3 Kings

by Zack O'Malley Greenburg

  “Jay is somebody who takes large risks and makes big bets, and day to day shows up at the office, and has opinions,” says Genius cofounder Zechory. “He’s not just sort of throwing his name on it.”49

  And now, more than a decade after putting an end to his beef with his chief rival, Jay-Z seems set to battle Nas not for the King of New York title, but for Silicon Valley supremacy.

  Aside from Beats, Dre’s most notable tech investment happened as part of his headlining gig at the Coachella music festival in 2012. That year, he brought a host of old friends—including Snoop Dogg, Eminem, and 50 Cent—to the stage in front of a crowd estimated at a hundred thousand. But the star of the show was Tupac Shakur, in the form of a Dre-funded hologram-like illusion that moved and sounded so much like the late rapper that some wondered if he’d never died.

  The virtual resurrection might not have happened if it wasn’t for Beats. Concert promoter Goldenvoice, a subsidiary of live-music giant AEG, had just expanded the festival to two weekends but didn’t yet have a headliner for the second. As the date approached, Jimmy Iovine caught wind of the situation and invited Dre and Coachella founder Paul Tollett to his home in Holmby Hills. By this point, Dre hadn’t toured in ages, so he didn’t have a traditional agent or manager to handle the negotiation—Iovine took care of that (and didn’t charge a commission).50

  “Jimmy helped convince him, and that’s how that happened,” says Randy Phillips, AEG’s chief at the time. “He’s a branding genius. I’m sure he thought it would only make Dre hotter, which made Beats hotter… That was his motivation, other than he thought it would be a great piece of entertainment.”

  Phillips couldn’t reveal the precise dollar amount Dre received for his set but confirmed that it was “into the multiple millions.” For Dre, though, the performance fee wasn’t a major motivation. “Dre’s such a perfectionist,” says Phillips. “He really wanted it to be something that no one’s ever done before.” In fact, given what Dre paid to develop the hologram, Phillips believes that the superproducer simply broke even on the show.

  It may be hard to understand how a performance could be so pricey to stage, but there were quite a few moving parts. The details of Shakur’s image were crafted by Digital Domain, the Hollywood effects house behind Brad Pitt’s reverse-aging character in The Curious Case of Benjamin Button, and the image itself was brought to life with an old trick used in theater. An overhead projector splashed the image of Shakur onto a tilted piece of glass on the floor, which reflected it up through a Mylar screen to create the illusion of a three-dimensional human.51

  Dre spent both cash and time tweaking the ersatz Shakur with its creators; on top of that, he shelled out to bring living guests to the Southern California desert. Interestingly, Dre had wanted the release of his long-rumored album Detox to coincide with the groundbreaking Coachella moment; according to a ghostwriter who worked with him at around the same time, he had—and still has—“hundreds” of completed tracks in his vault. But Dre couldn’t identify an album’s worth that satisfied him. So he shelved Detox, it seems, for good.

  One could say that Dre did bring new music with him—in the form of Kendrick Lamar. Dre had taken the up-and-coming Compton rapper under his wing, opening doors for Lamar after Top Dawg Entertainment, the independent label he’d gotten his start with, signed up with Interscope/Aftermath. While recording his major label debut with Dre, Lamar immediately identified something that the producer, now infinitely wiser and more circumspect than he’d been in his reckless 1990s days, brought to the table: leadership.

  “That’s probably one of the best qualities you can have when you have these young kids all around you in the studios, trying to create,” Lamar told me at the end of an interview for a 2015 Forbes story. “When you have leadership, you have people that actually genuinely care about you and your well-being and your growth, not only in the industry, but as a person.”52 Lamar’s manager, Dave Free, added anecdotes about Dre giving his young charge instructions both vocal (“You should be more aggressive here… Pronounce the word this way”) and strategic (to make songs eternal, “you should never say dates”).53

  The tutelage paid off, lyrically and financially: Lamar made his Coachella debut in 2012, performing “The Recipe” with Dre. The song was the first single on Lamar’s album Good Kid, M.A.A.D. City, which would go on to earn platinum certification and Grammy nominations for Best New Artist, Best Rap Performance, Best Rap Album, and Album of the Year. Though he didn’t win any in his first go-around, Lamar picked up six golden gramophones for his subsequent album, To Pimp a Butterfly.

