PLUS, THE EMPI RE-BUILDING ECONOMICS OF DRAKE.
The Toronto-based artist’s brand power has only increased during the Raptors’ NBA playoff run.
Turn on a radio in Toronto or open up a playlist and you’ll likely hear Drake’s latest No. 1 hit. Step on a subway and you’ll undoubtedly see riders sporting hoodies adorned with his familiar golden owl logo. Travel downtown and you’ll look on in confusion as a line of people, blocks long, wait outside his clothing line’s flagship location for a new exclusive. You can’t avoid him no matter how hard you try.
Drake’s gravitational pull has only increased during the Toronto Raptors’ historic run to the NBA Finals, where he has been spotted giving emotional interviews about the team’s success, gleefully prancing up the sidelines as opposing players miss free throws and even giving head coach Nick Nurse the occasional shoulder rub.
And his omnipotence is no mere accident of superfandom.
As he taunts opposing players from his courtside seats, it’s easy to forget he’s also a business partner — likely the first to explicitly hitch his brand to a sports team. The move was one of the many brilliant strokes Drake has undertaken to expand and diversify his portfolio well beyond album sales and music streams. On the power of his brand, one that is now global, he’s built an empire with multiple revenue streams by following the path laid out by others such as Jay-z as well as by adding some of his own innovations along the way.
It’s a Jay-z lyric that Midia Research music analyst Mark Mulligan points to in describing Drake: “I’m not a businessman, I’m a business, man.”
The strategy seems obvious in retrospect, one that Drake hinted at in a 2013 interview with GQ when he set a personal goal of earning $ 250 million by the time he was 29. He knew the only way to get there was to expand outside music.
“Rappers aren’t really the rich ones,” Drake said then, noting that you needed a piece of someone’s business to be ”super wealthy" and that he had advisers looking into how he could reach that goal. Six years later, the teenage- actor- turned- hiphop-musician-turned-entrepreneur is reportedly worth between US$ 140 million and US$150 million. Instead of snatching a piece of someone else’s business, he built his own. Here’s how he’s doing it.
Music sales and streams
Drake would not be as successful with his other business plans if his music was no longer relevant, Mulligan said, calling it his “heartbeat.” This year alone, Drake broke a 54-year record formerly held by The Beatles for the most singles — seven — to simultaneously appear in Billboard’s Top 10. His record company said he became the first artist to surpass the 50-billion stream mark globally in 2018.
According to Nielsen Music, Drake was also the most streamed artist in the U. S. in 2018 with more than 11.12 billion streams across his entire catalogue. To get a ballpark of the total revenue generated by these streams, Mulligan suggested multiplying by US$0.007. (Each streaming service, whether it be Youtube, Spotify or Apple, gives artists a different cut, but Mulligan said that is the average). That would put gross streaming revenue for his music at US$77.89 million in 2018.
Of that amount, according to Mulligan’s formula, 78 per cent (US$60.75 million) would go to the label that releases Drake’s albums, Young Money Entertainment. Drake’s cut is likely 25 per cent, or US$15 million.
Drake would also stand to earn revenue from the remaining 22 per cent of the original total. Five per cent of that is taken off the top for administration fees and the remaining 17 per cent is usually split between the music’s publisher and its songwriters, Mulligan said. That would put the songwriter’s share, of which Drake would have to split with any co-authors, at about US$8.14 million.
Drake’s 3.7 million digital song sales and 131,000 physical album sales would be much less lucrative, with Mulligan suggesting the former pays him a 17- per- cent rate — which, a quick calculation suggests, would net US$622,710.
Concerts
The vast majority of an artist’s income today is driven by live performances. If Drake committed to enough of them, he would likely be able to attain the super wealth he desires without having to diversify as much, Mulligan said.
In the second half of 2018, Drake played 43 dates across North America as part of his Aubrey and the Three Migos tour. The tour reportedly earned US$ 79 million, but Mulligan said some of that goes to the booking agency, ticketing agency, tour promoters and Migos. Operational costs such as lighting and sound also have to be taken into consideration.
Being a global star, Drake would likely get paid for the concerts through a guarantee, said Catherine Moore, an adjunct professor of music technology at the University of Toronto.
