Silent Buyer

Bloomberg Businessweek (North America) - - Contents - NARD LEO AN IN EVAR IEHORDE D R DM N YN BN A

Meet the kid who spent $2 mil­lion to buy the Wu-tang Clan’s sin­gle-copy al­bum

t was one of the great­est sales pitches the mu­sic in­dus­try has ever heard. In Marc March 2014, Robert Diggs, bet­ter known as RZA RZA, the pro­ducer and de facto lead­er­lead of the iconic rap group Wu-tang Clan,Clan an­nounced that the Clan would cre­ate o only one copy of its next al­bum, Once UponUp a Time in Shaolin, and sell it to the high­est bid­der. “We’re aboutabou to put out a piece of art like nob no­body else has done in the history of mu­sic,” RZA told Forbes. “We’re making asa sin­gle- sale col­lec­tor’s item. This is like some­one hav­ing the scepter­scepte of an Egyp­tian king.”

Ini­tiall Ini­tially, the Clan wanted to for­bid the buyer from pub­licly re­leas­in­gre­leasin the al­bum for 88 years, but over time de­cided to grant the buyerbu to­tal free­dom as long as the al­bum wasn’t sold com­mer­cia com­mer­cially. That meant the owner could lis­ten to the record in a soundp sound­proof room, drive a pickup truck over it, or release it for free on the In­ter­net. If the owner de­sired, he could be the only one who ever heard it. In an era when peo­ple are happy to stream mu­sic rather than ac­tu­ally possess it, Once Upon a Time in Shaolin of­fered a chance to own some­thing truly unique.

The Wu-tang Clan hired Pad­dle8, an on­line auc­tion startup, to sell the al­bum. The 31-track al­bum would come in a hand­carved box, ac­com­pa­nied by a leather-bound book with 174 pages of parch­ment pa­per filled with lyrics and back­ground on the songs. The mu­sic it­self was ex­pected to be spec­tac­u­lar. All the sur­viv­ing mem­bers of the Wu-tang Clan con­trib­uted to Once Upon a Time in Shaolin, along with some spe­cial guests. Aside from RZA and his co-pro­ducer, Tarik “Cil­var­ingz” Az­zougarh, no­body had heard the en­tire record. It was stored in a vault in the Royal Man­sour Mar­rakech ho­tel in Morocco, and any du­pli­cates had been de­stroyed.

Even be­fore the bid­ding be­gan, the Wu-tang Clan claimed, it had re­ceived a $5 mil­lion of­fer. Fans spec­u­lated that the buyer might turn out to be di­rec­tor Quentin Tarantino, a Hol­ly­wood as­so­ciate of RZA’S, or ven­ture cap­i­tal­ist Ben Horowitz, who’s writ­ten about his love of rap. Some Wu-tang fans ob­jected to the group’s plan. Two of the group’s dis­grun­tled ad­mir­ers started a Kick­starter cam­paign to buy Once Upon a Time in Shaolin and keep it out of plu­to­cratic hands. “Some­one who has dis­pos­able mil­lions, it’s just an­other shiny new toy for them,” says Rus­sell Meyer, one of the or­ga­niz­ers. “It’s most likely not go­ing to be some­one who ap­pre­ci­ates the mu­sic.” The drive to keep the mu­sic out of the hands of the mil­lion­aires was spir­ited but ul­ti­mately too small. Fans pledged just $15,406.

Then, on Nov. 24, Pad­dle8 an­nounced that the Wu-tang Clan had sold the al­bum for a record fig­ure “in the mil­lions.” The price had been agreed to in May, yet ac­cord­ing to the press release, the par­ties “spent months fi­nal­iz­ing con­tracts and de­vis­ing le­gal pro­tec­tions for a dis­tinc­tive work whose value de­pends on its sin­gu­lar­ity.” But the group wouldn’t re­veal the buyer’s name. RZA said he wanted his pri­vacy. “This was very much a mu­tual de­ci­sion,” RZA in­sisted in an e-mail. There was only one wrin­kle: The buyer didn’t care about his pri­vacy; he wanted to go pub­lic.

