yet to make a similar deal with a hip-hop artist.

Both Jay and Live Nation agreed to a ten-year, $150 million deal. The deal was the genesis for Jay-Z’s record label and entertainment company, Roc Nation—a joint venture between Jay-Z and Live Nation where both parties split profit equally. The ten-year deal also included a $25 million upfront payment, $25 million advance on his next tour, $25 million for investments, $10 million album advance for 3 albums in 10 years, $20 million worth of publishing, licensing, and rights, and $5 million a year for overhead expenses. “I’ve turned into the Rolling Stones of hip-hop,” Jay said to The New York Times after the deal.

The deal expanded Jay-Z’s global footprint with worldwide tours, which boosted his impact and increased his cash flow. The money from this deal was used to invest in startups like Uber, SpaceX—and even start his own venture fund, Marcy Venture Partners. Today, Roc Nation has entered many areas that Jay could only dream about at Roc-a-Fella Records or at Def Jam. The company is now worth $140 million.

Roc Nation became the blueprint that other hip-hop execs wanted to follow. In the past decade, Quality Control Music, Dreamville, Top Dawg Entertainment, and OVO Sound have strived to make similar evolutions from record labels to entertainment companies. And thanks to Jay’s worldwide touring success, the rest of hip-hop has upped its global performances. Now, hip-hop artists like Cardi B earn their biggest live performance checks in Europe—and aren’t afraid to let us know about it.

Jay-Z is in a unique position. He’s hip-hop’s greatest rapper and its most influential business leader. Where he goes, others follow. They may not be able to replicate his 2008 Live deal—or his 2017 Live Nation deal for $200 million), but they can learn a lot from it.

3. Formula 50: Hip-Hop Gets Paid in Equity

These days, if a consumer product company has a billion-dollar exit, you expect to see a hip-hop artist on that cap table. But “pay me in equity” wasn’t that common until 50 Cent’s partnership with Vitaminwater.

In 2004, the Get Rich or Die Tryin’ rapper was hip-hop’s kingpin. His debut album was still getting heavy radio play. His manager, the late Chris Lighty, had helped 50 land a sneaker deal with Reebok, an upcoming biopic on the big screen, and his own video game. The acclaimed rapper was ready to do the same in the beverage space.

One day, 50 told Lighty that he wanted to do a bottled water deal. He noticed the price difference between Poland Spring and other bottles of water and saw an opportunity to leverage his brand similarly. The idea was on-brand for 50. He was a healthy workout fanatic (at the time) who didn’t drink alcohol.

Lighty hit up former business partner, and occasional Shark Tank guest, Rohan Oza. The two had worked together on A Tribe Called Quest’s 1994 commercial with Sprite. Oza, a former Coca-Cola exec, had just joined Glaceau, Vitaminwater’s parent company, and connected the dots.

It began with a test run where 50 drank Vitaminwater in a Reebok commercial. After that 50 and Lighty wanted to invest, Glaceau pushed back. But in October 2004, the two sides agreed to a deal where 50 Cent got a 10% stake in his Formula 50 brand.

50 pushed the brand heavily in commercials, songs, and more. Vitaminwater sales grew from $100 million in 2004 to $700 million in 2007. In May 2007, Coca-Cola bought Glaceau for $4.1 billion, and 50 Cent got paid.

The rapper-turned-mogul walked away with a reported $100 million from the Vitaminwater deal. The specific terms of the deal have been held closely though. In 50 Cent’s bankruptcy case in 2015, he asked that the terms of his deal stay private because the details could “ruin his career” and give future business partners the “upper hand in negotiations.” Remember, this is the guy who let false rumors fly about a lucrative Bitcoin investment he never made! He told CNBC that he would never deny reporting that is “favorable to my image and brand.”

But regardless of 50’s antics, his influence on hip-hop brand partnerships is undisputed. Artists like Drake (with Daring Foods), Jay-Z (Oatly), Diddy (Ciroc), have all gotten in on the upside of their various partnerships with consumer-packaged-goods brands.

Formula 50 wasn’t just a flavored water brand. It was a formula for how hip-hop would partner with brands moving forward.

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Tomorrow morning, Zack will finish our countdown with the top two deals! Subscribe to his newsletter here. And tomorrow at 3/26 2pm ET, we will host a Twitter Spaces where we share our honorable mentions, discuss our thoughts on the list, and hear from you!

Money Moves

• A great breakdown on David Bowie’s “Bowie Bonds” by Trung Phan.
• A legendary interview with Steve Harvey on becoming a mogul.
• How much money Apple and Netflix spend to try and win Best Picture at the Oscars
• Spotify says 9,500 artists had recording catalogs that generated $100k+ on the platform​
• Music streaming now accounts for 65% of all recorded music revenue.

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coming soon from Trapital

Podcast: Brandon McEachern and Marcus Allen, Broccoli City. They are the co-founders of Broccoli City, a music festival in Washington D.C. This year, they have Summer Walker, Ari Lennox, Lil’ Durk, Gunna, and more. We talked about the economics of music festivals, planning during a pandemic, and more.

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