It’s easy to think that Jay-Z sold out when Iconix purchased the rights to the Rocawear brand in 2007. Perhaps he did, but if his business track record in the music industry is anything to go by, it may be more of a strategic business move rather than a pure cash-out.
Shawn Carter, more popularly known as the rapper, producer and hip-hop mogul Jay-z, may have sold Rocawear for $204 million in cash a few years ago but the terms of the deal had “contingent payments of an additional $35 million of Iconix stock based upon the brand surpassing certain pre-determined performance thresholds over the next three to five years.”
This means that he stands to earn a further US$35 million if Rocawear performs well over the next 3 to 5 years. In addition, from the US$204 million cash transaction, Forbes estimates that Jay-Z would receive about a quarter of the figure (about US$50 million) after “taxes and payable commitments”.
If he did only receive a net US$50 million from the sale, it would appear that a significant portion (ie. US$35 million) of the deal is still tied to the future performance of Rocawear.
Although he sold the brand, “Rocawear co-founder Jay-Z will be in charge of all product development, marketing and licensing for Rocawear. Jay-Z’s senior management team in licensing, marketing and product development will also join Iconix. He will retain his stake in the operating company that manufactures all of the Rocawear men’s apparel and his two partners in that business, Alex Bize and Norton Cher, will continue to run that company and enter into a long-term license agreement with Iconix for the core young men’s apparel category.”
Clearly, even though he has sold Rocawear, Jay-Z will still be very much involved in the Creative direction, operations and financial performance of the company.
When Jay-Z sold Rocawear to the Iconix in 2007, he commented, “Iconix is pioneering a new brand management model and by combining Rocawear with their platform, my team and I can focus on our strengths in design and lifestyle … I’m also looking forward to working with Neil Cole and the Iconix organization on other brand development opportunities.”
It appears that instead of purely ‘selling-out’, the king of hiphopreneurs may have been establishing a longer term business partnership when striking the alliance with Iconix in 2007.