  The Coachella performance by Dre and his guests—living and otherwise—was the highlight of the festival, prompting Phillips to try to coax Dr. Dre into doing a world tour. The superproducer declined. When Phillips encountered Dre sitting one row behind him at a staging of The Book of Mormon in Los Angeles in 2014, he figured he had to give it one last shot. Dre knew what Phillips wanted even before he opened his mouth.

  “Oh no,” said Dre with a chuckle. “Not you again.”54

  Phillips pestered Dre throughout the evening, but no matter how much money he offered, the Beats cofounder turned him down.

  “He would have gotten a hundred, a hundred and fifty million dollars guaranteed for a world tour,” says Phillips with a shrug. “He doesn’t need the money.”

  As Troy Carter and I wind down our conversation in Culver City, we touch on the reason Dre doesn’t need any more money: Beats, which is probably hip-hop’s most successful startup thus far, and its corporate parent, Apple, which arguably holds the same distinction in the tech world.

  I point out a paradox in the companies’ intertwined history: that Apple probably wouldn’t have purchased Beats, a headphones-and-streaming company, if Steve Jobs had still been around in 2014, because the Apple founder didn’t believe that streaming would work.

  “I had that conversation with Steve,” Carter begins.55

  “What did he say?” I ask.

  “‘People don’t want streaming. They want to own their own music, and streaming will never work.’”

  “When was this? In what context?”

  “The year before he passed away… I was at Apple having a meeting with him. We got into a debate around streaming: ‘People want to own music; they don’t want to stream it.’”

  Carter pauses.

  “If you look at the history of Apple, he didn’t do that many acquisitions,” he says. “He was more of a builder than an acquirer.”

  In the end, Carter believes that Jobs’s successor, Tim Cook, did the Beats deal due to a combination of factors: first, to bring a billion-dollar headphone business into Apple’s fold; second, to get Iovine and Dre—and their music industry connections—under the tech giant’s umbrella; and third, to acquire the functioning skeleton of a promising music streaming service.

  “As you’re projecting out, and you’re looking at being able to compete with Spotify, what the future of the business looks like, being able to have insiders… Apple can’t do that [alone],” says Carter. “Dre’s and Jimmy’s competence, and being able to bring them into a team, is fantastic as you’re doing deals with the music business and you see this change in landscape.”

  Dre’s Beats Music, and the Apple Music behemoth it developed into, gave him the biggest foothold in the streaming space among all three kings. As was the case with so many business categories, though, the others managed to get into the sector in their own lucrative ways—even if it meant going quite literally to the ends of the earth in search of promising leads.

  CHAPTER 11

  Ice in the Winter

  By the fall of 2015, the Barclays Center was barely three years old, but it already felt like the House That Jay Built. And though there were others who played a larger role in the Nets’ move to downtown Brooklyn, Jay-Z became the individual most closely associated with the arena that transformed the urban fabric of a vast swath of his hometown—for better or worse—from a non
descript neighborhood by the train tracks into a bustling commercial hub.

  Though he sold his pieces of the team and its arena in 2013, he did so only after securing a branch of his 40/40 Club and a cozy relationship with the venue’s management, as well as a brick-and-mortar Rocawear store on-site. So when Jay-Z took the stage on October 20 at the charity concert to celebrate “one million people and counting”1 using his streaming service, Tidal—whose parent company he acquired earlier in the year for $56 million—the building whose glowing neon innards he gazed up at was more of a personal clubhouse than an 18,000-seat arena.

