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TERRY GROSS, host:

This is FRESH AIR. I'm Terry Gross.

Everyone who thought that rap music wouldn't last long was proven wrong. My guest, Dan Charnas, says the phenomenon of hip-hop can't be understood by just examining the lives of the artists because the culture could not have survived and thrived without the people who funded, promoted and sold it.

That's why Charnas' new book, "The Big Payback," is a history of the business of hip-hop. Some of the most influential hip-hop entrepreneurs are also performers, like Sean Combs, Kanye West and Jay-Z.

Charnas used to work in the hip-hop industry. He started in the mailroom of Profile Records in the 1980s, which was the home of Run-DMC. He became the label's rap, A&R and promotion manager and also worked for Rick Rubin as vice president of A&R and promotion at Def American.

Charnas wrote about hip-hop for the Source magazine and other publications and is a graduate of the Columbia School of Journalism.

Dan Charnas, welcome to FRESH AIR. You describe in your book how hip-hop went from street and party music to, you know, to recordings and radio play. And that story kind of starts with Sugar Hill Records and the track "Rapper's Delight." What was the importance of that recording?

Mr. DAN CHARNAS (Author, "The Big Payback: The History of the Business of Hip-Hop"): Well, it was a record that basically was the first of its kind and auspicious in that even though it was the first of its kind, it became a huge international hit, even bigger than the record that it actually sampled, which was "Good Times" by Chic.

Basically, it's a record that created an industry. Nobody thought that the stuff that was in the streets was even music. It was just stuff that people did at parties. But Sylvia Robinson, who co-founded Sugar Hill with her husband Joe Robinson, heard this stuff and had the notion that she could actually turn it into a record. And she did, and it was extremely successful, due in no small part to her own production genius.

GROSS: So she actually created the Sugarhill Gang. They were not a pre-existing trio of rappers. How did she put the group together?

Mr. CHARNAS: That's right. She wanted to, I think, work with Lovebug Starski, who was the first rapper that she ever heard, but when she didn't hear back from him, she had her son Joey Jr. basically put together this crew of people from suburban New Jersey who weren't really tied to the scene. They weren't known across the river in the Bronx and in Harlem.

And so she had this sort of make-shift audition outside of a pizza parlor in Inglewood and put these three guys together who had never met each other before, had the backing track all ready, again a replaying of Chic's hit "Good Times," and created this record in a matter of minutes.

GROSS: So let's hear the opening of "Rapper's Delight." Tell us what you think really stood out when this came out in - was it '78, '79?

Mr. CHARNAS: '79, summer of - actually late summer of '79, I believe September of '79.

GROSS: So what made this stand out when it was...

Mr. CHARNAS: Well, the defining line for me in that opening is: What you hear is not a test. I'm rapping to the beat. And me, the crew and my friends are going to try to move your feet.

What he's saying is that what you're about to hear, these guys talking on top of this music, is something new and something that you've never heard before. And it occurs to me that he felt that he had to try to explain what this new phenomenon was.

And, of course, this is something that people had to explain not only in this first record but in record after record after record until the mainstream establishment finally got that this was something that was really important.

GROSS: OK, so here's "Rapper's Delight" by the Sugarhill Gang, recorded in 1979.

(Soundbite of song, "Rapper's Delight")

THE SUGARHILL GANG (Rap Group): (Rapping) I said hip, hop, the hippie the hippie, do the hip, hip, hop, and you don't stop, the rocket to the bang, bang, boogie, say up jumped the boogie to the rhythm of the boogie beat.

Now what you hear is not a test. I'm rapping to the beat. And me, the groove, and my friends are going to try to move your feet. See I am Wonder Mike, and I'd like to say hello to the black, to the white, the red, and the brown, the purple and yellow. But first I got to bang, bang the boogie to the boogie, say up jump the boogie to the bang, bang boogie. Let's rock, you don't stop. Rock the riddle that will make your body rock. Well so far you've heard my voice, but I brought...

GROSS: So that's the first real rap record that made it onto radio that sold, and boy did it sell.

Mr. CHARNAS: That's right.

GROSS: And it's a big part of the story in the new book "The Big Payback: The History of the Business of Hip-Hop" by my guest Dan Charnas.

