Jay Z – Sports Agent

The Superyacht Life, May 2015

Why buy a team to watch them play when you can recruit a roster of stars and become a sports industry player instead? When Jay Z makes his move, you’d better believe the game is on…

Jay-Z-1,2Also at The Superyacht Life

When the baseball star Robinson Cano, second baseman for the Yankees, was sold to the Seattle Mariners last December, it wasn’t Cano, or the Mariners or the Yankees that people talked about – it was the man who cut the deal, the former crack dealer turned hip hop Gatsby, Jay Z.

He’d launched his sports management company only six months earlier – Roc Nation, the latest addition to his hydra-headed business empire – and the jury was out on whether Beyonce’s other half could cut it in this famously competitive business. So come the Cano deal, his every move was pored over.

It was like a rap battle, the way it went down.

The way, for example, the rookie Jay Z swaggered into the ring, and challenged one of the biggest players in the game, Scott Boras, the man responsible for two of the biggest “free agent” deals in history, both to the baseball star Alex Rodriguez. (An athlete typically becomes a free agent after his first contract with a club has expired, leaving him free to entertain offers from all comers.) Or the way he lured away one of Boras’s prize clients and then taunted Boras in the song “Crown”: “Scott Boras, you over baby, Robinson Cano, you coming with me.” And the way Boras chose to respond – an indignant quote to the Wall Street Journal – which only highlighted the cultural gulf between the two men.

Then just a week before the announcement, the news leaked that Cano wanted $310 million, a huge figure. Comment thread pundits sucked their teeth – Jay Z had shown his hand, surely a mistake? And wouldn’t the inflated figure scare away other bids? The Mariners had reportedly offered $225 million for 9 years, but then it’s a famously weak team, one of only two in the league to have never even qualified for the World Series, baseball’s highest competition. The New York Yankees by contrast has 27 World Series titles, and it too had an offer on the table. Sure, it was $175 million for seven years, but still. It’s the Yankees.

On December 6th, Jay Z announced the deal like a rapper dropping the mic at the end of a song – $240 million for ten years with the Mariners. It was the third biggest free agent deal in history. Jay Z might have 99 Problems, but being a sports agent clearly wasn’t one.

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“It’d be foolish for any agent to not take Jay Z very seriously indeed,” says Darren Heitner, a former agent himself, and the man behind SportsAgentBlog.com. “Many are jealous, frankly. He’s never done this job before and he hasn’t even had his agency for one calendar year and he’s already got top talent on his books in all major leagues, like Robinson Cano (MLB), Kevin Durant [NBA All-Star for the Oklahoma Thunder] and Geno Smith [NFL quarter back for the New York Jets]. It’s a very impressive start.”

Most wealthy celebrities tend to buy equity in sports teams rather than represent talent. Will Smith bought a piece of the Philadlephia 76ers (NBA), Gloria Estefan bought a sliver of the Miami Dolphins, as did J-Lo; even the rapper Nelly (remember him?) bought into the struggling Charlotte Bobcats (NBA). Typically these are little more than gestures of love from affluent fans – passive investments with perks like front row seating, the ear of the coach and the opportunity to take your nephew for pictures with the team on his birthday.

Jay Z also invested in equity – in 2010 he bought a small slice of the Brooklyn Nets (NBA), his home team. But his investment was far from “passive”. He used his clout to lead the club to rebrand and move from Jersey to Brooklyn where a new arena was being built. It was Jay Z’s influence that helped attract investors for the arena, and convinced the Russian billionaire Mikhail Prokhorov to buy in as the majority stakeholder.

He had to sell his shares last year in order to get certified as a sports agent, but his interests are clear – it’s the engagement that he craves. The business challenge.

And this is the message that Roc Nation sends too – that Jay Z doesn’t want to just watch his money grow, or pal around with athletes, he’s in it for the game, the competition and the victory, just like the talent he represents.

As an agent he also gets to wield a greater influence. The owners of prestige teams are almost entirely billionaires, and while Jay Z comes close – with a net worth of over $500 million – he would still play second fiddle in that arena. But as an agent, he’s a force. The team owners are his adversaries across the negotiating table – he’s taking their money, not vice versa. And in the context of Jay Z’s entrepreneurial track record, this choice of his to go toe to toe as an agent, to prove his talent-luring, deal-making chops is entirely fitting.