There’s prob­a­bly only one group of rap­pers that could pull off such a stunt. The Clan ar­rived in 1993 with a de­but al­bum ti­tled En­ter the Wu-tang (36 Cham­bers). The group was com­posed of nine guys from Staten Is­land and Brook­lyn with enig­mat­ic­tic stage names such as Masta Killa, U-god, Raek­won, Ghost­facee Kil­lah, GZA, Method Man, In­spec­tah Deck, and Ol’ Dirty Bas­tard. rd. They were some of the most in­ven­tive word­smiths that hip-hopop au­di­ences had ever en­coun­tered, meld­ing street lingo with mar­tial arts al­lu­sions and the say­ings of the Five Per­cent Na­tion,tion, an ob­scure black move­ment.

In a rap world that’s be­come ob­sessed with fame and money, the Clan holds a spe­cial place. Its mem­bers never achieved the pop­u­lar­ity of Eminem or Jay Z, but they’re ven­er­ated by rap­pers such as Drake and Kanye West for their orig­i­nal­ity. “They’ve been dope for over 20 years,” says An­drew Dubois, co-ed­i­tor of The An­thol­ogy of Rap. “That’s half of hip-hop’s ten­ure. Peo­ple all around the world care about the Wu-tang Clan.”

The ar­chi­tect of Wu-tang’s early suc­cess was RZA, whom the mem­bers re­ferred to as the ab­bot. It was RZA who cre­ated the group’s weird au­ral back­drops us­ing rhythm tracks from old Mem­phis soul songs in­ter­spersed with frag­ments of jazz mas­ter Th­elo­nious Monk’s pi­ano and moans of soul singers that he elec­tron­i­cally al­tered to sound like ghostly ex­ul­ta­tions. RZA was also a mas­ter strate­gist, per­suad­ing all the mem­bers to give him full con­trol for five years and al­low him to pro­duce ev­ery al­bum by the group and any of their solo records. “I said, ‘Give me five years and I will take us to No. 1,’ ” RZA wrote in The Tao of Wu, his 2009 mem­oir-cum-spir­i­tual guide­book. “It was a long con­ver­sa­tion, eye-to-eye, man-to-man. I said that no one could ques­tion my author­ity. It had to be a dic­ta­tor­ship.”

RZA turned out to be just as skilled at busi­ness. He showed up ev­ery evening at 6 p.m. at the of­fices of Wu-tang’s la­bel, Loud Records, with a le­gal pad full of ideas, in­clud­ing which ra­dio sta­tions to tar­get and where to send pro­mo­tional street teams. Steve Rifkind, the la­bel’s founder and an ac­com­plished rap pitch­man him­self, says he ap­proved nearly all of them. “He was definitely busi­ness-minded,” Rifkind says. “I think you’re born with that.”

The Clan’s first al­bum sold 2.4 mil­lion copies in the U.S., ac­cord­ing to Nielsen Mu­sic. The fol­low-up, a dou­ble al­bum called Wu-tang For­ever, sold more than 2 mil­lion. In be­tween, Raek­won, Ghost­face, Method Man, and GZA re­leased RZApro­duced solo albums that are con­sid­ered just as weighty by fans. The group started Wu Wear, one of the first hip-hop artist-branded cloth­ing lines, and opened a Wu Nails shop on Staten Is­land run by RZA’S sis­ter.

Af­ter five years, RZA re­lin­quished his con­trol over the Wu-tang Clan, and the group was never the same. Sub­se­quent albums and solo projects weren’t as strong and didn’t sell as well. The Clan flooded the mar­ket with mu­sic, in­clud­ing albums by artists who weren’t of­fi­cial mem­bers but part of a so-called ex­tended Wu-tang fam­ily.

One of those Wu af­fil­i­ates was Cil­var­ingz, a Dutch rap­per of Moroc­can de­scent who im­pressed the group in 1997 when he climbed onto the stage at a show in Am­s­ter­dam and of­fered some im­promptu verses. Months later he showed up at Wu Nails. Even­tu­ally he got a deal to put out a record un­der the Wu-tang ban­ner. “Any­one who would go half­way across the world, with­out a penny, to chase their dream was some­one I felt needed to be taken se­ri­ously,” RZA says. It was great for Cil­var­ingz, but fans were over­whelmed. “There was a mo­ment where there was so much Wu prod­uct in the world,” says Sasha Frere-jones, a Los An­ge­les Times critic-at-large and a for­mer New Yorker writer who has chron­i­cled the group over the years.

