Inside The Black Business NetworkElizabeth Lesly
In the summer of 1991, Jheryl Busby was in big trouble. The chief executive of Motown Record Co. was desperately trying to save an enterprise rich in tradition, if little else. Motown had an abundant record library, but big names such as Michael Jackson and Smokey Robinson had defected years earlier to labels with deeper pockets. Worse, Motown was having distribution problems, and Busby was in the midst of suing its distributor and part-owner, giant MCA Inc., for allegedly failing to promote the venerable label and its acts.
So what did Busby do? He turned to the black business community for help. He asked Clarence Avant, an influential, behind-the-scenes music impresario, to arrange for him to plead his case to Earl G. Graves, the flamboyant publisher of Black Enterprise magazine. By December, Busby's face was beaming from the magazine's cover on newsstands nationwide. Inside, he talked up plans for "the new Motown" and lamented MCA's "ineptitude." He spent long hours talking over Motown's situation with Graves, Avant, and other black business luminaries such as Robert L. Johnson, CEO of Black Entertainment Television (BET).
Busby's new friends helped him form a strategy to leverage Motown's platinum brand name to create Motown TV specials and thematic restaurants. More important, Johnson made a standing offer to buy out MCA, easing the pressure on Busby and giving him time to both find a new distributor and develop hot new acts such as Boyz II Men. "I had never before asked for a favor or advice," Busby says. "But when you're driven by fear, you reach for the familiar--[to those who] understand your story."
By this August, it was payback time. The MCA suit was settled in the spring, and PolyGram NV, the new distributor, offered to buy a rejuvenated Motown for $325 million--five times what Busby and other investors had paid in 1988. Busby, who had owned 10% of the company, will stay on as CEO. Avant will continue to help Motown strategize as the label's new chairman and a member of the PolyGram Holdings Inc. board. Johnson has laid plans to collaborate with Busby on cable-TV projects, including a Diana Ross 30th anniversary special. And with a bright new future, Motown has become much more attractive to new acts.
Welcome to The Network--an informal, but powerful, system of contacts and relationships that is helping drive economic growth in the African American business community. At its core it is a cadre of entrepreneurs and a smattering of high-ranking corporate executives who together make up the black business elite. But it envelopes countless other African American businesspeople and heavy hitters in politics, social activism, and religion. With much the same energy that characterized the civil rights struggle, this network is focused squarely on economic development. The eyes are still on the prize, but the prize these days is a slice of wealth and influence in what remains a business world dominated by white males.
Sure, by mainstream standards, the African American business community has a long way to go. According to Black Enterprise, the combined sales of the 100 largest black-owned companies totaled just $5.7 billion last year--about the same as Quaker Oats Co. And in key industries ranging from heavy manufacturing to information processing, African Americans are scarce, either as owners or as executives.
But as black businesspeople create strong beachheads in fields such as communications, entertainment, and consumer goods, networking provides leverage that would otherwise be lacking. Working together, African Americans are forming pools of capital and new opportunities that are helping to overcome traditional barriers to success.
The operative concept: Strength in numbers. The deals aren't Paramount-Viacom, but there are plenty of them. This coming April, Avant, New York entrepreneur Percy Sutton, and Chicago broadcaster Eugene Jackson will launch the World African Network, a premium cable channel featuring videos and other programming produced by African Americans. In Gary, Ind., former Mayor Richard Gordon Hatcher was able to bid for a lucrative new lake-boat casino license only after calling on several potential investors from the black business elite, including Graves and Essence magazine Publisher Edward Lewis.
After black entrepreneur J. Bruce Llewellyn's ABC affiliate in Buffalo ran into financial woes, Granite Broadcasting Corp., whose biggest individual investor is Oprah Winfrey, acquired a 45% stake in October. The talk-show host also helped out when Hollywood financing for Malcolm X ran out last year and director Spike Lee approached her, Michael Jordan, Bill Cosby, and others for the cash to finish the film. When Honeywell Senior Vice-President Mannie Jackson wanted to buy the Harlem Globetrotters earlier this year, Graves and BET's Johnson gave him business advice, the rapper Hammer offered insight on the live-entertainment industry, and activist Jesse Jackson lent contacts to investment bankers. Says Johnson, who spent four years as a Globetrotter before joining Honeywell in 1968: "When we work together as a group, there's an exponential expansion of our contacts."
For young African Americans, those contacts are invaluable. Having mentors in high places is an advantage their elders never had. An internal network at Xerox Corp. helped Executive Vice-President A. Barry Rand break through the glass ceiling to become one of the highest-ranking black executives in the U.S.. As a result, he and others like him feel a strong responsibility to help open doors. "There is a tremendous sense of obligation to serve as a mentor," says Frank Savage, senior vice-president of Equitable Cos. "I can't be like a normal white executive and just do my job and go home."
