Jay-Z's Endorsement Deal

ByAnn Rafalko,

Feb. 18, 2004 -- Many hip-hop lyrics sound like shopping lists for the rich and famous with rappers waxing rhapsodic about their Mercedes-Benz cars, Louis-Vuitton bags or Nike Air Force Ones.

These days, many are hoping for a freebie or loaner from the brands they sing about, but in 1986, when the group Run-DMC penned the song "My Adidas," it was all about love — for the sneaker. In that one song, Run-DMC, one of the most influential rap groups, laid out a love affair that continues today.

Rappers love sneakers.

And with love being a two-way street, the sneaker makers love the booming sales that the rappers bring in.

Reebok Employs Rapper to Boost Sales

Is it coincidence then that in 2003, hip-hop superstar and business mogul Jay-Z became the first non-athlete to score an endorsement deal for a line of sneakers from an athletic shoe company?

The $13.5 billion athletic shoe industry has moved from the basketball court into the living rooms and nightclubs of America. According to NPD Group, the industry grew by 2.6% in 2003 with the majority of growth in consumers aged 18 to 29. With the release of Reebok's (nyse: RBK - news - people ) S. Carter by the Rbk line, Jay-Z, whose birth name is Shawn Carter, joined the ranks of sports luminaries like Michael Jordan, LeBron James and Stephon Marbury to have his own line of sneakers.

The price of such deals has soared since Michael Jordan signed with Nike in 1984 to the tune of $2.5 million over five years.

In 2003, Cleveland Cavalier rookie LeBron James signed a seven-year endorsement deal with Nike worth an estimated $90 million (see: "Slam Dunk"). With prices like these, some athletic shoe companies have changed the way they dole out their endorsement dollars. Fewer athletes are being courted to put their name on a shoe. Instead, athletes are now signed to endorsement deals to promote someone else's shoe.

Jay-Z's deal comes at a time when hip-hop is rapidly gaining mainstream cultural acceptance. Since 1993, hip-hop and rap has grown to 13.8% of all music bought in the U.S., according to the Recording Industry Association of America. Todd Krinsky, vice president of the Rbk division of Reebok, says Jay-Z, who has a small stake in the New Jersey Nets NBA team, was signed because he is "an icon in sports and an icon in music" and "has a huge passion for basketball."

The biggest distinction between deals with athletes versus hip-hop artists is that these deals extend only to the artists' feet, allowing them to wear other clothing labels — an important distinction as many hip-hop artists have their own fashion lines.

The success of the S. Carter line has led to further endorsement deals with hip-hop stars for Reebok, which needs to improve its image with consumers between the ages of 13 and 29. In this age group, Reebok ranks fourth in consumer dollar spending, behind Nike (nyse: NKE - news - people ), Adidas and New Balance, according to the NPD Group.

And1, an upstart basketball-gear maker with a heavy focus on promoting streetball, has no plans to create a line for a hip-hop star. "We're about the marriage of hip-hop and basketball," says Ron Skotarczak, vice president of And1 Entertainment. He sees the moves by Reebok and Nike as "a reaction to the success we have made." Asked about the connection between hip-hop and basketball, Skotarczak answered with an oft- heard phrase, "rappers want to be ballers and ballers want to be rappers," meaning sports stars and rappers influence each other in equal amounts.

Each year, the brand organizes a U.S. and European tour of famous streetball players. Tour sponsors have included Pepsi (nyse: PEP - news - people ) divisions Mountain Dew and Lay's, Nintendo and the Toyota (nyse: TM - news - people ) Scion. Each stop also features a hip-hop artist to further And1's symbiosis of sport and music.

The multimedia nature of And1 began with a series of videos called The Mix Tapes, a nod to the early days of hip-hop when young emcees would self-release tapes of themselves rapping over instrumentals in hopes of winning a record deal. The brand has expanded their athletics empire with Street Hoops, a video game released by Activision (nasdaq: ATVI - news - people ) in 2002, and a television series on ESPN, a division of The Walt Disney Co. (nyse: DIS - news - people ). The success of these multimedia ventures may even spawn CDs in the near future, bringing the influence of hip-hop in sports full circle with an album of hip-hop inspired by basketball.

If sales continue to buoy Reebok's venture into non-athlete endorsement deals, expect to see other athletic footwear company's jump on the trend. Nike has released one shoe from New York City sneaker-customizers, Remix Da Kickz, who have been creating hand-painted custom Nike Air Force One sneakers for rappers like Ludacris, Nelly and Usher. While not a full-fledged endorsement of the trend, perhaps it gives a clue to the future of the athletic shoe industry.

For more, go to Forbes.com..

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