So - now one of the things about this record that I think infuriated a lot of people in the hip-hop world was that one of the rhymes in this was actually taken from a different rapper. Would you tell the story?

Mr. CHARNAS: Well, one of the guys in the group, Big Bang Hank, he was, I guess you could call him either a roadie or a manager for the Cold Crush Brothers, who were a very well-known and very well-respected crew in the Bronx, who had no records.

And, I mean, there weren't any rap records at the time. So when Ms. Rob, Ms. Robinson, you know, told Big Bang Hank she wanted to make this record, he went back over to Grandmaster Caz, who was on the lyricists in the Cold Crush Brothers, and said: Do you mind if I borrow a few of your rhymes?

And Caz basically threw his lyric book at Hank and said, here, use whatever you want. Because the notion of a rap record was so ridiculous to everybody. Who thought that it would amount to anything, especially Hank, who wasn't an MC at all.

GROSS: So should we hear that part of the record, where he takes Casanova's rhyme?

Mr. CHARNAS: Sure.

GROSS: OK.

Mr. CHARNAS: And he says his name.

GROSS: He acts like he's Casanova?

Mr. CHARNAS: He says: I'm a C-A-S-N-O-V-A. And it was literally his rhyme. He didn't even bother to change, you know, change the name.

GROSS: OK, here it is.

(Soundbite of song, "Rapper's Delight")

THE SUGARHILL GANG: (Rapping) Check it out. I'm the C-A-S-N, the O-V-A, and the rest is F-L-Y. You see, I go by the code of the doctor of the mix, and these reasons I'll tell you why. You see, I'm six-foot-one and I'm tons of fun, and I dress to a T. You see, I got more clothes than Muhammad Ali, and I dress so viciously. I got bodyguards, I got two big cars...

GROSS: OK, that's another part of "Rapper's Delight" by the Sugarhill Gang. And my guest, Dan Charnas, is the author of the new book, "The Big Payback: The History of the Business of Hip-Hop."

OK, so the Robinsons with their record label, Sugar Hill Records, brought rap music to the radio, to the record store. But what did the artists who recorded for the record label think of the label and of the two people who ran it?

Mr. CHARNAS: I think that very quickly, people felt taken advantage of by the Robinsons. You know, the Robinsons operated much like a lot of operators in the indie record world, you know, operating on kind of a shoestring budget, betting their own money on the possibility of success and really holding on to cash and not necessarily giving the kind of accountings that a more corporate company would.

I think that they were seen as greedy, seen as interlopers and very quickly got a very bad reputation in the quote-unquote real hip-hop world.

GROSS: Did the performers get royalties on their record sales?

Mr. CHARNAS: I don't believe that they did. I think they had to ask for everything they got after their initial advance, if they got an advance at all. And I think that according to the research and the anecdotes that I've collected, I think that for the most part, artists had to beg for any moneys that they got, and it was given grudgingly.

GROSS: Did they take - did the Robinsons take songwriting credits or...

Mr. CHARNAS: They did, and the most famous of those credits were for "Rapper's Delight," in which the musical track was lifted from Nile Rodgers and Bernard Edwards, who wrote the original song "Good Times," and those two writers had to sue and eventually won credit for that song.

GROSS: So how long did Sugar Hill's prominence last in the hip-hop world?

Mr. CHARNAS: Well, Sugar Hill basically had kind of a lock on the business in the early 1980s, which I believe they kind of frittered away over the years, partly because of the bad reputation that they developed for paying artists and partly, I think, hubris.

There's a story in the book of a young concert promoter from down south named Cedric Walker(ph). And Cedric has this idea that he, he's going to create this sort of three-ring circus of hip-hop that includes DJ'ing and MC'ing and break dancing.

And he wants to get Sylvia Robinson excited about this concept. So he flies on his own dime to New York, he goes to Sugar Hill's offices, he meets with Sylvia Robinson. And she literally curses him out and throws him out of the office, saying: Why do I need you for? I was the first person to put a rap act on tour.

