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YOUNG, MOBILE, Def

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RUSSELL SIMMONS IS A BLUR, IN A STATE OF PERPETUAL MOTION: One minute he's at the MTV Video Music Awards, rubbing shoulders with a new generation of pop music elite weaned on the hip-hop of his pioneering Def Jam label. Next, he's at Fashion Week, mixing with the beautiful people and promoting Baby Phat, the women's wear line he launched with his wife, supermodel Kimora Lee Simmons. An instant later, he's speaking to college students in support of the Hip-Hop Summit Action Network, the nonpartisan organization he co-founded with former NAACP executive director Dr. Benjamin Chavis to promote voter registration among young adults.

Wherever Simmons goes, whatever he does, he's talking. Sometimes it's with his wife, other times it's with his close friend and business partner, Kevin Liles, and sometimes it's with his mentor, Donald Trump. (Hell, maybe even all three at once.) Moving and talking, moving and talking — Russell Simmons is the quintessential wireless user.

“I live wireless,? says Simmons, CEO of Rush Communications, the $330 million company that controls his myriad entrepreneurial pursuits. “Right now I've got a phone in my ear, a phone in my lap and a BlackBerry in my left hand. That's just what I do.?

What Simmons does is stay connected — to family, friends, associates, an array of powerbrokers from all walks of life and, impressively, culture at large. Simmons has remained a tastemaker for two decades, a merchant of cool, synonymous with the hip-hop lifestyle that Def Jam mainstreamed. Music, film and television, fashion, politics, even financial services — Simmons has done many things, almost all of them very well. And now he's making the leap from wireless maven to wireless magnate.

This month, Simmons and Liles will launch Def Jam Mobile, a wireless content platform created in partnership with AGmobile, the wireless services division of greeting card giant American Greetings. The new venture will target a generation of wireless subscribers for whom hip-hop is an unequivocal “life soundtrack,? such as teens and twentysomethings raised in the urban sprawl of New York and Chicago, as well as products of the farms of Nebraska, the swamplands of the Mississippi Delta and the manicured lawns of Beverly Hills. Def Jam Mobile will deliver not only traditional content like ringtones and SMS news alerts, but also Simmons' Laws of Success and even daily affirmations from his kid brother Joseph, better known as Reverend Run of the legendary rap group Run-DMC.

“There's all kinds of sh*t,? Simmons says. “We can provide a lot of content and give it a label — brand it — so people know where to go to get what they need.?

What separates Def Jam from the other mobile content developers entering the wireless arena is an already powerful brand, not to mention the buying power of the culture it reflects. When Simmons and Rick Rubin founded Def Jam Records in 1984, few recognized hip-hop's staying power, its potential to cross cultural divides or the extent to which it would redefine what young Americans say, wear and purchase. But according to yet another Simmons-backed venture, the Simmons Lathan Media Group, hip-hop now represents a $10 billion industry whose audience includes an estimated 45 million consumers between the ages of 13 and 34, 80 percent of them white, with a cumulative annual spending power of $1 trillion.

It is the same demographic that the wireless industry that research firm the Yankee Group currently values at $91.7 billion has coveted since its inception: young, hip consumers flush with disposable income, a hyperspeed culture quick to seize on how and how much mobile communications can enhance their lives. For young consumers, Def Jam Mobile promises carriers cultural entrée. Traditional wireless brands signify little beyond their core business.

“For 20 years, we've not only been making music, but building a lifestyle,? Liles says. “We never felt we were a record company. We always felt we were a lifestyle company. And if you wanna be the cool kid, then you wanna have access to Def Jam Mobile services and whatever we're providing.?

The first building block in Simmons' lifestyle company was Def Jam Records. The label's superstar acts like Public Enemy and the Beastie Boys expanded rap into uncharted creative and commercial territory, exerting a chokehold on global teen culture that the music maintains to this day.

“Def Jam is part of a movement,? Simmons says. “Hip-hop is the most powerful social, political and cultural force African Americans have ever seen, and it's a great opportunity for them to change the world. Music is a small part of it.?

Music was always just part of it for Simmons himself. Also in 1985, he produced Krush Groove, a feature film loosely based on Def Jam's origins. Made for just $3 million, Krush Groove earned about $20 million at the box office and established Simmons as a force in Hollywood. From there he moved into television, creating Def Comedy Jam and Def Poetry Jam for HBO, followed by excursions into fashion (Phat Farm and its sequel, Baby Phat), magazines (One World) and financial services (Rush Cards, a prepaid Visa card for Americans with blemished or nonexistent credit histories). Before Def Jam Mobile, he even dabbled in the wireless phone business, creating a signature handset in partnership with Motorola.

“I'm very slow,? Simmons says. “By the time I get into things, it's when the thing's ready to pop off. I've been using mobile phones since before anybody used ‘em. And there came a point when I knew the content was really critical.?

Liles' story follows the same central themes: bootstrapping, ambition and vision.

Today, Liles is a part owner of the Def Jam brand, and as president and CEO of Def Jam Enterprises, he oversees Def Jam Interactive, Def Jam Gaming, Def Jam Electronics and now Def Jam Mobile — everything but Def Jam Records, more or less. Def Jam games leveraged the brand into a new sector; wireless is an extension of the same approach.

“Everybody uses their cell phone — not just to call people, but to instant message and for self-expression,? Liles says. “I said, ‘I have to find out how I make that connection — how do I make this an extension of myself, and bring the lifestyle we've brought to the music and the clothing to wireless?’?

For starters, Def Jam Mobile will focus on what the company does best, developing content inspired by its rich musical history. “Everybody has ringtones, but we don't want to just go for the ringtones that everybody has — we want to go into those favorite B-sides that are pumpin' at every club around the country,? Liles says.