As the group’s hits dwin­dled, the Clan drifted apart. Ol’ Dirty Bas­tard, whose real name was Rus­sell Jones, died in 2004 of a drug over­dose in a New York record­ing stu­dio. Method Man

be­came an ac­tor, ap­pear­ing in films such as How High, and briefly co-star­ring in a Fox sit­com called Method & Red, about two rap­pers who end up liv­ing in a lily-white sub­urb. RZA also went to Hol­ly­wood, pro­vid­ing some mu­sic for Tarantino’s mar­tial arts-themed Kill Bill films, and in 2012 he di­rected and starred with Rus­sell Crowe in The Man With the Iron Fists.

RZA man­aged to re­assem­ble the Clan’s sur­viv­ing mem­bers for the long-awaited al­bum A Bet­ter Tomorrow, re­leased last De­cem­ber. It drew pos­i­tive re­views but sold only 60,000 copies in the U.S. The Wu-tang Clan had tried mar­ket sat­u­ra­tion. Now it went in the op­po­site di­rec­tion with Once Upon a Time in Shaolin.

On a chilly evening in March, at the Mu­seum of Mod­ern Art’s PS 1 ex­hi­bi­tion space in Long Is­land City, sev­eral dozen po­ten­tial buy­ers and writ­ers turned in their cell phones, tablets, lap­tops, and any­thing else with record­ing ca­pa­bil­ity. Joined by 36 giddy fans who had won tick­ets on Hot 97, a New York ra­dio sta­tion, they were ush­ered into a dimly lit domed room for an event billed as the first and only time that a por­tion of Once Upon a Time in Shaolin would be heard in pub­lic. The or­nate box that would hold the al­bum was dis­played on a pedestal, watched over by dark-suited se­cu­rity guards.

The crowd lis­tened to a 13-minute ex­cerpt played at an eardrum-rat­tling vol­ume and cheered when it was done. Shaolin sounded like the best Wu-tang Clan al­bum in years. Af­ter­ward, RZA andd Cil Cil­var­ingz,i whoh first sug­gested the one-copy con­cept con­cept, dis­cussed the record with Frere-jones. Clad in a black jacket, black pants, and a black ball cap, RZA, who is tall and slen­der, com­pared the Wu-tang Clan to Mozart and the al­bum to the Mona Lisa. Cil­var­ingz, who is shorter and wore a gray puffy jacket over a hoodie, sounded a sim­i­lar theme when he talked about a trip the two men took a decade ago to Egypt. “RZA and I would ride horses into the desert com­pletely alone and have the pyra­mids pretty much to our­selves,” Cil­var­ingz said. “Half­way climb­ing up the pyra­mids of Cheops, I said to RZA that one day we would do some­thing spe­cial to­gether that would last through­out the ages.”

Frere-jones, who liked what he had heard of the al­bum, wanted to know who the be­witch­ing fe­male singer was on one of the tracks. “That was Cher,” Cil­var­ingz said. “Cher?” “Yeah, Cher. The Cher.” ( Cher couldn’t be reached for com­ment.)

Frere-jones also quizzed the pro­duc­ers about how the rest of the Clan felt about not be­ing as in­volved in the making of

Once Upon a Time in Shaolin as they pre­sum­ably had been with pre­vi­ous records. “I guess the best way to de­scribe it is with an anal­ogy,” RZA an­swered. “Ev­ery­body got on the boat, but they didn’t know where the boat was go­ing. But look where it landed. You know what I mean? Hey, it’s not on Gil­li­gan’s Is­land.”

“Well, we don’t know which is­land it’s go­ing to be on yet, right?” Frere-jones said.

“We don’t know,” RZA said.