Cedric Walker walks out of this meeting, he goes back across the river, and his Plan B is to talk to this minor, lesser artist-manager by the name of Russell Simmons, who has some budding rap acts like Houdini and Run-DMC. And so it's Russell Simmons who gets to make this deal with Ricky Walker, and that tour idea eventually becomes the Fresh Fest, which was the first successful national rap tour and in a way symbolizes how Sylvia Robinson and Joe Robinson and Sugar Hill were eclipsed by people like Russell Simmons.

GROSS: My guest is Dan Charnas, author of the book "The Big Payback: The History of the Business of Hip-Hop." We'll talk more after a break. This is FRESH AIR.

(Soundbite of music)

GROSS: Let's get back to our interview with Dan Charnas about his new book "The Big Payback: The History of the Business of Hip-Hop."

You say if you heard a rap record on the radio in 1984, Russell Simmons had something to do with it. Some examples?

Mr. CHARNAS: That's right. Russell Simmons obviously was the manager and producer of Run-DMC, Run of Run-DMC, is his brother Joe. He was the manager of Houdini, another successful rap act on Jive Records. And Curtis Blow, another -was the first rapper signed to a major label. That was Russ' first client.

So most of the stuff that you heard on radio that was popular, that was Russell. Russell had basically made himself into the first person who cared to develop rap artists from the management side.

GROSS: How is that different, developing them from the management side, from what Sugar Hill had done?

Mr. CHARNAS: I think Sugar Hill basically was - I think they saw themselves as riding out a fad. I don't think that they had any particular belief that this was a powerful culture that had staying power.

I mean, we had just come off of the disco era, which, you know, turned out to be very, very short-lived. And I'm sure that a lot of people, including Sylvia and Joe Robinson, thought that the same would happen to this rap stuff.

The difference was that Russell Simmons actually did not like the records that Sugar Hill was turning out because they didn't sound to him like the hip-hop that lived in the streets and in the parks and in the clubs, which was very raw, very beat-oriented and didn't sound like disco at all.

And so Russell Simmons' key innovation, when he made Run-DMC's first record, was to basically order his producer-partner Larry Smith to take out all the music - I just want to hear a beat. So it's just two guys rocking over a beat box with some DJ scratching in between. That was unheard of, and a record like that had never been done. That, I think, really changed the game musically and is a great sort of separation point or turning point between the Sugar Hill era and the era that followed.

GROSS: And that first record that Russell Simmons produced for Run-DMC was "It's Like That." So why don't we hear it?

Mr. CHARNAS: Indeed.

GROSS: Is there anything else you want us to listen for?

Mr. CHARNAS: Well, "It's Like That," I would just say that "Sucker M.C.'s" actually was the B-side for that, which was even more radical in many ways than "It's Like That" because "Sucker M.C.'s" was literally - "It's Like That" had these little keyboard stabs in it, and "Sucker M.C.'s" had basically nothing in it but that beat and scratching. Like, that was one of the first times that you actually heard scratching on a record used for percussive effect.

GROSS: Should we hear that instead?

Mr. CHARNAS: I think that'd be great.

GROSS: OK.

Mr. CHARNAS: I love that record.

GROSS: Let's hear it.

(Soundbite of song, "Sucker M.C.'s")

RUN-DMC (Rap Group): (Rapping) Years ago, a friend of mine asked me to say some MC rhymes. So I said this rhyme I'm about to say. The rhyme was def and then it went this way: Took a test to become an MC and Orange Krush became amazed at me. So Larry put me inside his Cadillac. The chauffeur drove off and we never came back.

Dave cut the record down to the bone, and now they got me rocking on the microphone. And then we talking' autograph, and here's the laugh, champagne, caviar, and bubble bath. But see ah, ah that's the life, ah that I lead, and you sucker MC's is who I please.

So take that and move back, catch a heart attack because there's nothin' in the world, that Run'll ever lack. I cold chill at a party in a b-boy stance, and rock on the mic and make the girls wanna dance, fly like a dove that come from up above. I'm rocking' on the mic and you can call me Run-Love.

GROSS: That's Run-DMC, and my guest is Dan Charnas, author of the book "The Big Payback: The History of the Business of Hip-Hop."

