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GUY RAZ, host:

Welcome back to ALL THINGS CONSIDERED from NPR News. I'm Guy Raz.

What started out as background sounds at small house parties in Harlem and the South Bronx 30 years ago is now a multibillion-dollar empire.

(Soundbite of song, "California Love")

2PAC (Rapper): (Rapping) Now, let me welcome everybody to the wild, wild West.

RAZ: Hip-hop has become big business, one of the biggest selling genres of music in the world. And a new book tells the story of how what was originally a person behind a few turntables and a microphone morphed into a way of life, a language, a style, a social and political expression and money, a lot of money.

Mr. DAN CHARNAS (Author, "The Big Payback: The History of the Business of Hip-Hop"): Sometime in the middle to the end of the last decade, BusinessWeek estimated that the hip-hop business had grown to, on the music side, about $1 billion a year, and on the fashion side, $2 billion.

RAZ: That's Dan Charnas. He's the author of "The Big Payback: The History of the Business of Hip-Hop." And in it, he describes the moment in 1979 when a fledging label called Sugar Hill started to move rap behind New York's five boroughs.

Mr. CHARNAS: One night, a woman named Sylvia Robinson, who was previously America's first female record producer - she had produced records in the 1960s for Ike and Tina Turner - she happened upon this stuff in a nightclub at a birthday celebration and had the thought to make a record out of it. And that record ended up being "Rapper's Delight" by a group...

RAZ: Wow.

Mr. CHARNAS: ...that she called The Sugarhill Gang, and it was not only a surprise hit, it literally became the bestselling 12-inch single of all time, back when music was sold on 12-inch pieces of vinyl.

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

THE SUGARHILL GANG (Music Group): (Rapping) I said a hip, hop, the hippie, the hippie, to the hip, hip, hop, a you don't stop the rock...

RAZ: Now, before long, there was a new crop of labels who specialized in rap, and they started to take over from Sylvia Robinson's Sugar Hill label. These were not black-owned, like Sugar Hill. They were called Profile, Tommy Boy, Def Jam. Explain how that happened, and how did Sugar Hill lose its market share?

Mr. CHARNAS: Well, the first thing is that Sylvia Robinson and her husband Joe Robinson weren't quite honest with the dispersement of their royalties, and they earned the ire of the artists who recorded for them.

I think some of it was hubris, too. There's a story in my book where a young concert promoter named Cedric Walker comes all the way from Atlanta, Georgia, to meet with Sylvia Robinson to try to convince her to do a rap tour that would involve not only the rapping but would also include break-dancers, and it would just be this sort of three-ring circus.

RAZ: This is in the early '80s.

Mr. CHARNAS: In the early '80s - a three-ring circus of hip-hop culture that he wanted to call the Thresh Fest(ph). She literally threw him out of her office, cursing at him. And what he did was he went back across the river to Manhattan and met with a second tier artist manager named Russell Simmons, who had just a starter group called Run-DMC, another artist named Kurtis Blow, and he agreed to do the Thresh Fest with Ricky Walker. And that became the first successful national rap tour.

(Soundbite of song, "The Breaks")

Mr. KURTIS BLOW (Rapper): (Singing) Well, these are the breaks. Break it up, break it up, break it up.

RAZ: Russell Simmons, of course, he's a legendary figure in the history of hip-hop, a guy who basically was the first mega-marketer, I guess you could say, right?

Mr. CHARNAS: Absolutely.

RAZ: Something like that. He teams up with Rick Rubin, he's white. They team up in the '80s. They basically create Def Jam Records.

Mr. CHARNAS: And what ends up making this Def Jam partnership work is that Rick brings the sort of creative engine. He's a record producer, a studio rat. Russell brings his mouth and his persistence and his absolute insistence on anything promoting his art.

RAZ: It was also, I guess in a sense, the marriage of sort of rock and hip-hop. I mean, Rick Rubin famously brings Aerosmith on to sort of back up Run-DMC in the track "Walk This Way," not only revitalizing Aerosmith's career, by the way, but it turns that song into a huge mega-hit.

Mr. CHARNAS: Do you know that the Run-DMC version of "Walk This Way" was more successful than Aerosmith's original?

RAZ: I didn't know that.

(Soundbite of song, "Walk This Way")

RUN-DMC and AEROSMITH (Music groups): (Singing) She start swingin' with the boys in the school, with your feet flyin up in the air.

