#035: How Did Jay-Z Just Make $615 Million on Two Deals?
“You only have to do a few things right in your life so long as you don’t do too many things wrong” – Warren Buffett
Jay-Z is a business… man. Over the past two weeks, he has sold stakes in two of his businesses for approximately $615 million. These deals are not only representative of the level of superstar that Jay-Z (real name Shawn Carter) is, but even more clearly show the master negotiator and business mind that he posses. It is an all too common position for entertainers to be stuck between a brand partnership or business deal that comes with a large sum of money, but doesn’t always fit their values or cultural beliefs. The fact that these deals for Jay-Z have none of those conflicts, and in fact help reinforce his cultural standing, makes them even more remarkable.
The first deal requires us to begin back in 2006, when the go-to champaign at the time for Hip Hop music videos and at the club was luxury brand Cristal. In 2006, the new Roederer (the parent company of Cristal) managing director Frédéric Rouzaud told a special edition of The Economist that “the house viewed Cristal’s association with rap with curiosity” and when asked if he thought the association would harm the brand, he replied, “that’s a good question, but what can we do? We can’t forbid people from buying it. I’m sure Dom Pérignon or Krug would be delighted to have their business”. This led to a swift response and a boycott of Cristal from the Hip Hop community, with Jay-Z stating, “I view his comments as racist and will no longer support any of his products through any of my various brands, including the 40/40 Club, nor in my personal life”.
So what did Jay-Z do? He swiftly purchased 50% of luxury champaign Armand de Brignac and gave it the nickname ‘Ace of Spades’. Within months, Ace of Spades became the hottest luxury champaign on the market. It became ‘the cool’ and had the cultural buzz not only because of Jay-Z, but because of the history with Cristal and the empowerment that it represented. In 2014, Jay-Z acquired the other 50%, becoming the sole owner. Just two weeks ago, on February 22nd, LVMH Moët Hennessy Louis Vuitton (LVMH) purchased 50% of Armand de Brignac for a rumored $315 million+. Not a bad return for Jay-Z after 15 years of drinking high-end champaign and still retaining 50% of the business.
The second deal is the conclusion to TMZ photos that surfaced in 2020 of Jay-Z and Twitter and Square CEO Jack Dorsey spending a lot of time together taking long conversational walks in the Hamptons. Square, the financial services company started by Dorsey in 2009, purchased a majority stake in Jay-Z’s music streaming platform Tidal for $297 million. The deal also gives Jay-Z a seat on Square’s board. This deal is an attempt for Square to get a piece of the music streaming revenue boom for the decade ahead and also is a data play for all of Tidal’s users. Additionally, Jesse Dorogusker — an executive at Square — stated that, “Square will offer financial tools to help Tidal’s artists collect revenue and manage their finances”. A strategic partnership that comes with a $300 million check and a seat on the Square board isn’t too bad for Mr. Carter.
With Roc Nation, Jay-Z’s music management and record label, in a down year due to the pandemic it was a great time to have the infusion of over $615 million for Jay-Z. However these deals represent something much larger than the capital alone. Jay-Z was at the precipice of realizing that ownership and a revenue stake in the brands that a celebrity endorses will have a much larger payoff, even if it takes years to develop. This has become ‘the norm’ in recent years, but it took trailblazers like Jay-Z and 50 Cent (see his Vitamin Water deal, which netted him $150-200 million) in the early 2000s to create the possibilities that exist today. It’s easy to be impressed by the $600 million in earnings and leave it there, but it is more important that these deals pave the way for similar deals for entertainers across music, sports and film in the years and decades ahead. For that alone, everyone in the entertainment industry should be thanking Jay-Z today and for the years ahead.
(1) Richard Woodard. “Rapper Jay-Z Boycotts 'Racist' Cristal.” Decanter, 22 Feb. 2021, www.decanter.com/wine-news/rapper-jay-z-boycotts-racist-cristal-94054/.
(2) Lucas, Amelia. “LVMH Buys 50% Stake in Jay-Z's Champagne Brand Armand De Brignac.” CNBC, CNBC, 22 Feb. 2021, www.cnbc.com/2021/02/22/lvmh-buys-50percent-stake-in-jay-zs-champagne-brand-armand-de-brignac.html.
(3) Rosman, Katherine. “Square Acquires Majority of Tidal, Jay-Z's Streaming Service, in $297 Million Deal.” The New York Times, The New York Times, 4 Mar. 2021, www.nytimes.com/2021/03/04/business/media/tidal-square-jay-z-dorsey.html.
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JAY’S SONGS OF THE WEEK:
Tim Riehm - “You’re a Star”
Bruno Mars x Anderson .Paak - “Leave The Door Open”
itoldLexi - “Just Breathe”
Verzache - “Think About It”
Justin Bieber - “Hold On”
REI AMI - “do it right” (feat. Aminé)