So, you know, you were talking about how one of the things Russell Simmons wanted to do and succeeded in doing was stripping away the music and the disco from hip-hop recordings and making it more like it sounded at parties and on the street and reducing it to, like, the beat and scratching.

And you talk about how he did similar things with his sense of what hip-hop performers should be wearing.

Mr. CHARNAS: Wow, yeah, absolutely. Russell also felt that hip-hop should sound like itself. It should also look like itself. And in many ways, he stripped hip-hop of its, I guess you could call it, disco artifice, show-biz artifice.

I think a lot of earlier hip-hop performers from the Bronx, they dressed up in shiny suits and go-go boots and cowboy fringes and other kinds of things that were really fantastical, whereas Run-DMC, they were dressed in, you know, sweat suits, stuff that they might wear on the streets.

Now, you know, it was a stylized version of what kids were wearing, but nevertheless, it was something that was more authentic to what hip-hop was and ironic because that hip-hop, that authenticity came from Queens, which was considered the suburbs, not from the Bronx or Harlem.

GROSS: Though Queens had become pretty urban.

(Soundbite of laughter)

Mr. CHARNAS: That's correct, that's correct. But to the folks in the Bronx, that was the country.

GROSS: OK, fair enough. So how did Russell Simmons hook up with Rick Rubin and form their partnership with Def Jam Records?

Mr. CHARNAS: Well, Rick Rubin was a college student, I think a junior at the time at NYU, who heard "Sucker M.C.'s" and "It's Like That" by Run-DMC and was inspired to make his own record because he had the same thought.

He had only heard rap on records, but when he finally moved into the city as a young freshman and saw this stuff as it played out in the clubs, he said, this stuff is so much better live. Why can't we make a record that sounds like hip-hop does live, a DJ scratching, MCs over beats?

And so he created a song called "It's Yours." And the irony was he wanted to make it with a group called the Treacherous Three, who were signed to Sugar Hill. Because they had exclusivity with Sugar Hill, he had to make it with the brother of one of the people from the Treacherous Three, who was T La Rock.

Russell Simmons hears this record and goes bonkers. He loves it, and he wants to know who did the record. And when he finally meets this person who did the record, he doesn't believe that this white, Jewish college student actually made that record because, he says, it's the blackest record I've ever heard.

GROSS: So let's hear that track that you're talking about that Rick Rubin produces and Russell Simmons loves, "It's Yours."

(Soundbite of song, "It's Yours")

T LA ROCK (Rapper): (Rapping) Commentating, illustrating, description giving, adjective expert. Analyze a song by the musical mystic and people love the universe. It is yours. It's yours. Do you like it? Do you want it? And if you had it, would you pawn it? Well, it's yours.

Taking a record that's already made with the help of the mix boys, using the cross fade. Rhythm...

GROSS: That's "It's Yours" by T La Rock, and my guest is Dan Charnas, author of the new book "The Big Payback: The History of the Business of Hip-Hop."

So in some ways, they're a very unlikely combination, but they get together. And what roles did they each play in the new partnership of Def Jam Records?

Mr. CHARNAS: I think that Rick was the studio rat. He was the guy who was going to really be a hands-on producer and visionary for the records themselves. He was a great A&R man. He had an ear for talent.

Russell Simmons, his strong suit was promotion. Russell talked and talked and talked until people listened to him, and he talked some more until he convinced them of what he wanted them to do. And he talked some more until they became his friends and wanted to do anything they could for him.

And that was - that combination was the success behind the record company that they partnered on, which was called Def Jam, which basically became the first rather, it wasn't the first, but it was the successor to Sugar Hill as far as being the dominant rap brand but ended up having tremendous staying power over the years.

GROSS: And it was a rap label that was headed by people who were deep into rap. It just wasn't another way of keeping a label alive or of making money. They loved this. This was their lives.

Mr. CHARNAS: That's the most important point, too. It was a label made by and for rap fans.

GROSS: So you describe Def Jam as turning nine minute toasts, you know, like the early hip-hop recordings, to three-minute songs with classic pop structure: verse, bridge, chorus. So what was the force responsible for making this into a more pop form? Was that Rick Rubin, do you think?