Ac­cord­ing to RZA, Shaolin at­tracted many suit­ors: “Pri­vate col­lec­tors, tro­phy hun­ters, mil­lion­aires, bil­lion­aires, un­known folks, pub­licly known folks, busi­nesses, com­pa­nies with com­mer­cial in­tent, young, old,” he says. “It var­ied.” Se­ri­ous bid­ders got to hear the 13-minute high­lights in pri­vate lis­ten­ing ses­sions ar­ranged by Pad­dle8 in New York.

One of them was a phar­ma­ceu­ti­cal com­pany ex­ec­u­tive named Martin Shkreli. He’s 32 years old but seems much younger, with a ten­dency to fiddle with his hair and squirm in his seat like an ado­les­cent. The son of Al­ba­nian im­mi­grants, Shkreli grew up in what he de­scribes as a tough part of Brook­lyn’s Sheepshead Bay neigh­bor­hood. He skipped grades in school be­cause he was so bright. Shkreli idol­ized sci­en­tists, but he was also a mu­sic fan. Pri­mar­ily in­ter­ested in rock as a teenager, he didn’t understand rap, but that changed when he read Shake­speare in high school. “You would get th­ese rhyming cou­plets and so­lil­o­quies and stuff like that, but the cou­plets would really kind of jar you,” he says. “They would be really th­ese big, soul-crush­ing mo­ments that Shake­speare in­tended to stir your spirit. And in many ways, mu­sic does that.”

Shkreli was taken by the Wu-tang song C.R.E.A.M., which stands for “Cash Rules Ev­ery­thing Around Me.” It in­cludes the of­ten-re­peated phrase “Dolla dolla bill, y’all!” Shkreli turned out to be good at making dol­lars him­self. He founded two hedge funds that shorted phar­ma­ceu­ti­cal stocks and then started his own drug com­pany, Retrophin, earn­ing a rep­u­ta­tion on Wall Street as some­thing of a boy ge­nius. In Septem­ber 2014, how­ever, he says he was “asked to leave” by the com­pany’s board. Retrophin later al­leged af­ter an in­ter­nal in­ves­ti­ga­tion that he’d abused his po­si­tion and mis­used as­sets. Shkreli says he didn’t do any­thing with­out the com­pany’s ap­proval. Retrophin and its for­mer CEO are now fac­ing off in court. “I was pretty pissed,” Shkreli says. “But I re­al­ized that it ac­tu­ally would be bet­ter for me, maybe not ego-wise, but fi­nan­cially. I could just sell my stock and build my own next com­pany.”

Now that Shkreli had more money, he started col­lect­ing mu­sic-re­lated items. He once joked on Twit­ter about try­ing to buy Katy Perry’s gui­tar so he could get a date with her. He got Kurt Cobain’s Visa card in a Pad­dle8 auc­tion and some­times pro­duces it to get a rise out of peo­ple when it’s time to pay a check.

Shkreli heard about Once Upon a Time in Shaolin and thought it would be nice to own, too. He at­tended a pri­vate lis­ten­ing ses­sion at the Stan­dard Ho­tel hosted by Pad­dle8 co-founder Alexan­der Gilkes. Shkreli, who de­scribes him­self as a bit of a recluse, re­calls Gilkes telling him that if he bought the record, he would have the op­por­tu­nity to rub shoul­ders with fa­mous ac­tresses and rap­pers who would want to hear it. “Then I really be­came con­vinced that I should be the buyer,” Shkreli says. (Pad­dle8 de­clined to com­ment, cit­ing its pol­icy of client con­fi­den­tial­ity.) He also got to have lunch with RZA. “We didn’t have a ton in com­mon,” Shkreli says. “I can’t say I got to know him that well, but I ob­vi­ously like him.”

