Zack O’Malley Greenburg no longer needs an introduction.  As the man behind hip-hop’s most talked about list, the Forbes staff writer is accustomed to having his work applauded and scrutinized.  However, no one will doubt Greenburg’s credibility after rap’s most successful stars from Diddy, Jay-Z, 50 Cent, Nas and Drake have praised his list through their lyrics.

If you were curious to know the last time that Greenburg was given a shout-out through song take a close listen to Birdman’s latest crew single, “Tapout,” from his upcoming “Rich Gang” compilation.  It just happens to be a coincidence that three of the artists on the track [Birdman, Lil Wayne, Nikki Minaj] have all been frequent additions to the Forbest list.  As “Tapout” comes to a close Ms. Minaj goes in for the kill when she raps:  “Pull up in that you can’t afford this/ Number one bitch on the Forbes list.”  It’s safe to say that the single is an early hit as it is one of the greatest gainers on Billboard and has already reached No. 1 on the Heatseakers Songs chart while currently sitting at No. 19 on the R&B/Hip-Hop Airplay list in less than a month. 

Although Greenburg’s latest Forbes Five was released in the April 15 issue of Forbes magazine that didn’t stop New York’s Power 105.1 Breakfast club trio of Charlamagne Tha God, Angela Yee and DJ Envy from having a heavy debate on the topic last week.  The popular radio hosts noted that Diddy topped the list for a third consecutive year at a staggering net worth of $580 million.  Their main concern was that while all of the moguls including Jay-Z at No. 2 with $475 million, Dr. Dre at $350 million, Birdman at $150 million and 50 Cent at $125 million were all worthy of being highlighted for their hustle, Shawn Carter should be considered the best because of the diversity of his business ventures.  All of the data they provided for their reasoning came directly from Zack Greenburg’s article.  I spoke with Greenburg to get a better idea of how he conducted his research.

How do you differentiate the Forbes Five list from the Cash Kings list that you create?

The Forbes Five is the net worth so that’s their personal fortune and what their entire empire is worth.  We’re not talking retail source sales, growth, or the entire company.  For example, Dr. Dre doesn’t own all of Beats.  He owns a quarter of Beats so its net worth and we take all of their stakes in all of their various enterprises and we value them and add it all up.  We do standard calculations also for past earnings.  I basically spent the first part of this entire year working on this package and there are only five guys on the list but it’s a lot of work.  There are a lot of calls and digging around.  I talk to Wall Street analysts, some of the rappers themselves and talking to agents and managers to get the net worth picture.  The Cash Kings are annual earnings.

What are the criteria that you use and what are some of the things you will leave out when calculating the net worth?

Let’s say Jay-Z has earned $200 million in the last five years.  That doesn’t automatically get added into his net worth.  You have to take out 35 percent for federal income taxes, another 10 percent for state and local taxes and between 15 and 20 percent for agents and manager’s fees.  Then you may be left with a third of annual earnings that ultimately go toward net worth.  We will do a calculation that takes all of that into account.  Obviously we don’t assume that they save every penny. 

Tell us about some of the interviews that you accompanied with the list this year.

50 Cent and Birdman were the two big ones that I did.  I also interviewed Drake and Jay Sean.  I did a story on Cash Money.

When you were interviewing those guys were they aware that they were being considered for the Forbes Five list?

50 Cent knew but that interview was primarily for another story on him that will be out soon.  But I also asked him directly about his net worth and he knew that this would be part of this package as well.  With Birdman I was just talking to him at the Grammys about Cash Money and I wasn’t sure where I was going to use the story.  We only talked for a couple of minutes that time but obviously we’ve had more substantial conversations in the past for previous Forbes Five packages.  Last year, I sat with him and we spoke for an hour about the empire.

What were the great sound bites that you gathered this time around? 

I thought it was interesting talking to Drake, for example, about what it’s like working for Birdman.  You don’t always think about Birdman as a manager but he is.  He and his brother manage this whole empire.  Obviously there are other people involved but ultimately he is the boss and it was kind of cool to hear Drake and Jay Sean talking about him.  Drake said it’s a hands-off approach and the idea is to get a diverse cast of characters on the label and let them do their own thing because they have rappers, rockers, and country artists on the label.  The country artists on the label probably know more about country music than Birdman does so you gotta let them do their thing and flourish and that’s what’s been happening over there. 

I found it interesting that Birdman’s money is primarily from music where the other guys have other businesses outside of music that puts them on the list?

Yes, that’s a very interesting thing.  Another interesting thing is that none of these guys are big touring acts except for Jay-Z.  In recent years, none of these guys have done that much touring if any.  Some of them don’t tour at all or they do one or two shows a year. 

You stopped the list at five but who are the honorable mentions here?

The honorable mention here is Lil Wayne.  By our calculations he crossed the $100 million threshold.  That’s mainly based on the valuation of Young Money as part of Cash Money but he wasn’t quite up to the $125 million that 50 Cent had.  That might change as Cash Money and Young Money continues to grow, especially as his other ventures like the Trukfit clothing line continue to grow.  Why only five?  It would have been nice to do six to get Wayne on there but we’ve done five and you can’t change the Forbes 400 to the Forbes 500.  If there were a tie we would have probably made a sixth.  In the first year, we did five because it’s really hard to do net worth valuations period but it’s particularly hard to do net worth valuations for people who aren’t worth that much. 

