How Dr. Dre Built a Multi-Billion Dollar Music Empire

Dr. Dre is one of the most successful entrepreneurs in the music industry. His hustle, work ethic, and skill have taken him from the streets of Compton to a multi-billion dollar exit to Apple. His unyielding drive is what separates him from his contemporaries and makes him one of the best professionals the industry has ever known.

Humble Beginnings

Dre grew up in a rough household with an abusive father. After dropping out of high school, Andre Romelle ‘Dr. Dre’ Young started his career in the early 80’s DJ-ing at a local Compton nightclub called, Eve After Dark.

From a young age, Dre was crafting his skills in business and sales. After recording one song called ‘Surgery’, Dre managed to sell 50,000 copies of it on his own in and around the Compton area. Soon, Dre found himself hosting his own radio show on the local radio station, KDAY.

The Rise of N.W.A.

In 1986, Dre met fellow rapper Oshea ‘Ice Cube’ Jackson who introduced him to the record label Ruthless Records which was run by rapper, Eric ‘Eazy E’ Wright. Together the three formed the group N.W.A. and two years later, in 1988, released their debut album, Straight Outta Compton. The new harder, grittier form of gangster rap redefined the direction hip-hop would take and the album went triple platinum, selling over 3 million copies. What separated Dre from many others in the industry was an unyielding work ethic.  In 1991, at the behest of his bodyguard Suge Knight, Dre left N.W.A to form his own label with Knight called, Death Row Records.

The Formation of Death Row Records

As a businessman, Dre has was capable of spotting great talent and crafting relationships as well as opportunities. Dre’s first solo album on the label was called The Chronic and featured a young and unknown artist, Calvin ‘Snoop Dogg’ Broadus, as well as Dre’s younger stepbrother, Warren ‘Warren G’ Griffin. The Chronic went multi-platinum and to date has sold over 7.5 million copies. Along with working on his own album, Dre was busy producing for these young artists as well. In 1993, Death Row Records released Snoop’s debut album, Doggystyle, which went RIAA certified quadruple platinum and sold more than 4 million copies. Two years later the label signed another young rapper they planned to position as the next big thing, Tupac Shakur.

Pivot Perseverance & Partnership

When Dre was down he never stayed that way for long. In 1995, amid growing concerns that Knight was no longer dealing honestly, Dre left Death Row Records. One of Dre’s best skills was knowing when to cut ties in a professional relationship that was no longer profitable.

After cutting ties with Death Row Records, Dre decided to form his own label Aftermath Entertainment, and partnered with legendary producer Jimmy IovineThis was the start of a symbiotic business relationship that would eventually create a multi-billion dollar empire.

But, success didn’t come easy, or without perseverance.

In the early days of Aftermath, Dre faced financial difficulties as well as a trademark infringement lawsuit against him. Additionally, after several records that fell short of expectations, critics began to ask if Dre was still relevant. Despite all the negativity surrounding him, Dre pressed on and soon had the insight to sign an unknown young rapper out of Detroit named, Eminem.

Going Platinum Again

Dre produced three songs on Eminem’s debut album The Slim Shady LP, which went quadruple platinum. In 1999, Dre continued to prove he was back when he released his second solo album 2001, which went six times platinum. He also won Producer of the Year at the Grammy Awards that year for it. In May or 2000, Dre released Eminem’s follow-up album, The Marshall Mathers LP, which went certified 10 times platinum.

Over the next few years, Dre would continue to release hit-after-hit including artist 50 Cent’s first two albums Get Rich or Die Trying and The Massacre, which would combine to go eleven times platinum. But by 2011, Dre announced he would be taking a leave from music to focus on his other ventures full-time. Just before doing so however, he decided to finish producing an album for one last up-and-coming young superstar, Kendrick Lamar.

Music Film & More

Along with his music career, Dre easily made the transition from music into film producing and worked on several successful projects including the Academy Award nominated N.W.A biopic, Straight Outta Compton.

Along with recording, producing, and securing endorsement deals with Coors Lights and Dr. Pepper, Dre was also heavily involved in other business ventures as well. In 2001, he reportedly sold a 30% stake in his Aftermath label to parent company Interscope Records for $35 million. This sale, combined with another $17 million from his production work, placed Dr. Dre at #2 on Rolling Stones Magazine’s list of highest paid musical artists that year.

The Birth of Beats By Dre

In 2006, while Dre and Iovine were discussing what they saw as the two biggest problems in the music industry at the time – piracy and the audio quality of Apple’s earbuds – Iovine recalls Dre remarking, ‘”Man, it’s one thing that people steal my music. It’s another thing to destroy the feeling of what I’ve worked on.”

Despite harsh criticism, and the prevailing belief that very few customers would pay $200 for a pair of headphones, the two pressed on and soon developed their first set of studio quality headphones, Beats by Dre Studio.

According to Iovine, “When you believe in something, the last thing you say to yourself is, ‘Well, no one’s doing this, so there must be no good reason to do it.”‘

Utilizing the pool of celebrity talent available to them, the team sent samples to celebrity friends and asked them to wear them to help with advertising. One of the smartest such moves was when Dre sent 15 pairs to Lebron James in 2008. When the US Men’s Basketball teams arrived in Beijing for the ’08 Olympics, all 15 members of the team wore the Beats headphones.

Growth To Exit

By 2011, Beats had already provided laptop speakers to HP and surround sound audio for Chrysler. In August, Beats accepted a $309 million offer from HTC for a 50.1% ownership stake of the company. The marriage was short-lived however. According to a statement by Beats COO Luke Wood,  “I think that they really wanted to focus on core phones and I think their ambition is to try to build other channels of support with their accessories.”  A little over 2 years later, after already having bought back $150 million in shares from the struggling HTC, Beats bought back the remaining 24.84% in shares owned by HTC, for $265 million.

On the same day the buyback was announced, a concurrent announcement was also made that Beats would sell a minority share of ownership to the Carlyle Group for $500 million. The deal placed the value of Beats over $1 billion.

Then, one year later, on May 28, 2014, it was announced that Apple would buy Beats Electronics for $3 billion. The deal included the purchase of Beats Music’s streaming service which was in direct competition with Apple iTunes. The deal consisted of $2.6 billion in cash and another $400 in Apple stock, and marked the largest single acquisition Apple had ever made. After taxes, Forbes estimated that Dre’s cut alone was $620 million, which was the largest single payday for any musician ever.

After all of his shrewd business dealings, today Dre’s net worth sits at an estimated $740 million dollars. Not too bad for a guy who started out as a local DJ.

 

 

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