Hav­ing par­tic­i­pated in bid­ding wars for com­pa­nies and drugs, Shkreli says he had a feel­ing from the start that he’d made the high­est of­fer for Shaolin. As it turned out, he was right. Shkreli won’t say how much he paid. But some­one fa­mil­iar with the deal says the Wu-tang Clan sold him the al­bum for $2 mil­lion. Be­fore Shkreli closed on the ac­qui­si­tion, he was per­mit­ted to lis­ten to a few more snip­pets to make sure it was all there. Shkreli del­e­gated the task to an em­ployee. The same month, news broke that Shkreli’s new com­pany, New York-based Tur­ing Phar­ma­ceu­ti­cals, had pur­chased an anti-par­a­sitic drug called Dara­prim and raised its price from $13.50 a pill to $750. Demo­cratic pres­i­den­tial can­di­date Hil­lary Clin­ton de­nounced him. “Price goug­ing like this in the spe­cialty drug mar­ket is out­ra­geous,” Clin­ton tweeted. Her Repub­li­can op­po­nent Don­ald Trump also at­tacked Shkreli. “He looks like a spoiled brat to me,” Trump said. The BBC wrote that Shkreli “may be the most hated man in Amer­ica.”

Shkreli seems mildly amused by the con­tro­versy. He says it’s his duty as Tur­ing CEO to max­i­mize prof­its for his in­vestors. “What’s es­caped the con­ver­sa­tion is, hey, how about the fact that this is ac­tu­ally what I’ve been hired to do,” Shkreli says. “It’s like some­one crit­i­ciz­ing a bas­ket­ball player for scor­ing too many points.” He adds that he’s tried to make Dara­prim more eas­ily avail­able to hos­pi­tals. Mean­while, he’s been prank­ing his crit­ics. In Oc­to­ber he do­nated $2,700 to Bernie San­ders, Clin­ton’s ri­val, which the cam­paign gave to a Wash­ing­ton health- care fa­cil­ity. Shkreli then ap­plied for

an in­tern­ship on the Ver­mont se­na­tor’s cam­paign. “I enjoy the back and forth,” he says.

Shkreli seems more con­cerned about how the Wu-tang Clan would re­act to the Dara­prim dis­pute. “I was a lit­tle wor­ried that they were go­ing to walk out of the deal,” he says. “But by then we’d closed. The whole kind of thing since then has been just kind of, ‘Well, do we want to an­nounce it’s him? Do we not want to an­nounce it’s him?’ I think they were try­ing to cover their butts a lit­tle bit.”

Af­ter learn­ing that Bloomberg Busi­ness­week was about to re­port that Shkreli had pur­chased the al­bum, RZA e-mailed a state­ment: “The sale of Once Upon a Time in Shaolin was agreed upon in May, well be­fore Martin Skhreli’s [ sic] busi­ness prac­tices came to light. We de­cided to give a sig­nif­i­cant por­tion of the pro­ceeds to char­ity.”

As for Wu-tang fans likely to feel queasy when they learn that he’s the owner of Once Upon a Time in Shaolin, Shkreli just shrugs. “At the end of the day,” he says, “they didn’t buy the last al­bum or the one be­fore that, and all they had to pay was $10.”

It’s a Fri­day af­ter­noon at Tur­ing’s Man­hat­tan head­quar­ters, and Shkreli and his employees are preparing for a Christ­mas party that evening. Three ex­ec­u­tives play a video game. A woman shows Shkreli the cock­tail dress she plans to wear. Shkreli had ar­ranged for the rap star Fetty Wap to per­form for his employees. “Typ­i­cally you would say, ‘As an av­er­age fan, I can’t get Fetty Wap to give me a per­sonal con­cert,’ ” he says. “The re­al­ity is, sure you could. You know, at the right price th­ese guys ba­si­cally will do any­thing.”

Shkreli wants more artists to make pri­vate albums for him. He fig­ures they could use the money, and he will let them do what­ever they want. “It’s al­most like the in­struc­tions to the band are, ‘Do your best work, how­ever much time it takes, and never com­pro­mise any­thing for me,’ ” he says. “‘I just want to hear what you’ve got.’ ”

He hasn’t lis­tened to Once Upon a Time in Shaolin yet. He’s saving that for a time when he’s feel­ing low and needs some­thing to lift his spir­its. “I could be con­vinced to lis­ten to it ear­lier if Tay­lor Swift wants to hear it or some­thing like that,” Shkreli says. “But for now, I think I’m go­ing to kind of save it for a rainy day.” <BW>

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