AS RAP MUSIC HAS EXPLODED, SO TOO HAVE THE FORTUNES AND BUSINESSES OF SOME OF TODAY'S HOTTEST YOUNG MUSIC EXECUTIVES

I DON'T MEAN TO BRAG, I DON'T MEAN TO BOAST, BUT WE'RE LIKE HOT BUTTER ON YOUR BREAKFAST TOAST."

--Wonder Mike

IN THE 20 YEARS SINCE RAP MUSIC SWAGGERED FORTH from the block parties and basement jams of the Bronx, it has made the transition from fad to cultural phenomenon. In fact, hip-hop culture has become hip-pop culture, its influence felt from Madison Avenue to Hollywood.

Look no further than Long Island's exclusive Hamptons for evidence of rap's mainstream appeal. Last summer, this tony suburb hosted parties thrown by Jay-Z and Sean "Puffy" Combs that attracted a motley crew of attendees ranging from raunchy rapper Lit' Kim to the doyenne of home-making Martha Stewart. Calvin Klein and Mountain Dew recognize the role of rappers as tastemakers, nabbing the likes of Foxy Brown and Busta Rhymes, respectively, to endorse their products. But none of this would've been possible if hip-hop hadn't conquered the charts and captured the minds of the record-buying public.

Last year, rap surpassed country to become the third-best-selling music genre behind rhythm and blues and rock. According to SoundScan, which tracks retail music sales, by October this year's rap sales had increased 17%--putting the genre on track to surpass 1998's total sales of 81 million records and over $1 billion. The most telling moment of 1999 was Lauryn Hill's five-award domination of the Grammys. In one of her many acceptance speeches, she summed it up best with the statement: "Wow, this is hip-hop!" Oh, you don't know?!

Somewhat obscured by the gangsterism and materialism that dominate today's rap scene is an emerging aesthetic of entrepreneurship. "It's become part of the hip-hop culture now to become a business mogul," says L. Londell McMillan a New York-based entertainment attorney. "Rappers are talking about everything from recoupment status to publishing percentages and ownership of their music."

Perhaps most responsible for rap's mogul mantra is Russell Simmons, co-founder of Def Jam and the original b-boy executive. "We were the guinea pigs for the corporate music business to build a new kind of relationship with entrepreneurs who wanted to fight for a bigger share of the profits," says Simmons. These deals are not fundamentally much different from the mainstream rock-and-roll deals, adds McMillan, who negotiated The Artist's release from Warner Brothers Records in 1996 and represents rap label Ruff Ryders--home to multiplatinum-selling rapper DMX. Whether it's money or a proven track record, rap labels are beginning to bring more to the table and have more leverage than ever before. "I sold 10 million albums before I had a joint venture," says Simmons.

Today's successful rap music entrepreneurs have indeed been able to wrestle more favorable deals from the Big Five record companies and distributors (Sony, BMG, Universal, WEA and Cema). In turn, they've followed Simmons' lead (see sidebar, "The Blueprint of Hip-Hop") and expanded into other businesses that leverage the marketing muscle of their music.

"The biggest difference between today's label executives and the first generation is that they come into the game seeing the whole picture--records, movies, clothes, magazines, the Internet--and start making inroads into those businesses earlier," says Andre Harrell, former CEO of Uptown and Motown Records and now president of Bad Boy Records. Like medieval lords, these princes of the ghetto are establishing fiefdoms they hope will endure beyond their reign at the top of the charts.

But the ability to diversify is predicated on building a profitable record company, and there are still only two paths to power in the music biz: by keeping it real for consumers or by capturing the attention of the music industry's idol makers. Or, in the words of Niccolo Machiavelli, "One attains [power] either by popular favor or by favor of the aristocracy."

"I'M THE GHETTO BILL GATES, BUT I'M LEGIT."

--Master P

"One of the main reasons I'm so successful is because I didn't go to a record label looking for any money," says 29-year-old Percy Miller (better known as Master P or, simply, P). Instead, in 1994, they came looking for him. "He'd been selling a lot of our records in his [Richmond, California-based] No Limit Record Store and had also gotten his self-produced No Limit records distributed in stores throughout the Bay Area," says Bryan Turner, president and CEO of Los Angeles-based Priority Records. After hearing of Miller's success, Turner offered him a typical boutique-label deal that heavily favored Priority, the exec says. It was promptly declined.

"P never coveted the short money. He knew there was much more upside if he made the right deal," says Turner. After Miller had independently sold over 350,000 copies of his first two albums, 99 Ways to Die and The Ghetto's Tryin' to Kill Me, Turner sweetened the pot. The fight deal was one in which Priority receives about 15% of the profits in return for pressing and distribution. The rest goes to No Limit, as does 100% ownership of the master recordings, which allows No Limit to profit from future sales such as catalogs and reissues.

Over the past two years, Master P, along with fellow hard-core acts Snoop Dogg, Mia X, Mystikal, Silkk the Shocker and C-Murder, have pushed No Limit's sales to over 28 million records, with gross receipts of nearly $250 million. No Limit's heralded cross-marketing strategies, in which each release is used to promote other No Limit artists and products, keep expenses low and profit margins high. "A lot of companies are trying to figure out how we keep our costs down," says No Limit Records COO Tevester Scott. "We just learned the game quickly and understand where to put our money."

Rather than pay top dollar for sought after hip-hop producers who charge as much as $20,000 per track No Limit uses mostly in-house producers and records in its own studios. As for big-budget videos, "save that for Britney Spears and the Backstreet Boys," laughs Scott, who runs the record company's day-to-day operations. Such frugality has afforded Miller the capital to pursue other ventures. "I let this rap thing open up other avenues because you can't just depend on the music business," says Miller through a top row of gleaming gold teeth, each set with a diamond big enough for any would-be bride to covet.

The No Limit empire now spans music, film, clothing, sports management, real estate and toy merchandising (Master P dolls and No Limit bicycles). Combined revenues of No Limit Records and No Limit Film for 1998 are estimated at over $160 million. No Limit Gear--for which Miller purchased Los Angeles-based clothing manufacturer Nexis rather than rely on licensing--is expected to bring in $10 million this year. Each company is a separate entity, with Miller serving as CEO and owner. His real estate concern, New Orleans-based PM Properties, owns over 100 properties across the U.S., including the homes of several No Limit rappers and executives.

Ironically, Miller has divested himself of ownership of No Limit Sports, the most embattled of his ventures, due to his desire to play in the NBA. Players aren't permitted to own sports agencies and, at press time, Miller was in training camp with the Toronto Raptors. No Limit Sports, which represents nearly two dozen pro football and basketball players, came under intense scrutiny for its negotiation of 1999 Heisman Trophy-winning running back Ricky Williams' contract. The contract, worth between $11 million and $68 million, stipulates that Williams perform at an All-Pro level to reach the top salary. Such incentives are not new to football. However, they are typically reserved for players without the bargaining leverage of a Heisman Trophy. So far, the deal has not panned out for Williams. The running back has been hampered by injuries in the first quarter of the season.

"As an agency, their work will be judged by how effectively they negotiate contracts over the long run, not by a single contract," says sports agent Bill Strickland of Washington, D.C.-based Stickland and Ash. However, others in the industry believe that No Limit Sports can't afford many more questionable contracts for high-profile players. The Williams contract negotiations underscore the need for Miller to identify seasoned and talented executives to run his various enterprises. "I'm just trying to build a great team," says Miller.