It's important to note that the black business network is hardly monolithic. Participation is not a prerequisite for success. Joshua I. Smith, chief executive of Maryland-based Maxima Corp., a $48 million information-systems management company, is a staunch Republican whose business relies not at all on the black business community. And superlawyer Vernon E. Jordan Jr. takes great pains to underscore his independence, bristling at the notion of lumping black business people into a separate group. "I don't have a role in that network," Jordan says, noting that he's a lawyer, not a businessman. "You have to transcend race in this process."
The fact is, however, that ethnic groups have been networking in this country for years to claim a share of the nation's wealth and power. The Polish did it in Chicago, the Irish in Boston, the Jews and Italians in New York. Cubans are doing it now in Miami, as are Koreans in Los Angeles.
What makes the black network different is its scope. It's national, for one thing. And its reach is far deeper than that of other ethnic networks. Largely because of those decades spent agitating for legal and political rights, African Americans have established powerful advocates nationwide in local, state, and federal government. Blacks also have a strong, unified voice for change through such activist groups as the National Association for the Advancement of Colored People and Jesse Jackson's Operation PUSH. Legislation and agitation benefiting minority business is the result. And many of the black business elite are taking full advantage.
LEG UP. A prime example is Bruce Llewellyn, arguably the most prosperous black entrepreneur in mainstream business. In building his three main companies--Philadelphia Coca-Cola Bottling, Queen City Broadcasting, and Garden State Cable Television--he used all the benefits the network has to offer.
Llewellyn proved himself during the 1970s, when he built up Bronx-based Fedco Foods Corp. from $18 million in sales to the largest minority retailer in the U.S. Annual sales neared $100 million when he sold it in 1982. After that, he turned to soft-drink bottling and got a leg up with Coke when his cousin, General Colin L. Powell, put in a good word with Charles W. Duncan Jr., who was president of Coca-Cola Co. before becoming Deputy Defense Secretary and Powell's boss in the late 1970s. It didn't hurt that Operation PUSH was targeting Coke at the time, charging that it had done little to open its lucrative bottling franchises to minorities.
When he ventured into broadcasting in 1985, Llewellyn was similarly resourceful. First, he tapped a roster of investors that reads like a Who's Who in the African American community. He has drawn on Ed Lewis from Essence and Bill Cosby. Betty Shabazz, Malcolm X's widow, invests with Llewellyn, as do wealthy sports figures O.J. Simpson and Julius Erving.
Part of the allure was that during the 1970s, a handful of white and black members of Congress had persuaded the Federal Communications Commission to bestow rich tax advantages on those who sold broadcast properties to minorities. Since the program began, there have been more than 300 such sales. The properties that make up Queen City and Garden State Cable are among them.
For the black network, the linkage of politics, activism, and business is key. While Caucasian ethnic groups have been able to gain wealth and fold seamlessly into the white power base, that's not always possible for blacks. Prejudice remains a barrier. "There's a multistage process through which you emerge into the mainstream," says Northwestern University economist Marcus Alexis. "Blacks have to look at how others have moved along and understand where we are in relationship to where we have to go. This is just the beginning."
Marianne C. Spraggins, a formidable political fund-raiser and managing director of Smith Barney Shearson Inc.'s municipal finance department, compares modern black networking to the close communication among African Americans in the antebellum South. "I call it an extension of the drum," she says. "We are in communication in one way or another on all levels all the time."
The master communicator is Earl Graves, a canny entrepreneur and socialite whose empire includes one of the nation's most successful Pepsi bottling companies and stakes in countless smaller ventures. He is a director of Chrysler Corp. and a trustee of Howard University. More than anyone else, he is the network's cheerleader.
It was Graves whom former Drexel Burnham Lambert CEO Frederick H. Joseph sought out during the 1980s when--as Joseph says--"I made it my business to find out who knows people" in the black network. Graves hooked him up with a relatively obscure financier named Reginald F. Lewis, and Joseph urged Drexel to finance Lewis' $985 million acquisition of Beatrice Co.'s international food business in 1987. That created the largest black-owned business in the country, with 1992 revenues of $1.7 billion. Sadly, Lewis died of a brain tumor last January but was succeeded by his half-brother, Jean S. Fugett Jr. (Beatrice has recently come under investor fire for poor results.)
Graves, 58, has always used Black Enterprise as his power base. His friends--from Commerce Secretary Ron Brown to the guy who designed the light fixtures at his Westchester County (N.Y.) estate--are commonly featured. The tone is overwhelmingly upbeat and celebratory--too much so, some complain. Graves founded the magazine in 1970 with a $175,000 Small Business Administration loan. Alliances with other major black magazines followed.