Mr. CHARNAS: I think that, you know, it's equal parts Rick and the intelligence of the artists with whom he worked. You know, these were people who grew up on pop music themselves and perhaps saw themselves - had a bit more aspiration than the folks who just wanted to rhyme and rhyme and rhyme. So I think it was definitely a collaboration.

But what came out of it was a completely new vision for what hip-hop could be. And I think it was that work that really solidified the idea in many fans of this - in the minds of many fans of this music that hip-hop could be the next rock 'n' roll.

GROSS: Dan Charnas will be back in the second half of the show. His new book is called "The Big Payback: The History of the Business of Hip-Hop." I'm Terry Gross, and this is FRESH AIR.

(Soundbite of music)

TERRY GROSS, host:

This is FRESH AIR. I'm Terry Gross back with Dan Charnas, the author of the new book "The Big Payback," about the history of the business of hip-hop and the people who funded, promoted, and sold the music. Charnas is a journalist who's covered hip-hop and used to work in the industry. He was vice president of A&R and promotion at Rick Rubin's Def American.

When we left off, we were talking about the label that Rick Rubin and Russell Simmons used to run together, Def Jam Records.

So there is a third person that enters the partnership with Russell Simmons and Rick Rubin and that's Lyor Cohen and what's his role in their business?

Mr. CHARNAS: Lyor Cohen is a concert promoter in Los Angeles who basically, according to Russell, just shows up on his doorstep one day saying, I want to come work for you. Although, Lyor has a different story. He says that Russell offered him a piece of the company.

But Lyor quickly begins to earn Russell's trust on the management side, which is Rush Artist Management, which is Russell's management company, which is the flipside to the record company, Def Jam. And Lyor quickly ends up being able to make a lot of money for Russell on the management side. He not only shepherded Run-DMC as a tour manager through Europe and basically created some deals whereby Russell could leave Cedric Walker behind them to Def Jam tours instead of the Fresh Fest tours, but he also arranged one of the first, if not the first, merchandising deals for rap artists with Winterland Company and the first endorsement deal with Adidas for Run-DMC.

But Lyor is primarily a businessman and Rick Rubin is primarily an artist, so when - where they came into conflict was in issues over Def Jam artists who were also Rush clients, like Run-DMC and the Beastie Boys. And very quickly it devolves into a situation where the two of them are arguing a lot and Russell...

GROSS: About what? What were their differences?

Mr. CHARNAS: Well, one example in the book is how Rick Rubin wanted the Beasties to do a movie but he wanted to be the one to control how it was rolled out because he didn't trust Hollywood to do anything but make a mockery of the Beastie Boys. Whereas, Lyor Cohen just charged ahead and started making, you know, arranging meetings for the Beastie Boys out in Los Angeles, which Rick quickly found out about and basically said if they take any deal that I'm not a part of or I'm not in control of, I will not allow the Beasties to use their own music or perform in this movie.

So that was a big bone of contention between Rick and the group, between Rick and Lyor, and Russell was sort of caught in the middle of it and at one point he turns to Bill Adler, the publicist for Rush and laments, my Jews are fighting.

(Soundbite of laughter)

GROSS: So who won the fight?

Mr. CHARNAS: I think that Rick basically just surrendered. I don't think that he wanted to fight Lyor Cohen or fight Russell, because Russell and Rick also had very differing musical tastes and I don't think that Rick liked any of the things that Russell was bringing to the label. So at a restaurant nearby Def Jam's offices, the Noho Star, Rick takes Russell out and says, listen, I want to remain friends but I think the only way to do it is if we are not working together anymore. So do you want to leave the company and leave it to me? And Russell says no. And Rick says, OK, I guess I'll leave.

And he left. He went to California and left the whole company behind and left the lawyers for years and years to work out the disengagement or divorce agreement between the two of them.

GROSS: And then he leaves hip-hop, too, and instead produces heavy metal and eventually ends up doing, like, you know, Johnny Cash's stripped-down recordings, that great American music series. And when Rick Rubin leaves hip-hop, you quote him as having said, and I'm paraphrasing here, that hip-hop isn't any longer about art, it's about getting paid.