“He’ll get a guaranteed amount whether there’s two people in the seats or whether it’s a sellout,” she said.
The rapper will also likely earn additional revenue through a deal with the concert’s promoter to get a cut of the merchandise sales at the venue and could even receive a percentage of food and beverage sales, Moore said.
“Now I’m on the road, half a million for a show,” Drake rapped in the 2013 hit “Started from the Bottom.” Using those figures, he would have netted US$21.5 million in 2018 for live shows.
Drake would also bring in revenue from OVO Fest, a yearly outdoor music festival in Toronto that attracts some of the world’s top artists — Jay-z, Eminem, Kanye West and others — as headliners. Drake also performs. Drake did not stage OVO Fest in 2018, but has already promised to do so in 2019.
The OVO clothing line
Drake wasn’t the first and won’t be the last artist to launch a clothing brand, but the manner in which he’s doing so reflects a broader business strategy, said Sean Wise, an associate professor of entrepreneurship and innovation at Ryerson University. He calls Drake a “master of SWIPE” — “steal with integrity and pride everywhere.”
“Drake learns from others what works then he does it better, by kicking it up a notch,” Wise said in an email.
OVO, which stands for October’s Very Own, a nod to Drake’s birthday, began as a blog in 2008 that was run by his associates and quickly drew a following from fans who wanted to stay updated on the burgeoning star.
In 2011, after a collaboration with Canada Goose Holdings Inc., the brand was spun-off into a clothing line that’s continued to grow as Drake’s star power increased. Further collaborations with Roots Ltd., Nike Inc. subsidiary Jordan and the Toronto Raptors helped, too.
Where Drake has strayed from the typical path of celebrity brands was in taking his clothing line and placing it in OVO brick-and-mortar stores, of which there are now seven across Canada, the U.S. and the U.K.
OVO’S success can be attributed to how it’s successfully built a sense of community with its consumers and its devotion to remain authentic, NPD fashion analyst Tamara Szames said. The decision to use brick-andmortar stores allows Drake to continue building that connection.
“They’re authentic to what they stand for and they haven’t changed that throughout the maturity of the brand,” Szames said.
The same could not be done had he allowed the line to be sold at department stores, which wouldn’t allow Drake to control the brand’s messaging. He seemed conscious of this in a 2011 interview with Complex magazine.
“Everybody else wants me to make it with the cheaper fabric and put it in Macy’s and ‘ Oh don’t worry we will make 100 million in the first year.’ Naw, f-- k you, because that’s not what we are about. I’m not ready for OVO to be that. Because OVO is still something I represent,” he said.
Szames sees OVO, which has since been spun-off into a record label, as a fusion of streetwear and luxury. On its website, shoppers can buy hats and T- shirts for $ 48 and hoodies for $128. OVO’S latest collaboration with Dsquared2 has items such as a denim jacket being sold for $998 and a T-shirt being sold for $288.
Toronto Raptors
York University marketing professor Vijay Setlur, who specializes in sports, is unsure whether the Toronto Raptors pay Drake to act as a global ambassador, but one thing is certain: it’s been beneficial for both parties.
The relationship, which is the first of its kind as far as Setlur knows, began in 2013 and initially involved Drake, who was already a fan and season ticket holder, being at the head of the club’s rebranding. Since then, Setlur said, the relationship has evolved into so much more.
“You can see how the relationship has evolved from using a pop- culture figure to infuse the club with more relevancy to a co- branding play to a licensing play and now to a sponsorship play,” he said.
Drake has used the partnership as an opportunity to link his brand with the Raptors. Those in attendance when the club holds its yearly Drake Nights receive free Ovo-branded T-shirts and other exclusive items. These past exclusives were resurrected in the spring for an OVO x Raptors collection of hoodies and T-shirts that sold out in days.
The co-branding attempt became more obvious throughout the playoffs this year as fans, on two occasions, received shirts that placed the OVO logo side by side with that of the Raptors.
This year also saw the partnership develop into one that included sponsorship. The Raptors’ practice facility, formerly known as the Biosteel Centre, became the OVO Athletic Centre. And, of course, the team’s practice jerseys now include an OVO owl on the chest.