Guys like Jay-Z, Diddy, Dr. Dre, 50 Cent and Birdman are all wealthy because they’ve signed with a company or have stakes in companies that we can actually value and put a pretty realistic number on.  These are companies that have comparable publicly traded rivals that we can look at earnings multiples or price of sales ratio or something like that to put a realistic value on something like a Beats by Dr. Dre.  For many other genres like pop, for example, it would be really hard to do a net worth valuation because there are not as many pop musicians starting their own companies so you have to just rely on lifetime earnings which we have a pretty good handle on but then it’s all up to what stocks did they invest in and how much did they spend.  Some of that stuff is really hard to know and particularly when it’s the only thing you’ve got to go on it’s pretty hard to come up with a credible valuation on somebody.  With these guys the businesses that make up a bulk of their net worth are a little more tangible and definable.

Tell us the secret to Diddy’s dominance on this list.

The huge thing with Diddy is Ciroc and that’s what puts him on the top of the list. 

What’s the relationship between Diddy and Ciroc?

Five years ago Ciroc and Diddy decided to do this deal wherein Diddy would get a cut of all profits in exchange for promoting this thing like crazy basically.  The other thing and the reason we count this toward his net worth is that if Ciroc the brand were ever to be sold he would split the proceeds after Diageo recoups all of its expenses.  They made that deal a long time ago back when Ciroc was this middling mediocre brand.  It was ranked 40th or 50th in terms of sales and now it’s in the top five.  It’s really close to being in the top 3 entirely because of Diddy.  It has ascended to this level where it’s on par with Ketel One or Grey Goose.   Grey Goose was sold for $2 billion a decade ago and Ketel One sold half of it for a billion dollars a couple of years ago too.  We looked at the case volume and talked to Wall Street analysts about the whole deal and came up with our estimate of what he would take home if Ciroc were ever sold and that makes up the bulk of the valuation.

Where does Sean John clothing fit into his net worth?

That’s definitely a component.  It definitely doesn’t make up the majority of his net worth but it’s a fairly big chunk.

You mentioned that Jay-Z sold his share of Rocawear but we’ve see him on Oprah sitting in his very own office at Rocawear, promoting the clothing, and saying that he was chasing Ralph Lauren.  What is his role now?

Yes, when he sold Rocawear he was paid partially in stocks of Iconix, the company that bought it. He received tens of million of dollars of that payment came in stock options.  He also gets money from Rocawear to be its spokesperson.  They still pay him millions of dollars to do that and have that association.

Talk more about 50 Cent.  Where is the money coming from for a guy who hasn’t released a record in a while?

I think those numbers are pretty conservative.  50 Cent got $100 million after tax when Vitamin Water’s parent company, Glaceau, got sold to Coca Cola five years back.  There were a few years where he was making $30 million to $40 million a year from “Get Rich or Die Trying” which sold more than 13 million records.  He had a few albums after that that did pretty well.  He had the clothes, the video games, the shoes and all of that stuff so he was making a lot of money.  He was spending a lot of money and making a lot of money.  He’s also got some stakes now in company such as SK Energy Shots and SMS Audio that aren’t big components.  We really count that Vitamin Water deal as the biggest windfall that lends credence to our number but there are other companies that he’s become involved in recently that continue to grow.  SK Energy has a shot to be a really valuable property for him given that’s it’s already the No. 2 energy shot after 5-Hour energy.  It’s a very distant second, something like 5 percent to 90 percent.  5-Hour Energy is 90 percent.  They wouldn’t confirm their market share but 50 Cent said his company would be 10 percent by the end of the year.  It might be optimistic but they are growing fast, close to 20 percent week over week volume growth in some stores and you are starting to see them pop up all over the place.

Can you help us understand the financial impact that SMS Audio has in the marketplace compared to Beats By Dre?

There’s a report that came out from a research firm called NPD group that I cited. They say that Beats has 65 percent of the premium headphone market so that’s $99 and up.  SMS has about 1 percent.  Also, Jay-Z’s Roc Nation Skull Kandy Aviators is about 1 percent.  The second ranked company is Bose that has 21 percent.  Sony has 2 percent.  So it’s just complete domination by Beats by Dr. Dre.  They did something with that category that has never been done before.  Interestingly, Sole by Ludacris is 2 percent.  If we were to expand our list to the top 10 I’m sure Ludacris would be top 10. 

What were the surprising things about this year’s results versus last year?

It’s been interesting to see 50 Cent after the Vitamin water deal regroup and sort of start-up SMS Audio and SK Energy and he didn’t start it this year.  It’s interesting to see these go from idea and early stage start up to this year being something that is worth quite a bit of money.  I think out of all of them in a way you could argue that he is positioned to move up the most on a percentage basis year after year based on the success of those two companies. 

It will be interesting to see the growth of Diddy when his cable channel Revolt TV comes out which could be later this year or 2014 and who will be involved in that and how ownership will be structured because cable television is pretty valuable.  There’s a set metric for valuing and there’s a certain amount you can project per subscriber.  If he gets into the millions of subscribers for his cable channel when it goes up you can start to see him creep toward that billion-dollar mark pretty quickly.

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