Mr. CHARNAS: The mainstream forces had to be knocked over the head a couple of times over the years to get it. You know, every year there was a kind of a breakthrough hip-hop hit. It took three or four years to even convince MTV to go forward. And it took another three or four years for pop radio to embrace hardcore hip-hop and have the courage to play it during the day.

(Soundbite of song, "Walk This Way")

Unidentified Man #1: (Rapping) (Unintelligible)

RAZ: I'm speaking with Dan Charnas. He's the author of a new book. It's called "Big Payback: The History of the Business of Hip-Hop."

Dan Charnas, you tell an absolutely fascinating story in the book, and it's about how already in the early '90s, the music industry was really tilted in favor of label owners and not the artists.

But there were two people in the hip-hop world who helped sort of shift that balance, and I want to ask you about one of them in a moment, The RZA from the group Wu-Tang Clan. But first, I want to ask you about sort of this unlikely champion of hip-hop. This is an ad executive you write about named Wendy Day. She was white. She was 30, which was considered ancient in that world. What did she do?

Mr. CHARNAS: Wendy Day went to work for a company in Canada that sold to Seagram, and she ended up making, she says, almost a half-million dollars. And she was basically sitting on this wad of cash, wondering what to do with the rest of her life.

And she took this course on the pop music business from a man named Burt Padel(ph), who was at the time accountant to a lot of hip-hop stars. And he taught Wendy, and also Sean Puffy Combs, who attended that same class, about how onerous recording contracts were and how tilted the relationship was.

So Wendy Day decided that this is what she was going to do, that she was going to dedicate her life and her fortune to liberating rap artists from bad deals.

She quickly realized that she needed to do more than that, that she needed to help them get better ones. And she becomes instrumental in the landmark deals that Master P landed in the 1990s, Eminem.

The biggest deal she ever did was the deal for a label that has a lot of currency right now called Cash Money. They did an unheard of deal with Universal for 80 percent of the wholesale price and a $3 million advance against records that they hadn't even sold yet.

And Russell Simmons at the time was shocked. He said: I had to wait 10 years before I got a deal like this. And people are walking in and getting these deals right now.

RAZ: Tell me about how The RZA was involved. We've had him on the program, by the way. You talk about how he does something very, very clever.

Mr. CHARNAS: Yeah. Well, basically, what he insisted on was if he signed a deal for his group, which had eight to nine members at the time, that he was going to insist that he have the right to make separate solo deals for each of the members of the group, and this was unheard of at the time.

It was a clause in every standard recording contract where if I, a record company, bought your group's contract as an artist, and if the group split up, I would have the right to all the solo albums that possibly came out of that and at a lower rate.

And RZA turned that on his head. He found a record company to accept his terms and gradually sold off the solo artists to other record companies. Five years later, every single major record label, there were six at the time, had a stake in the Wu-Tang Clan's success, which...

RAZ: That's incredible.

Mr. CHARNAS: And it was - and you know how RZA is very fond of Eastern mythology...

RAZ: Yeah.

Mr. CHARNAS: ...and it was very Eastern because if one label succeeded, then all the other labels succeeded. and instead of artists clamoring to be stamped with the brand of Columbia Records or Sony Music, it was the labels that were clamoring to be stamped with the big Wu-Tang double disc.

(Soundbite of song, "Protect Ya Neck")

WU-TANG CLAN (Rap Group): (Rapping) The Wu is too slamming for these Cold Killing labels. Some ain't had hits since I seen Aunt Mabel. Be doing artists in like Cain did Abel. Now they money's gettin stuck to the gum under the table. That's what you get...

Mr. CHARNAS: To me, what that signifies is that for the first time, black artists were really not only embracing but insisting on their own self-worth, that they were sure of it and that they came to the table with leverage. And as a result, I think that changed, again, the metanarrative of this whole thing, the changing relationship between the races in this country. And hip-hop, I insist, played a huge role in that.

RAZ: That's Dan Charnas. He's the author of "The Big Payback: The History of the Business of Hip-Hop."

Dan Charnas, thank you so much.

Mr. CHARNAS: Thank you very much.

(Soundbite of song, "Run This Town"

RIHANNA (Singer): (Singing) Heeeey-hey-hey-hey-hey-heyyy we gonna run this town tonight.

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