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Already a mythic figure in American business, Jay Z has evolved from Brooklyn crack dealer, “pushing weight, back in 88” (a lyric in the song Takeover from The Blueprint) to global entertainer to a kind of all conquering hip hop hyphenate – an entrepreneur-slash-CEO-slash-one-man-brand. And this, rather than the music, was always the goal. In his book Decoded, he writes, “a lot of people came to hip hop not out of a pure love of music, but as a legit hustle, another path out of the hood…. To be honest, it was my mentality to some degree…. I was an eager hustler and a reluctant artist.”

There were hiccups along the way – notably the misdemeanor assault on the producer Lance Rivera in 1999, whom Jay Z allegedly stabbed in the stomach with a 5” blade. But still his ascent to the boardroom has been relentless. In his song Operation Corporate Takeover from 2006, he sings, “I got Forbes on the living room floor. And I’m so close to the cover, f***er I want more.” Two years later, he was on the cover with Warren Buffett.

What emerges from Jay Z’s story is just how well suited he is to the rough and tumble of the agent world. For instance, he has been ring-tested when it comes to both knowing the value of talent and then protecting that value from grabbing hands. Before he became a record label boss he was a performer, fighting to control his destiny in an industry dedicated to exploiting talent. He made it an early mission to own his masters as soon as he had the leverage to do so. While at DefJam, he even paid $5 million to buy back the rights to an album he hadn’t yet recorded (what would become Blueprint 3). These things catch the attention of star athletes.

He also has a nose for talent, at least in music, a nose that has grown more astute over the years. At his first label – Rocafella records – the careers he created, like Memphis Bleek and Beanie Siegel, were like satellites around his sun, and tended to wither when removed from the warm glow of his star power. But when he became President of DefJam in 2006 he adapted swiftly to his new role as kingmaker. And who can argue with the instincts that discovered Rihanna and Kanye West?

But sports and music are very different. So Roc Nation has entered the fray with a heavyweight in its corner – Creative Artists Agency (CAA) one of the biggest talent agencies in the world. They’re uncannily well suited. Like Roc Nation, CAA’s expertise is also principally in entertainment – it’s a relative newcomer to sports, having launched its sports division only 5 years ago. And like the endlessly bragadocious rapper, CAA too has cultivated a brazenly elitist reputation as the stable of the biggest stars in the business.

“Jay Z has been very clever to this point,” says veteran agent Leigh Steinberg, named by Forbes as “the greatest sports agent in history.” “By focusing on superstars, he’s picking players who are at the peak of their revenue flow. The difference between Kevin Durant and 90% of basketball players is he has a huge marketing portfolio for endorsements. Most athletes don’t have a marketing portfolio at all.” 

Sports, Steinberg explains, is a pyramid in which the money concentrates at the top. At the base are the rookies who have no marketing pull or name recognition, and their player contracts – no matter which major sport in America – are salary capped, so there’s very little leeway for an agent to operate. Things only get interesting once that first contract expires, and the few stars have emerged. These athletes are now “free agents” and the opportunities for revenue multiply exponentially – which is why the major entertainment agencies have got involved in recent years. Along with CAA, WME (William Morris Endeavor) recently entered the fray with its purchase of IMG the big sports and events agency for $2 billion. And before that, SFX Entertainment acquired a basket of sports agencies before its sale to Clear Channel for $4 billion in 2000. Roc Nation is a continuation of this trend, the ongoing fusion of the sports and entertainment worlds.

“What these agencies are interested in isn’t the fees from the individual contracts so much,” says Steinberg. “It’s the marketing possibilities, the content supply for motion pictures and television and video games. To own equity in those things, to be producers in a reality TV show or competition, or to own a part of a new app that brings fans closer to sports – that’s the real goal.”

And those opportunities are clustered around the top talent. So Jay Z isn’t in the Jerry Maguire business, nurturing college athletes into the pros. He’s hand-picking the biggest names possible – or rather they’re choosing him. “A lot of athletes can identify with Jay Z’s own upbringing and struggles, and how he has become a diversified black entrepreneur,” says Steinberg. “To be part of that model would be very tempting.”