Mr. CHARNAS: That right. That's what he told me when I started to work for him too, that he felt that one of the reasons he left hip-hop - he said hip-hop didn't - I'm not leaving hip-hop, hip-hop left me.

GROSS: Did you share his feelings, though?

Mr. CHARNAS: I didn't because I think that there was a lot about hip-hop that Rick didn't understand at the time. He didn't understand political hip-hop. He didn't understand the new sort of digitally sampled hip-hop that relied a lot on the music of James Brown, which was very soulful and very funky and not very - didn't feel very rock oriented and I think Rick liked the rock aesthetic in hip-hop.

GROSS: If you're just joining us, my guest is Dan Charnas, the author of the new book "The Big Payback: The History of the Business of Hip-Hop."

Now you write a little bit about the RZA of the Wu-Tang Clan.

Mr. CHARNAS: Mm-hmm.

GROSS: Before we go any further, choose one of your favorite records by the RZA or by the Wu-Tang Clan and we'll play it.

Mr. CHARNAS: I think the one we've got to listen to is "Protect Ya Neck" because that was the record that they did on their own. And in response to -the record was a response to basically RZA and his cousin the GZA being dropped off of two Time Warner owned labels and having to pick up the pieces themselves and that's a big story in "The Big Payback."

GROSS: OK. So here's "Protect Ya Neck."

(Soundbite of song, "Protect Ya Neck")

WU-TANG GANG (Hip-hop group): (Rapping) So what's up man? Cooling man. Chilling, chilling? Yo, you know I had to call, you know why right? Why? Because, yo, I never ever call and ask, you to play something right? Yeah. You know what I wanna hear right? What you wanna hear? I wanna hear that Wu-Tang joint. Wu-Tang again? Ah yeah, again and again.

(Soundbite of fighting)

Wu-Tang Clan coming at you, protect your neck kid, so set it off the Inspector Deck. Watch your step kid. Watch your step kid. Watch your step kid. Watch your step kid. Watch your step kid. Watch your step kid.

Smoke on the mic like smoking Joe Frazier. The hell raiser, raised hell with the flavor. Terrorize the jam like troops in Pakistan. Swinging through your town like your neighborhood Spiderman. So, tick tock and keep ticking. While I get you flipping off the (bleep) I'm kicking. The Lone Ranger, code red, danger. Deep in the dark with the art to rip charts apart. The vandal, too hot to handle your battle. You're saying "Goodbye" like Tevin Campbell. Roughneck, Inspector Deck's on the set. The rebel. I make more noise than heavy metal.

The way I make the crowd go wild, sit back relax won't smile. Ray got it going on, pal, call me the rap assassinator. Rhymes rugged and built like Schwarzenegger. And I'm going to get mad deep like a...

GROSS: So that's the Wu-Tang Gang, "Protect Ya Neck." And how did you think that the RZA to the Wu-Tang Clan changed the business model of hip-hop?

Mr. CHARNAS: I love his story. Essentially, he and his cousin were signed to record labels owned by Time Warner and dropped after their first records were not successful. And what RZA did, whether consciously or unconsciously, is basically claimed his power. He said that I'm going to create a super group out of all of these folks, the tempest-tossed of the record business, if you will.

And instead of trying to get a deal with a label just like I have and just like every rapper wants, I'm going to start my own thing. And instead of making a deal with one label, I'm going to deal with them all and not only deal with them all but deal with them as a sovereign.

So what he does is he asks labels, in order to deal with the Wu-Tang Clan, which is a huge, sprawling eight to nine member group, he says you have - in order to deal with my group, you have to allow me to sign the individual members of this group to their own separate deals for solo deals. And this was unheard of in the record business. Record contracts have this clause in them call the leaving member clause which entitles anybody who invests in a group, any label who invests in a group to, if that group should break up, that label is entitled to retain the rights to record the individual members. And usually at a lesser rate.

But because this record was so hot in the streets, this one single, "Protect Ya Neck," RZA was able to actually get RCA to waive the leaving member clause of the Wu-Tang Clan's contract. So he was able to sign Method Man to Def Jam and he was able to sign Ol' Dirty Bastard to Elektra and GZA to Geffen Records. And within five years, all of the six major labels at the time had a stake in the success of the Wu-Tang Clan.