Graves, Ed Lewis at Essence, and John H. Johnson, the publisher of Ebony and Jet, share market information, throw promotional parties together, and occasionally pay joint calls on advertisers to underscore the significance of black consumers. A few years ago, Graves was bent on winning advertising from Hyatt Corp., but wasn't getting anywhere on his own. So Johnson, who has known Hyatt CEO Jay A. Pritzker for years, arranged a group meeting. Today, Hyatt is a frequent advertiser.
NEW FACES. For a dozen years, Graves and his wife, Barbara, have vacationed regularly with what Graves calls the "Traveling Team"--an informal assortment of longtime friends ranging from outgoing Virginia Governor L. Douglas Wilder to American Express U.S. Travel Related Services President Kenneth I. Chenault. Summers are spent either on Long Island or Martha's Vineyard. And every two years, as part of the National Brotherhood of Skiers event, networkers gather in such places as Vail or Aspen to check out up-and-comers they have invited. Most of the elite belong to the same civic organizations, from the NAACP to the Urban League.
Bringing in new faces is a major pastime of the network. Take Keith T. Clinkscales, now the chief operating officer of entertainment mogul Quincy Jones's Vibe magazine, a joint venture with Time Inc. Ventures.
In 1988, while still attending Harvard business school, Clinkscales launched his own magazine, Urban Profile, a bimonthly aimed at black college students. Looking for help and advice, he turned to BET's Bob Johnson, Ed Lewis, and Eugene Jackson of the World African Network, among others. They introduced Clinkscales to prospective investors and counseled him on the ins and outs of targeting the black market. The magazine grew to 50,000 subscribers before Clinkscales sold it to Career Communications Group Inc. His success led him to Vibe. "It's important to understand who the power players are," he says. "These people provide you with a solid base of contacts. If you treat it right, it's something to hold on to."
Helping along Ivy Leaguers like Clinkscales is crucial. But some worry the network risks leaving large portions of the African American community behind. "Our greatest challenge is finding a way to make opportunities for the people in the inner cities," says Northwestern's Alexis. Others, such as consultant Andrew F. Brimmer, the first black governor of the Federal Reserve Board, believe holding blacks to such a standard is unfair. "I do not see why black businesses should have any more responsibility than anyone else to improve life for blacks," Brimmer says.
Most networkers fall somewhere in between. While many give copiously to groups such as the Urban League and the United Negro College Fund, the prevailing ethic is that a rising tide lifts all boats. And that leads to another concern: For all its enthusiasm, some worry that the black business community is continually co-opted by white-owned businesses with deeper pockets.
In the past year, two of the biggest deals for companies owned by African Americans were Busby's sale of Motown to PolyGram and Ivax Corp.'s purchase of hair-care mainstay Johnson Products Co., which was owned by Joan B. Johnson, the former wife of Chicago entrepreneur George E. Johnson. Both deals lined the pockets of prominent black businesspeople. But they ceded ownership to whites. "The black market has been there to support these companies," grouses Ronny C. Anderson, associate dean of the University of Chicago business school. Selling "communicates powerlessness. The African American leadership is all too happy to sell out."
KEEPING CONTROL. BET's Bob Johnson sighs at such thinking. He identifies himself with a new wave of black entrepreneurs who are more concerned with control than ownership. BET's biggest investor is Liberty Media Inc., one of the companies cable giant John C. Malone recently agreed to sell to Bell Atlantic Corp. But for the most part, Johnson calls the shots at BET, and without Malone's investment, he probably wouldn't be in business.
Private, old-line, black-owned companies, Johnson argues, "are going to get creamed because they don't have the capital to compete." And his views are gaining popularity. Andre Harrell, a 32-year-old Hollywood entrepreneur, just landed a $75 million deal with MCA to produce movies, music, and TV shows--all with an African American bent. "My generation has a little more fun being successful than [the old guard] may have," he says.
Harrell may be the prototypical networker of the new generation. While he has leveraged contacts within the black community--from Motown's Busby to younger entrepreneurs such as Rush Communications' Russell Simmons--MCA's investment is what put his company, Uptown Entertainment, on the map. Harrell staunchly maintains control and retains the right to work with other partners. He is now completing plans to launch an Uptown advertising and media unit, which will be a joint venture with DDB Needham Worldwide Inc.
Harrell sees his mission with MCA as selling black cachet to mainstream audiences. "You have to realize," he explains, "black is pop now." Of course, Busby had similar expectations when he got in bed with MCA five years ago, and that didn't work out so well. Harrell expects no such trouble, but there is one thing he can count on: As a successful young entrepreneur, he'll always have The Network to fall back on.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.
- In One Tweet, Kylie Jenner Wiped Out $1.3 Billion of Snap’s Market Value
- The Two Words That Will Help Get an Airline Upgrade Over the Phone
- Apple Plans Upgrades to Popular AirPods Headphones
- Snap CEO Evan Spiegel Got $638 Million in Year of Firm's IPO
- Los Angeles Cracks Down on Out-of-Control Hollywood Party Houses