  A look around the Barclays Center during the show, dubbed Tidal X, yields confirmation: in the rafters, a banner bearing Jay-Z’s name boasts of his eight sold-out shows alongside the retired numbers of basketball legends Julius Erving and Jason Kidd, and down on the floor, ads for D’Ussé wrap the VIP section in front of the stage. A handful of the hottest young names in all genres of music take the stage, from Nick Jonas to Thomas Rhett to Meek Mill, ahead of planned sets by Jay-Z, Nicki Minaj, Beyoncé, and—the rarest treat of all—Prince.2

  As the show’s headline portion begins, Jay-Z struts out, decked in black save for the gold chain carrying his cognac’s logo. “I want to thank every single person here tonight… We raised a lot of money,” he says matter-of-factly, as if reading from a teleprompter. “We’re also having a good time.” Then he pauses, allowing the synths behind him to soar ominously through his silence, eliciting some additional whoops from the crowd.

  “Right now, though—I said right now, though,” he continues, his tone suddenly aggressive. “Don’t fuck with me. Brooklyn, make some motherfucking noise!”3

  Backed by a full band, he proceeds to launch into his set, bumping the audience into new levels of hysteria with “U Don’t Know.” As he glowers out across a sea of hands forming his Roc-A-Fella triangle logo with thumbs and forefingers, he delivers a line that’s long been one of his trademarks—but this time, it seems clearly aimed at the many observers, mostly outside the Barclays Center, who’ve been expressing doubts that his fledgling service can make a dent in the vast streaming market.

  “I will not lose,” he shrieks, his voice crackling with passion. “Ever!”

  Jay-Z’s theatrics at the Tidal X concert may have been a bit over-the-top, but they were nothing compared to the live-streamed launch event he arranged in March 2015, shortly after acquiring the company. A cast of music’s top acts were introduced as fellow artist-owners, standing shoulder to shoulder: Usher, Rihanna, Nicki Minaj, Madonna, Deadmau5, Kanye West, Jay-Z, J. Cole, Calvin Harris, Chris Martin, Jason Aldean, Jack White, Daft Punk, Beyoncé, Arcade Fire, and Alicia Keys (Lil Wayne, Indochine, and Damian Marley were later added to the roster).

  Keys gave an impassioned declaration to open the proceedings. The members of Daft Punk stood expressionless in their chrome helmets. Chris Martin and Calvin Harris tuned in remotely, their faces appearing split screen on a large monitor in the center of the stage. And then everyone came up and signed a sheet of paper to seal the deal; perhaps in the spirit of consummation, Madonna suggestively draped her leg across a table while scrawling her name. Each artist owned a piece of the company—estimates ranged from 3 percent per act (according to Billboard) to 1 percent (a source who asked not to be named) to somewhere in between (Aldean). “It’s a couple percent, or whatever it was, for us to initially come on and sort of help to launch it,” the country star told me a few months later. “Any other artist that comes in… they have a stake in it, too.”4

  Although nobody seems willing to say whether the acts made any cash payment for their equity stakes, it appears that committing to offer exclusive material to the service was their main contribution. That would have made sense for Jay-Z even if he’d given each act a 3 percent stake for free. Given Tidal’s $56 million valuation, that translates to $1.68 million per act, about half what Apple is thought to have offered the likes of Drake for exclusive-release windows on Apple Music at around the same time.

  Yet even as Jay-Z celebrated Tidal “going platinum” at his Barclays Center show, reports began to trickle out that things were looking less rosy behind the scenes. The company lost double-digit millions in its first full year under Jay-Z’s ownership, running through three CEOs along the way. Tidal’s employees and investors—with the partial exception of Aldean—were tight-lipped about the company’s financial situation. After multiple inquiries went unanswered by Tidal’s press department, I decided to head to Oslo, home to the company’s headquarters. A handful of people agreed in advance to talk to me, including Scandinavian hip-hop pioneer Tommy Tee, former employees of Tidal and its corporate parent, and a couple of Norwegian journalists who’ve been covering the service for years. Perhaps dropping by Tidal headquarters unannounced could also yield some useful information.5

  I arrived in Oslo—a city nestled among fjords and forests, where the winter sun rises at 9 a.m. and scoots slowly along the horizon for about seven hours before disappearing again—and immediately began to notice something odd: most Norwegians I encountered had never heard of Tidal. The trend spanned people from all walks of life, from local music industry operatives to coffee shop attendants; even a bartender at the hotel where Jay-Z stays when he’s in town hadn’t heard of the streaming service. It was all very strange for a company that described itself, even before Jay-Z’s takeover, as “an innovative media technology company at the forefront of the ongoing redefinition of music consumption in the modern digital world.”6