And that's huge because what it is, it's the turnabout of the relationship between the artist and the record label. Instead of artists seeking out the opportunity to be branded by Columbia Records or Elektra Records, it's Elektra Records and Colombia that are seeking out, they want to be branded by the market, the W. And that's one of the untold stories of the success of the Wu-Tang Clan.

GROSS: My guest is Dan Charnas, author of the new book "The Big Payback: The History of the Business of Hip-Hop."

We'll talk more after a break. This is FRESH AIR.

(Soundbite of music)

GROSS: Let's get back to our interview with Dan Charnas, about his new book "The Big Payback: The History of the Business of Hip-Hop."

So let's jump ahead to Jay-Z and where you see him as fitting into the business of hip-hop.

Mr. CHARNAS: Well, when you talk about Jay-Z, it's important not to leave out the contributions of his first partner, Damon Dash. Jay-Z and Damon Dash were in many ways a sort of a perfect yin yang partnership that Rick Rubin and Russell Simmons were for Def Jam.

You know, Jay was quiet, deliberate, an artist and concerned with making the music and the lyrics the best they could be. He was concerned with image as well. Damon Dash was loud and brash and insistent and entitled. And one of the great stories from their partnership is just after Jay-Z has his first few hit records, Damon Dash goes to a clothing company called Iceberg, Iceberg Jeans, and he says we'd like to get an endorsement deal. And Iceberg says well, you know, we're really not interested in Jay-Z, not the kind of person that we want representing our brand. And Damon says oh, really? OK. Fine. I'm going to start my own clothing company. I'm going to put you guys out of business.

And that is the inception of Rocawear, which becomes Damon Dash and Jay-Z's clothing company and essentially a much more valuable company then Roc-A-Fella, their record label, ever was. And Rocawear was largely Dam's baby. And when Jay and Dam began to quarrel in the mid-2000s, Dam was eventually forced out of that partnership. But that clothing company, Rocawear, became Jay-Z's retirement plan.

GROSS: Not the record company but the clothing company.

Mr. CHARNAS: That's right, Rocawear. Mm-hmm.

GROSS: So where else does Jay-Z fit in businesswise?

Mr. CHARNAS: Well, I think after sort of Dam set the basis for Jay, I think Jay sort of took the, you know, took the ball and kept running with it. Essentially, the Roc-A-Fella ethos was that hip-hop can be everything to its fans. It's not just music, it's not just entertainment even, but it can be the clothes that they wear, it can be the language that they speak, it could be the books that they read, it can be even the money that they spend, right, because Russell Simmons eventually does the RushCard, right, the Visa card for the hip-hop generation.

So I think Jay really is a product of that and acts according to that ethos. So he ends up diversifying into nightclubs and owning part of a sports team and a cosmetic line and then his landmark deal with Live Nation, a joint venture deal with Live Nation for most of his entertainment products.

GROSS: You know, I've always wondered, there's a number of people in the hip-hop recording industry who, you know, some of whom are performers who have become so big as entrepreneurs. And I think more so than in any other kind of music this has been a phenomenon of hip-hop and I'll include Russell Simmons, Sean Combs, Jay-Z, and I'm wondering if you've given any thought to why the entrepreneurial thing is so big in the hip-hop world?

Mr. CHARNAS: Sure. Because when you're shut out, you have to create your own institutions. So if you're shut out of the discos, you go out into the streets and the parks and you create your own thing, and if you're shut out of the major labels you create your own independent labels. And if you're shut out of the clothing companies, then you create your own clothing companies.

I think one of the great contributions of hip-hop to America is the fostering of this entrepreneurial ethos. And along with that, a sense of self-worth, a sense that, you know, I have leverage, that what I produce is worth something and I'm not going to settle for less. And that's a theme that you see over and over and over in hip-hop but really started to come to fruition with the Wu-Tang Clan, with Damon Dash and Jay-Z and Roc-A-Fella and Rocawear.

GROSS: So you have hip-hop basically developing its own business model and its own kind of industry, because they were shut out of the previously existing parts of the record world and radio and discos and so on. But eventually, like, the people in hip-hop start fighting with each other...