The market for ringtones is growing. According to market research firm In-Stat/MDR, U.S. ringtone sales will reach $146 million in 2004, and the Yankee Group anticipates that figure will exceed $1 billion by 2007. Week in and week out, the latest hip-hop smash unfailingly ranks as the industry's most downloaded ringer.

Def Jam is entering the wireless space in partnership with another brand better known for its efforts in other markets: AGmobile, the fledgling mobile applications and content division of American Greetings, the mammoth manufacturer of social expression products like greeting cards, gift wrap, candles and calendars. Launched in early 2004, AGmobile is part of AG Interactive, which operates a network of Web sites — AmericanGreetings.com, BlueMountain.com and Beatgreets.com among them — offering what the company calls “expressive content.?

According to Bryan Biniak, AGmobile's senior vice president and general manager, American Greetings chose to build its wireless business by targeting specific consumer segments, analyzing their wireless consumption habits and determining the specific brands best suited to reach each demographic. “We asked ourselves, ‘Do we want to own the ringtone vertical, or do we want to own a particular market segment and then super-serve that segment to be the data provider for the Hispanic market and the urban market?’? Biniak says. “So the strategy was developed based on historical data and market reality, and what we did then is identify the number one brands in those verticals.?

This past March, a few months before signing on with Def Jam, AGmobile announced a deal with Hispanic broadcasting giant Univision to create Spanish-language content, services and applications. Among the products: customized telegreetings, personalized graphics, ringtones and information and entertainment options, all of them marketed via Univision.com, the most visited Spanish-language Web site in the U.S.

“There's tons of ringtone providers, tons of wallpaper providers, tons of news and information — content like crazy. But we bring powerful brands that end users can recognize,? says Nick Montes, AGmobile's vice president of marketing and the former director of multicultural marketing and international services at Verizon Wireless. “From a carrier perspective, putting brands like Univision or Def Jam on your deck will definitely increase your revenue and downloads. Consumers are familiar with what kind of content these brands have delivered in the past, and know the content they're gonna deliver by mobile is just as good.?

But what most sets AGmobile apart from other content developers and aggregators is its retail presence. American Greetings has agreements with over 115,000 different retail outlets in the U.S., including exclusive deals with Target and Kmart as well as partnerships with Wal-Mart, Rite Aid, CVS and others.

Is the partnership a business slam dunk? “Russell has a great brand — it's in music, television, comedy and fashion,? says Mark Levy, vice president of content for wireless content provider and publisher InfoSpace Mobile. “But at the moment, it's so difficult to explain to somebody how they find content on a phone, or where they're going to get it. The evolution of this industry will be toward companies like Def Jam that want to use their brands to drive sales, but I don't know if the market's ready for that.?

However, certain segments of the consumer population seem more ready than others. Youth-focused Virgin Mobile USA has enjoyed a successful relationship with another longtime bastion of teen culture, MTV, delivering to subscribers exclusive MTV-branded news alerts, audio voting, ringtones and interactive voting for the network's hit Total Request Live music video countdown.

“There's increasing sophistication and significant uptake in these types of things,? says Howard Handler, chief marketing officer for Virgin Mobile USA. “Everyone's hearing the clarion call. MTV got in early with us, and for Russell to step up is fantastic.?

But there are no guarantees. Perhaps the biggest question is whether Def Jam — at 20, now older than many hip-hop artists and their fans — can still connect with the 18- to 25-year-olds who account for the core of the mobile multimedia audience. The label is no longer the sole monolith on the hip-hop landscape: both Bad Boy Entertainment and Roc-A-Fella (owned by rap superstars Sean “P. Diddy? Combs and Jay-Z, respectively, both avowed admirers of Simmons) now rival Def Jam for star power, audience share and cultural influence.

“I see Def Jam as a very strong musical brand and voice of expression,? Levy says. “I think with Russell's extension into Def Poetry Jam on HBO, he's got an extended audience there, but is it the target audience of 14 to 25 that's buying all this stuff? I don't know. Russell's done a good job of reinventing himself every few years — at a business level, people know who he is, and in the music industry people know who he is, but how far that extends to the buyers of the content we're talking about, I don't know.?

To Simmons, it's simple. Def Jam Mobile will blow up. It's what Def Jam products do.

“People want to know about the hip-hop news alerts we're going to send them,? Simmons says. “They want to know about the fashion designs that suit them. They want to know about the kind of political statements being made by hip-hop, and the kinds of social and political implications of hip-hop. They want Reverend Run's Words of Wisdom. They want Def Comedy. They want Def Poetry. They want everything Def.?

CELL-BUY TRENDS

Among U.S. wireless subscribers, non-Anglos are more inclined to adopt new services like photo messaging and ringtones. For example, African Americans are nearly twice as likely as whites to be enthusiastic about feature-rich handsets; and Hispanics spend more on wireless service per month than any other ethnic group.

WIRELESS SPENDING AMONG ETHNIC GROUPS (PER MONTH):
HISPANICS WHITES BLACKS
$54.65 $49.72 $49.25
WIRELESS DATA USE AMONG ETHNIC GROUPS:
HISPANICS WHITES BLACKS
12% 7% 20%
INTEREST IN WIRELESS APPLICATIONS AMONG ETHNIC GROUPS: DOWNLOADING RINGTONES:
HISPANICS WHITES BLACKS
21% 11% 20%
SENDING/RECEIVING PHOTOS:
HISPANICS WHITES BLACKS
19% 7% 18%
RECEIVING VIDEO CLIPS:
HISPANICS WHITES BLACKS
14% 4% 14%
Source: “Selling Telecom to Ethnic Minorities,? Forrester Research, April 2004
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