  More knew of WiMP, Tidal’s unfortunately named sister service, but barely. Tommy Tee confirmed that Tidal and, before that, WiMP had long been sort of like Spotify’s little brother. “They never really got a foothold in the market,” he told me.7 At the end of my first night in town, I met up with Kjetil Saeter and Markus Tobiassen, journalists working on a story about Tidal for the country’s top business daily, Dagens Naeringsliv. Over several rounds of beer, they painted a picture of a desperate, money-losing company; both wondered aloud how long Jay-Z would be willing to pour cash into an unprofitable enterprise.

  The next day, I trudged down to Tidal’s offices in central Oslo to see what I could glean. I walked into the nondescript five-story office building and made my way to the second floor, where a sign covered the entire wall, emblazoned with Tidal’s logo. While the office was far from packed—no security guard, no receptionist—it didn’t really seem like a company in crisis either. With its open layout and Pearl Jam posters, it just felt like a typical startup. Eventually, a woman dressed all in black walked by, and I introduced myself. She turned out to be Tidal’s French language curator8 and asked if I was being helped; I shook my head. She apologized, saying that someone named Louise usually manned the front desk.9

  A blonde woman appeared and suggested that I set up an interview with someone through the press contact listed on Tidal’s website; I informed her that I had already tried this. Then she said that Louise might be in a better position to help me. Did Louise have an email address I could try? I asked. Nope. The blonde woman went and fetched a tall guy named Erik sporting a gray beard and a rather unwelcoming disposition.

  By this point, Tidal employees were starting to notice the scene brewing by the door. I introduced myself, and Erik informed me that there were really only tech people at this particular office. (A bit of fishing on LinkedIn reveals that Erik’s title is senior vice president of customer experience—not exactly an entry-level IT job—and that he’s based in New York; one would think an SVP could speak knowledgeably about his company regardless.) When I asked if he or one of these tech people might be able to simply talk to me about Tidal past and present, I again received a flat denial.

  I clearly wasn’t welcome, and there weren’t any answers forthcoming, so I bade the group of onlookers ha det and walked out the door. If there was intrigue afoot, it didn’t seem as though anyone at Tidal wanted to tell me about it—or anything at all, for that matter. I would have to find answers elsew
here.

  Jay-Z may have purchased his very own streaming service in 2015, but Diddy had actually invested in one several years earlier—after getting a nudge from a Harvard alum named D. A. Wallach in 2011.10

  Wallach graduated in 2007, one class behind Facebook founder Mark Zuckerberg, and his first job after college was serving as lead singer of indie pop band Chester French. The group’s demo was discovered by Pharrell Williams, Kanye West, and Jermaine Dupri almost simultaneously, leading to a deal with Williams’s Star Trak imprint at Interscope.11 After three years of recording and touring, Wallach took a role as artist in residence for Spotify in 2011 as the service made its U.S. debut.12

  Swedish entrepreneur Daniel Ek founded the company in 2006, and in 2008 it expanded across much of Europe. Spotify quickly proved itself a viable alternative to piracy: for ten dollars per month, consumers could have essentially unlimited access to a vast buffet of music encompassing most major acts and albums. One-third of the population of Sweden signed up, and soon the company accounted for half of all music consumption there. Billionaires Sean Parker and Li Ka-shing joined a $50 million round that valued the company at $250 million; during the summer of Spotify’s U.S. launch, venture capital firms including Accel and Kleiner Perkins poured in another $100 million to bump Spotify’s valuation to $1 billion.13

  At the same time, Wallach set about recruiting artists to invest some of their own money into the service. It was a savvy move for Spotify, which needed musicians to buy into its model—figuratively more than literally—and offering them a chance to own a piece of the future of their industry was so compelling that they piled in without demanding a celebrity discount. “They were investing alongside other institutional investors and venture capital firms,” says Wallach. “By that time, it was attractive enough to them that we were just allowing them to invest.”14