Mr. CHARNAS: Yeah.

GROSS: ...and there's feuds, there's shootings, and it gets really ugly at times.

Mr. CHARNAS: Mm.

GROSS: And you've worked in the hip-hop world, you know, in the business, in the A&R end, and I'm wondering why you think it got to that point.

Mr. CHARNAS: Well, I would actually hearken back to something that Jay-Z said when you interviewed him on FRESH AIR. He said that, you know, just because I sign this recording contract and I'm now in this world doesn't mean I'm leaving the world that I just left behind automatically. I think that a lot of folks came from a very hardscrabble existence. And because of that, you know, there were all these tensions and sort of the quick resorting to violence that you have out in the streets. I think it took folks like Sean Combs and Shawn Jay-Z Carter a while before they realized that, you know, they had lawyers to deal with their problems. They didn't have to use their fists or weapons.

GROSS: You wrote your thesis on musical apartheid in America. Was this a masters thesis or?

Mr. CHARNAS: It was my senior thesis at Boston University.

GROSS: OK. So do you see hip-hop as a force that has racially brought young people more together or that has been more divisive?

Mr. CHARNAS: Absolutely. I mean I wrote that thesis in 19...

GROSS: Wait, absolutely which?

(Soundbite of laughter)

Mr. CHARNAS: Oh, sorry. Absolutely, yes, it has brought America together in terms of race and ethnicity as never before. It's hugely important.

When I wrote that thesis in 1989, one of the things I said at the end of the thesis was that hip-hop has the potential to end this process of what I called ambivalence. White America's relationship to black culture over the course of 400 years was sort of a simultaneous attraction and repulsion and that that repulsion was slow, and that sort of racist impulse was slowly being overcome by the attraction. And you could see it in the jazz movement of the early 20th century and then in rock 'n' roll and rhythm and blues in the 1950s and 1960s, which in many ways set the foundation for the civil rights movement and for white support of it, right?

What hip-hop did in the 1980s and 1990s as it became mainstreamed was, I think, prep a new generation for this multicultural meritocracy, for a nation in which we meet each other as cultural equals, as intellectual equals. And, more importantly, not have to be exactly like each other in order to meet each other that way.

And in no small way, I think hip-hop contributed to a young generation of white kids being able to vote for somebody like Barack Obama, and also prepared a generation of black kids to take the reins of power, through entrepreneurship, through politics, just through the use of their voice and the use of their pen.

GROSS: Well, Dan Charnas, thanks so much for talking with us.

Mr. CHARNAS: Thank you for having me.

GROSS: Dan Charnas is the author of the new book "The Big Payback: The History of the Business of Hip-Hop." You can read a chapter and find links to FRESH AIR interviews with Jay-Z, Rick Rubin, Russell Simmons and Run-DMC's Darryl McDaniels on our website, freshair.npr.org.

Here's Jay-Z with a very successful track from an album released on Jay-Z's own label.

(Soundbite of song, "Empire State of Mind")

JAY-Z (Musician): (Rapping) Yeah. Yeah, I'm up at Brooklyn. Now I'm down in Tribeca, right next to De Niro, but I'll be hood forever. I'm the new Sinatra and since I made it here, I can make it anywhere, yeah, they love me everywhere. I used to cop in Harlem. All of my Dominicanos, right there up on Broadway, brought me back to that McDonalds, took it to my stash spot, 560 State Street, catch me in the kitchen like a Simmons whipping pastry. Cruising down 8th Street, off white Lexus, driving so slow but BK is from Texas. Me, I'm up at Bed-Sty, home of that boy Biggie. Now I live on billboard, And I brought my boys with me. Say what up to Ty Treasury. Still sipping Malta. Sitting courtside Knicks and Nets give me high fives. I'm spiked out, I can trip a referee, tell by my attitude that I most definitely from.

Ms. ALICIA KEYS (Musician): (Singing) In New York, concrete jungle where dreams are made of, there's nothing you can't do. Now you're in New York...

GROSS: Looking for good books to give as gifts or to read yourself? Coming up, our book critic Maureen Corrigan talks about her favorite books of the year.

This is FRESH AIR.

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