15 May, 2014

How a gangsta becomes a billionaire

Melbourne Herald Sun, Thursday May 15, 2014

How do you make a billion? A lot of hard work - sure, but that's not enough. Talent? Definitely, but there are a lot of talented people around. Being smart and building on your ideas, that is a vital step.

Who would think the opportunity might be in the squalid streets of south-central Los Angeles? In among the street gangs and crack dens, a disaffected generation was creating its own music called gangsta rap, with its leading star Dr Dre.

He and his group NWA had hits, like the typical f- the police, but then he didn't slip back into the projects. He kept off drugs - "I think my thing was: if you ain't gonna make no money out of it, don't do it," is his philosophy. A good one in that environment.

He developed as a producer. He knew how to generate a great heavy-bass sound and raised artists like Eminem, Snoop Dogg, 50 Cent and fellow NWA, Ice Cube.

He gained a reputation as a perfectionist, working his performers and staff long and hard, while pushing himself even harder. Observed one artist, "When Dre walked in, it was time to work. All work and no play."

With his own record companies and walls-full of Grammies and awards, he did something clever with his money. He invested in himself.

Years of churning out hip-hop and rap made him familiar with the shortcomings of his audience's playing equipment. He wanted them to hear it as good as in the studio. So together with Jimmy Iovine of Interscope he created Beat Headphones - superior, distinctive, very expensive phones.

To persuade young adults to move from $10 ear pods to bulky phones at over $200 was no mean feat of marketing, believe me.

However, clever positioning, lots of hype and lots of social pictures with celebrities showing off their "b" logo headware, finally made Beats trendy; cultural icons, even.

But good marketing never stops there. The Doctor prescribed Beats in partnership with Hewlett Packard for laptop and tablet; deals with General Motors, for your Chrysler car; and the ideal accessory for your HTC mobile phone. In every case, the Beats made the product look cool. They even have their own New York City store.

Hey, why stop there? They're writing the music, singing, recording, playing, and putting it out through their speakers - what next?

Well, just as music downloads have sacked the record stores, they in turn have started to feel the heat of competition.

Spotify, Rhapsody, Rdio, have brought in the new phenomenon, streaming on subscription.

Are you following this? You don't pay to download a track, as with iTunes, you pay a subscription service which gives you the freedom of thousands of tracks, streamed so you don't get to keep them. This is where Beats Music launched, and it took off.

All these smart moves - the kind of marketing that was the hallmark of Steve Jobs - left Apple looking rather flat-footed.

Perhaps they recognised the footwork of a natural entrepreneur, but it has been only a year later and Apple can see how Beats can put some juice back into their iTunes. This is what has led to Apple's $3.4 billion bid.

The funky doctor seems quite taken by the idea which will net him personally $850 million. Together with his existing wealth this will take him close to billionaire status. Not bad for a boy from the 'hood.

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