The Real Reason Diddy and Jay-Z Are Making Comebacks

Last week I was shopping at Harlem USA to get my Fall wardrobe up, when a realization about Jay-Z and Diddy hit me while I was choosing between a Roc-a-Wear zipper hoodie and a Sean Jean long-sleeve button-up. I think both moguls/rappers/record execs are dropping comeback albums this year for the same reason.

Is it for fame? Nah - Diddy would have to shoot his girlfriend to get more press coverage than what he does now, word to OJ.

Is it for the "love of the game"? Nope - Jay-Z seemed happy enough making noise with his guest verses and throwing a farewell concert every 9 months.

Is it for money? Yes, but not in the direct way most people think. Making money off of CD sales is a loser's game, with a notoriously slim margin.

Instead I think Sean and Shawn are more concerned with with 100 million plus their respective clothing lines bring in. There are no official numbers for what Jay's Roc-a-Wear and Diddy's Sean John are worth, but a NY Post profile on Dame Dash from last year revealed that the apparel game is the real cash cow for The Roc, and beats the money from music times ten. The music they create serves more as marketing.

This strategy of back door earnings isn't the oldest, but it's definitely the smartest trick in the book. For instance, McDonalds doesn't make money on burgers and fries - they use the salty food to make you thirsty for their overpriced soda, which costs pennies to make. In the same way, U-Haul doesn't make money on truck rentals - the real business is overcharging for moving accessories. And auto makers will sell you a car for cheap - as long as they can trap with their expensive financing.

For my readers who study economics, you'll recognize what I'm saying as the "profit pool"of the hip-hop music industry. So, when you read about Jay's promotional world tour and Diddy's video blog, remember that what's at stake for them isn't the pitiful money they get from record sales, but the 3-figure millions their clothing lines bring in, which all rests on the lifestyle image they create for their companies, through their music.

Comments

[Bol]

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[dcase]

Good post. I remember in one of the major publications that upon their separation, Dash and Carter's clothing line was apparaised at around 120 million. Also, as an economist by training I must say that the term "profit pool" is not an economics term. Rather, it is likely found in the maagement and strategy literature.

[Ed Dunn]

I think this is more reinvention and elevation than backdoor earning. It is accurate to say the record label business have high seed investment and slim margins on their 1 out of 20 successful outputs.

But everyone needs a shirt on their back and this has a better business model for hip hop which is celebrated for creating multiple streams of revenue for it's cultural lifestyle (samauri champloo,boondocks on TV) - something no other genre has done before.

And remember back in the 80s when certain people was saying rap was a fad?

[Hashim]

"I think this is more reinvention and elevation than backdoor earning."

Ed, I feel that it's backdoor because Diddy and Jay-Z never let on how important the shirt sales are to their personal fortune. Instead they pretend it's all about the music, which is a much better story.

[BGZ]

Oh so true. Thanks for the insightful breakdown of the true meaning behind all that is right within the world, money.

[Dan Charnas]

Shit is real.

[Rob Fields]

Your POV makes sense. However, I'd pull up 30,000 feet and look at it like this: Rather than being some kind of sinister plan, it's probably the realization that their respective "empires" are like big bags filled with water. It's hard to move them forward just by pushing on one spot. At the level Sean and Shawn are playing at, it's imperative that they look at their businesses as a whole and keep all the plates spinning. Notwithstanding your point about the profit potential of clothing vs. records, what they're dealing with are their businesses holistically rather than cynically putting out records just to goose clothing sales.

Again, some good thinking here. I'm definitely looking forward to checking out more of your analyses.

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[Curt McGirt]

So true... Why do you think these major labels can stay afloat while bleeding to death financialy? The money is not in music sales for a huge label like Def Jam or Interscope; (Really UMG aka Universal Music Group)the money is in selling every thing that incorporates the general lifestyle that the music promotes.

It's funny how the most popular person in music becomes a "marketing genius" (50 Cent) becuase of their celebrity status but it's true. Rap music sells, cars, clothes, jewelery, liquor, etc. fueled by the monkey see monkey do mentality that most teenagers and dumbass adults display.

Ironically you dont see Ralph Lauren, Tommy Hillfiger, The Maloof Bros. (Owners of the Palms Resort and Sacramento Kings) In every T.V commercial to stay relevant to consummers to sell their products... Why? becuase they got every rapper, basketball player preppy suburban kid and crack dealer advertising their shit.

Really the biggest rap labels (Interscope, Def Jam, Koch, TVT, Asylum) are really huge urban advertising hubs that generate sales of other shit that aint music!

Jokes on u!

[Curt McGirt]

Oh yeah... gas stations dont make money from selling gas, they make cash by getting you to come in and buy a $3.00 slurpee!

Holla!

[Dallas]

Nice. Someone was channeling Clyde Smith (no Clyde Smith)

[Sonya K.]

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[d s]

In 2004, the year that Diddy was named Men's Designer of the Year, total sales for Sean Jean were $150.0 million. Roc Apparel Group should be in the same ballpark. Both are privately owned, so most of the profits are going into these two guys pockets. In the Men's Apparel industry, from what I understand profit ends up being about 25% of total sales.

[Aaron Y.]

Having Celebrities to wear one's brand will bring massive media expose. However, it costs too much to have such ones like Sean and Shawn to advertise a clothing line. In POV of a clothing line owner, Sean and Shawn are in the right track. They are like walking models. Anything they do will bring up the revenue in the clothing business. In my company, we did not invest any money for media expose. But check this out, a few days ago, in 2006 Billboard Music Award, one of the performers was Ludacris, He wore our shirt. I could not believe my eyes. We are brand new company and just starting to build up reputation in the street. It's a blast for us. Check out our stuff at www.fuyagroup.com and you and also watch the BillBoard Clip from YouTube

[kyle45]

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Jet Phynx just got back from the VMAS and he killed it @ the Afterparty. the takl now is he might be signing with Bad Boy insiders say that the deal will be done by next week.Other news with Jet is that he's on the remix of Us Places feat, Lupe, kanye, Pharrel. the trackis fire jet kills it again . this kid belongs with the majors....
Check out his new single called "Let EM Sing" Produced By Super Producer Tracknologist...on Myspace.com/Jetphynx
HSow the Kid some love He's the real Deal....

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[da' show]

It's one avenue that keeps the name on the street, but at the same time they are overly saturated brands that really doesn't set you apart from the next guy. A shameless promo for our t-shirt line United Five, United Five stands for the five boroughs in NY. The name comes from an old graffiti crew back in the early 90's. Our look is clean, simple but fresh. check us out http://united-five.com

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[sean john]

Great. I'm glad their back,,they have a good reason of making comeback.. they more on focusing in their clothing line. and that was really great.. keep it up!

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