Diversification is a cliché now – the rapper with the energy drink, the vodka brand, the shoe, the bar, the apparel line and on and on. But as Zack O’Malley writes in his analysis of Jay Z’s business evolution, “Empire State of Mind” (Penguin), that business model was pioneered by hip hop moguls – Russell Simmons, P Diddy and Jay Z, who conceived of the artist as brand, and the art as a lifestyle. Jay Z has either lent his name to, or manufactured a string of products far too long for this article, all of which he plugs shamelessly in his songs – the cologne, the clothes, the Reebok Shawn Carter sneakers, the 40/40 nightclub in Manhattan, the Audemars Piguet wrist watch, Armand de Brignac champagne… He even had a color named after him – Jay Z Blue – which was meant for a line of Jeeps that never quite materialized. (In the end, he managed to sell the color to General Motors – even in his flops, the self-proclaimed “black Warren Buffett” gets paid.)

“Look at the Victor Cruz [a wide receiver for the New York Giants] deal,” says Darren Heitner. “CAA handled the contract advisory side, and Roc Nation handled the marketing. It’s the perfect combination. Jay Z doesn’t yet have the player contract expertise he needs, and CAA can benefit from Jay Z’s marketing ability, his extensive connections with brands.”

No doubt marketing is one way in which the self-declared “Mike Jordan of recordin’” has made his own career a template for how he might manage others. But there’s another – his deal-making ability. It’s hard to resist the idea (which Jay Z himself often propounds) that he learned his business chops through selling drugs. The gritty romance of it feels satisfying, in the Hollywood sense at least. But while it may be true as far as shrewdness and courage go, it says little of the sophistication and innovation that he has shown at the negotiating table.

Witness the deal he struck with the music colossus Live Nation in 2008 – a so-called 360 deal lasting ten years and worth $150 million. It encompasses all his touring, recording and management of other artists, his publishing and licensing, his record label and talent agency, his touring advance and a three album deal. Furthermore, it responded boldly to a music industry that continues to be heavily disrupted by the internet. In short, a groundbreaking deal, catered to a specific star – one imagines, other stars in the sports world, taking note.

There is also another more prosaic reason for a top athlete to leave his agent and join Jay Z. “Personal attention is a big deal,” says Darren Heitner. “Of course there’s other things, like ego and the cachet of being associated with an icon. But a lot of stars come from big agencies – Scott Boras represents over 100 athletes. Roc Nation is a boutique operation by comparison. That can be attractive to top talent.”

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So far, Jay Z, the sports agent, has scarcely put a foot wrong. But success leads to growth, which in turn presents its own challenges. One of the themes of his career is the way he forms strategic alliances at the outset of a new venture, and then kicks away the ladder, often with acrimony. As Zack O’Malley writes in Empire State of Mind, “he has a habit of casting aside his teachers once he’s mastered their lessons.”

The drug dealer DeHaven Irby, who started Jay Z in the business, was the first to be cast aside – he claims Jay Z’s stories about hustling were in fact his stories. And the most notable example is Damon Dash, his former partner at Rocafella records. Dash helped him negotiated a sweet deal with DefJam that gave them 2/3 of the profits compared to the usual half. And critically it was Dash who taught the principles: “Don’t let people make money off us, and we shouldn’t give free advertising with our lifestyle.” In other words, if you mention product in your songs, make it your product. Jay Z bought out his old partner in 2004.

Whether this pattern continues with Roc Nation is yet to be seen. Certainly CAA is immeasurably more powerful than Dash or any street dealer, and Jay Z hasn’t come this far by making powerful enemies. And yet there are signs that he may have his eye on independence all the same. Sports agencies need certified contract advisors – a specific niche regulated by players associations – and initially Roc Nation relied on CAA for that end of the business. But that’s changing.

“They’ve signed their own contract negotiators, so that in the future they may not need CAA’s team,” says Heitner. “When the pie gets bigger, so do people’s eyes. In a few years, Roc Nation may be able to go it alone and compete with their former partner.”

For now, however, the marriage is strong and business is booming. The President of the Florida Panthers, just joined Roc Nation as Chief Strategy Officer. Robinson Cano is settled in Seattle. And Jay Z’s extraordinary American fable just marches forwards.

In Decoded, he writes that hip hop transforms everything it touches, including the corporate world: “It’s not about sitting behind the same desks and doing work the same way as the people that preceded us. Our goal is to take what we’ve learned about the world from our lives – and use it to remake the corporate world.”

He needn’t worry – his impact has already shaken up the sports world. As Leigh Steinberg says, “it was that lyric about Scott Boras that did it. Who else can criticize an agent and make it part of the culture?”