Normally, Drake would have to pay for these sponsorship deals. Sun Life Financial Inc., according to TSN, paid more than $5 million per year to have its logo placed on the Raptors’ in- game jerseys. Setlur, however, speculates that money may not have exchanged hands because the relationship is mutually beneficial.
For each year that Drake has been linked to the team, Toronto tailor Garrison Bespoke has gifted him a custom jacket lined with the team’s jersey. This year, the tailor gave Drake a diamond-encrusted jacket valued at $747,000.
Food and Drink
Unlike the other areas of his portfolio, Drake doesn’t appear to be implementing any particular strategy with his food and drink investments, said Shawn Rusich, director of BPR Inc., a communications agency that specializes in high-end food.
Rusich, who was hired to promote Drake’s Pick 6ix restaurant in Toronto when it first launched in January 2018, said Drake’s investments in the sector simply appear to be diversifiers for his ever-expanding portfolio.
For example, Pick 6ix was initially advertised as what Rusich calls an “elevated sports bar.” But when the buzz vanished and the reviews were bad, ownership used water damage from a flood as an opportunity to remodel.
“The concept itself was great, but I think that perhaps everything just didn’t come together at the time it opened and they took the chance to take a step back and see what would be most successful,” he said.
The new Pick 6ix Sports reopened in March 2019, replacing the more lavish items on its menu with pub food. Rusich approves of the move. “I think they’ve hit gold,” he said.
It’s difficult to say how much revenue Drake earns from Pick 6ix Sports, if any at all, Rusich said, given that most restaurants only become profitable after a couple of years.
Like Pick 6ix Sports, Drake’s line of whiskey, Virginia Black, is also accessible, Rusich said. Bottles are sold at Ontario’s liquor stores for $63.85 — an average price point for a bottle of bourbon, he said. The whiskey was launched in 2016 and sold 60,000 nine-litre cases after 15 months. That works out to an estimated $45.9 million.
In January 2018, Drake and his partners announced they wanted to IPO Virginia Black and were looking to raise $ 30 million to do so, but the attempt did not appear to be successful.
Since then, Drake has expanded into champagne with his Mod Selection line. No sales data are available yet, but the bottles retail for between US$300 and US$400 each.
Real Estate
Seeing lines of tour buses roll through a quiet and lush Toronto neighbourhood in the near future wouldn’t surprise Chestnut Park realtor James Warren. After all, the house Drake is building in Toronto’s Bridle Path isn’t complete, but it’s already a tourist attraction.
“He’s brought Beverly Hills to Toronto,” Warren said. “( The house) is iconic before it’s even been finished.”
Drake bought the land at 21 Park Circle for $6.7 million in 2016, tearing down the property so that his new home could be built. Plans for the new 35,000- square- foot home include a swimming pool with two nearby bars, basketball court, jersey museum and awards room. He also plans to have two saunas, a gym and a piano room in the home. When it’s completed, Warren estimates it could be worth between $30 million and $40 million.
Warren describes it as a very architecturally-designed home that’s “tasteful” and done in the “classic style,” which means it likely will not lose value should it appear on the market, even in the decades to come.
Drake also owns a mansion in Hidden Hills, Calif. — complete with a swimming pool, library, wine cellar, gym and tennis court — that is reportedly worth US$8 million.
TV and endorsements
Drake began his career in television as a young actor on Degrassi: The Next Generation, and he’s likely still earning residuals from his TV work.
Catherine Moore at the U of T said Drake’s desire to develop a strong connection with his audience came from his time as an actor.
“TV gives you a type of discipline because if you don’t have an audience, you don’t have a show,” she said.
Drake hasn’t earned an acting credit since 2013’s Anchorman 2: The Legend Continues, but his endorsements have kept him on the airwaves as he’s appeared in multiple commercials for Sprite and Apple Music.
His 2015 deal with Apple Inc. was reportedly worth US$19 million. Before that, Drake also signed a deal with Nike in 2013 that was reportedly worth US$10 million. His other endorsements have included deals with Eastman Kodak Co. and Virgin America Inc.
Drake has hinted he would be in favour of returning to acting, but he now seems intent on racking up producer credits due to his work with HBO’S Euphoria and Netflix’s Top Boy.