An urban rite of PASSage

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In Jay-Z's music video "i just wanna love u (Give it 2 Me)," the rap artist arranges trysts with beautiful women using some hot new technology. "Only way to roll is, Jigga and two ladies./I'm too cold, Motorola, two-way page me," he sings while pulling out the trendy little device to set up a bedroom rendezvous.

"We made that happen for Motorola," said Steve Stoute, exec VP-president of black music at Interscope Geffen A&M. The "we" refers to himself and his partner, Peter Arnell, the exuberant president of Interpublic Group of Cos.' AG Worldwide, an advertising and design shop based in New York City's Soho. The Jay-Z musical reference was an orchestrated pitch to Motorola to show what the two could deliver.

These two entrepreneurs have teamed over the past year to market brands via unconventional methods such as product placement in music videos and simply placing products in celebrities' hands.

Mr. Arnell is a style guru, designer, photographer and founder of AG. Mr. Stoute is a music promoter with impressive street cred and connections.

"We're like Andy Warhol meets Snoop Dogg," said Mr. Stoute, who knew the rap artist when he was represented by Interscope. "Only he's not Warhol and I'm no Snoop. I'm a record producer, and Peter is an advertising guy."

Mr. Arnell and Mr. Stoute's low-profile joint venture, incorporated in 1999, is dubbed PASS, an acronym of both their names. In the running for the urban marketing portion of a major athletic footwear account and about to break a campaign for luxury company Davidoff, the partners want to signal their arrival.

"We're coming out of the closet," Mr. Arnell said. "Actually, we're coming out of the limo door."

"Urban marketing agencies just go after really big accounts. They substitute a black actor for a white actor and call it an urban ad," Mr. Stoute said. "We go deeper because of my relations in the music business."

PASS is up against a small but growing field of agencies competing for that piece of the pie, including Burrell Communications in Chicago (partly owned by Publicis); True North Communications-backed Don Coleman in Southfield, Mich.; UniWorld Group, which is partially owned by WPP Group; D-Rush, part of Interpublic's Deutsch; Omnicom Group's Spike DDB; and Bcom3's Vigilante, all in New York.

PASS clients include Skytel, its first client; Jose Cuervo, which got its own dance track debuted in nightclubs; and Universal Music Group's Billings are estimated at $10 million.

In its most recent undertaking with Davidoff, the duo developed a new line of cigars, Zino Platinum Series-allegedly the most expensive cigar in the world. Posters featuring Jay-Z will launch the cigar this summer.

"Peter and Steve are giving us a completely different marketing approach for a cigar," said Reto Cine, president of Davidoff, who added the pair also has plans for Davidoff clothing.

PASS is developing a sake brand with Nobu, the sushi restaurant in Manhattan partially owned by Robert DeNiro where Mr. Arnell and Mr. Stoute first met. "We were table acquaintances," said Mr. Arnell.

Some PASS clients overlap with AG, such as Jose Cuervo, while others do not. "We can hook up anybody with anything," Mr. Arnell said.

An independent company owned by its partners, PASS operates outside of Interpublic and Interscope. When Interpublic took a 50% stake in AG last March, PASS was not part of the deal. "We are parent-company neutral, which allows us to navigate much quicker through things," Mr. Arnell said.

An industry executive close to PASS said WPP Chairman-CEO Martin Sorrell has talked to Messrs. Arnell and Stoute about acquiring their operation and merging it with WPP's urban youth agency UniWorld. Messrs. Arnell and Stoute would not confirm this, and Mr. Sorrell declined to comment.

"There have been a lot of offers to both invest [in] and own a part of this business," Mr. Arnell said. "We've kept it private because we want to develop it properly and see what it becomes in the next few years."

PASS currently works out of a small office across the street from AG and outsources most business to free-lancers. Soon, it will name a president.

Jordan Rednor, chief operating officer of Draft Worldwide, which is the Interpublic "silo" network under which AG Worldwide belongs, called PASS "a think tank and a matchmaker for brands."

Mr. Rednor views PASS as "complementary to all the IPG marketing companies. It just evolved around a very unusual and very fascinating relationship between Steve and Peter. And it keeps Peter happy."

In 1998, Draft acquired Kevin Berg & Associates, a youth and event marketing company with roots in nightclub promotions. But according to Kevin Berg, president and CEO of KBA, there's no conflict.

"They don't operate within four walls," Mr. Berg said. "They set a relationship up between a brand and a celebrity and they let it evolve in a way that is natural. And it works."

Russell Simmons, the music industry impressario who created the urban youth marketing agency D-Rush, now owned by Interpublic's Deutsch, also sees no conflict. "Peter is one of the people who got me in the advertising business in the first place," he said. "They are the validation that we are building the right kind of company. Hip-hop kids are leading the marketplace, and those hip-hop kids are 80% non-black already, because that's what America is."

Copyright January 2001, Crain Communications Inc.

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