‘The Big Payback’ Explains the Economics of Hip-Hop’s Explosive Growth

About 40 years ago, hip-hop started as a penniless outcast in some of America’s poorest neighborhoods.

“Hip-hop is innovation out of necessity, the necessity of being broke,” rapper/ producer El-P once said.

Today it is a multibillion-dollar industry that transcends cultures and generations and permeates not just the pop music charts, but also television, movies, comedy, fashion and product lines ranging from toys to liquor.

It’s a classic American story of cultural innovation intertwined with capitalist opportunity, a tale of music creating a community which in turn attracted maverick investors who then were swallowed by corporations. The transformation bred multimedia stars, moguls and celebrities such as Jay-Z and Eminem.

Author Dan Charnas tenaciously follows the money trail in The Big Payback: The History of the Business of Hip-Hop, which celebrates hip-hop even as it details the backroom deals and marketing strategies that contributed to its explosive growth.

Those who lament how money has sucked the creativity out of hip-hop haven’t been paying attention, Charnas argues. He says hip-hop has always been about finding a way to get paid, an art form that was driven by economic aspiration from the get-go, and proud of it.

Like blues before it, hip-hop was basically a form of folk music, a community talking to itself through music made with readily available instruments. In the case of hip-hop, those instruments weren’t guitars but turntables and microphones.

DJs homed in on key parts of dance records — break beats — and MCs toasted or rapped over them at parties in parks, clubs and recreation centers. Out of these celebrations in the South Bronx and other destitute areas of New York City an intricate urban culture emerged that also encompassed break-dancing and graffiti art.

The scene went undocumented until a few local entrepreneurs began putting out rap records in the late ’70s, notably Sylvia and Joe Robinson of Sugar Hill Records, named for a Harlem neighborhood. The first breakout hit was a crude merger of disco and rap, “Rapper’s Delightl” It featured a group of studio musicians, the Sugarhill Gang, playing the rhythm line from Chic’s big dance hit “Good Times”.

Chic sued for publishing credit and received an out-of-court settlement, and the rap single went on to sell millions, surpassing sales of the original.

Soon New York was teeming with small labels looking to cash in by going to the source of the music. Whereas “Rapper’s Delight” was more of an imitation of what was happening in the streets, best-selling singles by Afrika Bambaataa (“Planet Rock”) and Kurtis Blow (“The Breaks”) were made by longtime hip-hop scene–makers.

Blow was promoted by Russell Simmons, a hustler who saw hip-hop not as a quickie trend riding disco’s coattails but a sound all its own. He envisioned a music that was as hard as the streets from which it emerged and then made it happen by helping create a hip-hop career for his brother, Joseph “Run” Simmons of Run–D.M.C. The group’s debut single, “It’s Like That”/”Sucker M.C.’s”, couldn’t have been more elemental: little more than two voices trading lines over a brutal drum machine beat. It became an instant hit, roaring from boomboxes and clubs across New York, even though commercial radio programmers wouldn’t touch it.

The track blew away a New York University student named Rick Rubin, who responded by producing — or, as he said, “reducing” — an even rawer track: “It’s Yours” by T La Rock and Jazzy Jay. He self-released it on his own Def Jam label, which operated out of his dorm room.

Simmons was impressed, calling it “the blackest record ever.” Imagine his shock when he later discovered that its creator was a bearded white kid from Long Island.

The seemingly mismatched pair — the suburban punk rocker and the inner-city street hustler — forged a partnership that would lay the groundwork for hip-hop’s rapid expansion in the ’80s.

By 1985, the major labels saw there was money to be made, and Warner Bros. partnered with the Tommy Boy label that broke Bambaataa, while Columbia struck a deal with Def Jam. Rubin celebrated by throwing a party, ordering fast food and encouraging his latest proteges, the Beastie Boys, to start a food fight.

Run-D.M.C.’s1986 album, Raising Hell, was produced by Rubin, and spawned a massive breakout single, a collaboration with Aerosmith on the band’s ’70s hit “Walk This Way”. Rubin soon parted ways with Simmons, complaining that “hip-hop wasn’t about art anymore, it was about getting paid” — but he didn’t know the half of it.

As the East Coast scene flourished and the music became increasingly more sophisticated, thanks to the rise of Public Enemy, De La Soul, A Tribe Called Quest and others, West Coast hip-hop emerged with its rough beats and rougher rhymes.

One West Coast outfit, 2 Live Crew, found a thriving audience in Miami for its electro–funk party rap and eventually relocated there, where it joined forces with local promoter Luther Campbell.

The majors swooped in to sign a number of these artists, with predictably disastrous results. By the mid-’90s, the explicit content of music by Ice-T, the Geto Boys, DJ Quik and other gangsta rappers proved ill-suited for corporate tastes and was again pushed underground. But a new legion of more street-savvy entrepreneurs cashed in.

The Wu Tang Clan, an East Coast collective made up of eight MCs, scored deals not only for the group itself but for each individual group member. Before the term “branding” was a marketing cliche, Wu Tang was including merchandise catalogs in each album and cross-promoting releases across multiple labels. Thus, whenever one Wu Tang member released new product, all benefited.

Rapper/producer/hustler Sean “Puffy” Combs used his Bad Boy label “to usher in a new era in which authenticity and credibility were defined less by artistry and more by access to power, whether in the street or the boardroom,” Charnas writes.

By the late ’90s, Combs was worth $53 million, pulling in $32 million alone from a clothing line spun off from his musical accomplishments. Combs was the first major hip-hop star known more for his business celebrity than his microphone skills, which were marginal at best.

Combs also ushered in the era of the hip-hop mogul, young rappers who grew into multimillionaire rap emperors. Perry “Master P” Miller built his New Orleans No Limit label into the cornerstone of a $56 million business, earning revenue from not just music but clothing, real estate, dolls and even phone sex lines. Russell Simmons sold Def Jam to the dominant Universal Music Group for $125 million and spun off his fashion line Phat Fashions LLC for $140 million. Jay-Z (former drug dealer Shawn Carter) built his Roc-A-Fella label into the Def Jam of its day — and then went on to become president of Def Jam.

Along the way, Jay-Z supplied hip-hop with its new catchphrase. Once hip-hop was “the party that won’t stop.” Now, as Jay-Z intoned on a track by his protege Kanye West, the stakes were much higher: “I’m not a businessman, I’m a business, man.”

Charnas applauds hip-hop’s ubiquity, the way African-American artists from the inner city have transformed themselves and the pop charts with hits, which they then turned into business opportunities.

As spectacular as this story has been economically, the author doesn’t deeply examine the effect that it has had on the art. Can an art form that arose from poverty in the African-American inner city maintain its essence when it now is not only a universal language for at least two generations of listeners of all ethnicities and nationalities, but also a marketing juggernaut used to sell just about anything to its massive audience? Like rock ‘n’ roll, how hip-hop answers that question will determine whether the story of the next four decades will be as transformative and inspiring as the previous 40 years were.