Developed and narrated by K. Qhamata for SMAART INCUBATOR, Inc.
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Episode synopsis: Escaping a almost fatal gunshot. Jay-Z quicks drug dealing and decides to rap full time, but is quickly rejected by major record labels for not fitting into gangsta rap image of the 90's. Rebuffed but undefeated, Jay connects with local hustlers turned entrepreneurs, Damon Dash and Biggs Burke. Together they form Roc-A-Fella records, and seek to release Jay-Z's music independently.
Full Episode 01 Commentary
1995 Jay, Dame & Biggs Form Roc-a-fella
In 1995, after Jay-Z was shot at from six feet away, he decided to give rapping another try. This second attempt at rapping came after he had already devoted a decade to winning rap battles - and achieving moderate success by working with Big Daddy Kane and other rappers (.e.g. Jaz-o) in NYC. A producer named Clark Kent introduced him to Damon Dash, a Harlem entrepreneur who had contacts in the rap industry, but no one was interested in signing Jay-Z. His songs in 95 were considered too “sophisticated”, his wordplay “too wordy too different”. So Jay-Z and Dash, along with a silent partner, Kareem (Biggs) Burke, formed Roc-A-Fella Records, to put out Jay-Z’s music independently.
1996 Priority Deal
Roc-A-Fella eventually struck a distribution deal with Priority Records (which it later left for Island/Def Jam), and issued Jay-Z’s first album, “Reasonable Doubt,” in 1996. A cheerful, gangsta inspired love song called “Ain’t No Nigga” became his first hit; it also launched the career of Foxy Brown, who rapped as Jay-Z’s girlfriend/sidekick on the hit record.
The distribution deal they struck was a P and D deal, or what was more commonly called a 80/20 deal. The mechanics of that deal are just like the deal Apple struck with AT&T back in 2007 when they introduced the Iphone. Apple made the Iphones, but AT&T distributed them in stores. Under this 80/20 deal with Priority, Roc-A-Fella like Apple would do the same. Assuming all of the upfront costs of studio time, marketing and promotion, Roc-A-Fella would make the albums, then turn them over to Priority to be packaged and distributed to record stores.
The true upside of the Priority deal was Jay-Z and company would retain 100% equity control (i.e. ownership) of Roc-A-fella. Splitting only 20% to 30% of the profits made from record sales, while still maintaining the option of shopping Jay-Z’s second Album, “In My Lifetime Vol 1….”, to other major labels in the future.
1997 Def Jam Deal
Jay-Z brought Roc-A-Fella to Russell Simons in 1997 and sells a 50% stake in Roc-A-Fella to Def Jam for $1.5 million.
This deal effectively made Def Jam an equity partner and co-owner with Jay, Dame and Bigs. Unlike the Priority deal, this deal (referred to as a production deal ) not only gave Roc-A-Fella distribution, but full marketing and production budgets for not only all of Jay-Z’’s new albums, but for every current or future artist signed to Roc-A-Fella.
In addition, the deal also contained a clause which granted Def Jam the right to buy Roc-A-Fella for 7 times its initial signing value in future. This one deal, would laid the groundwork for the future birth of JAY-Z, Hip Hop CEO and Mogul .
Khufere Qhamata, is the founder of the SMAART INCUBATOR, a serial entrepreneur, and dedicated futurist. He is chief executive of Leap72, a strategic innovation consultancy advising corporations on how to use startup economics to grow and compete for the future. He is also a co-founder and board member of Academy M, a 501 (c) 3 nonprofit specializes in the mentorship and career development of millennials. You can follow him on Linkedin.