Russell Simmons, business and finance homework help

Russell Simmons

Russell Simmons turned off his cell phone and took a rare moment to admire the view from his fourteenth-floor office in midtown Manhattan. At 47, Simmons knew he had a lot going for him. As the president of Rush Communications, he sat at the helm of a constellation of successful enterprises, including a record label, a clothing line, a philanthropic arts foundation, and a multimedia production company. Lately, he had been thinking about how to leverage his influence as a hip-hop mogul to inspire young people to get involved in social issues, such as voter registration and education reform. Yet, when he was grow- ing up in Hollis, Queens, in the 1960s and 1970s, Simmons never could have imagined that his life would have turned out like this. Early on, Simmons decided that he wanted to make his own way in the world. His father had been a teacher, and his mother worked as a recreation coordinator. Both enjoyed stable jobs, but Simmons was not driven by a need for security. He wanted to live a fast-paced life and call his ownshots. In 1977, Simmons, who never liked school very much, enrolled at the City College of New York as a sociology major. That year, something happened that permanently changed the course of his life. He went to hear a rap artist named Eddie Cheeba perform and was amazed to see how the rapper had cast a spell over the audience with his freestyle rhymes. In Simmons’s own words:

Just like that, I saw how I could turn my life in another, better way. . . . All the street entrepreneurship I’d learned, I decided to put into promoting music. At that time, rap and hip-hop were under- ground musical styles, but Simmons set out to change this. He believed that rap music had the potential to reach a larger audience, and so he teamed up with another aspiring rap producer, Rick Rubin. Rubin had built a recording studio for rap artists in his New York University dorm room. Together, they decided to transform Rick’s studio into a viable record label. By 1985, Def Jam Records was officially underway. Def Jam experienced its first surge of success when it scored a hit with Run DMC’s remake of the Aerosmith classic, “Walk This Way.” Bridging the worlds of rock and rap music turned out to be a stroke of genius. Simmons and Rubin single-handedly introduced a whole new market of mostly white, suburban, heavy-metal music fans to hip-hop. Suddenly, Run DMC was being featured on MTV, and rap was no longer an un- derground fad. Simmons learned an important lesson from Run DMC’s success. He realized that these artists had gone to the top of the charts because they had remained true to their street style and musical origins. Whereas Run DMC may have popularized wearing gold chains, branded sneakers, and name- plate belts among suburban teenagers, these were the fashions that its core audience of urban youth had already embraced. Simmons understood that Russell Simmons, Life and Def: Sex, Drugs being perceived as authentic was key to making it in his segment of the music industry. You have to tell the truth. It endears you to the community. The [people] can smell the truth, and they’re a lot smarter than the people who put the records out. Simmons knew how to market his product, and his ability to promote rap music and the hip- hop lifestyle was influenced by how close he was to it. Simmons has maintained this philosophy of “keeping it real” throughout his business career. It permeates everything he does and is even reflected in his preference for wearing Phat Farm sweatshirts instead of Brooks Brothers suits. Since those early days, Simmons has gone on to launch many other business ventures, which are all geared toward the same target market: urban teens and young adults. This market has the power to influence the tastes and preferences of other consumers.

In 1999, Simmons sold his stake in Def Jam records to Polygram Records for over $100 million. He has since focused his energies on developing the various entertainment, fashion, and multi- media companies that make up Rush Communications. Simmons’s business goals have evolved from promoting hip-hop music to developing new products and services for the urban youth market. Simmons also began using his status as a taste-maker and hip-hop entrepreneur to influence public debate about political issues. In 2002, he organized a “youth summit” in New York, featuring hip-hop artists such as Jay-Z and Alicia Keyes. When Simmons put out a call for political action over the airwaves, some 20,000 students showed up at New York’s City Hall to protest the mayor’s proposed cuts to the education budget. Simmons has demonstrated that he has the skill and sophistication to market ideas as well as products and services. He continues to sit at the helm of Rush Communications, where he keeps his radar attuned to new opportunities in the marketplace.

Case Study Analysis

1. Why do you think Russell Simmons has been successful?

2. Describe the target market that Simmons is trying to appeal to in all of his business ventures. What does this target market value?

3. Simmons grew up surrounded by hip-hop music and culture. In what ways did this give him an advantage in the marketplace? How might his insider’s knowledge also function as a limitation?

4. Brainstorm a business idea that you could pitch to Russell Simmons that would be appropriate for Rush Communications. What market research would you need to conduct in advance to assess whether or not your idea had the potential to be successful?

5.Russell Simmons invested $5,000 to start Def Jam and then later sold his business to Polygram Records for $100 million. Calculate Simmons’s return on investment (ROI)

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