DJ Khaled's Business Model

Each time DJ Khaled drops an album, the same questions resurface: What does Khaled even do? How does he get paid if other producers make the beats? How do ALL these artists get paid? In fact, three of my friends have reached out to me this past week asking similar questions! I won’t go in full depth here, but there are two distinct parts to understand: the specific business model of Khaled’s albums, and how these albums help Khaled make money elsewhere.

Producers and beatmakers don’t have to be the same person

On several occasions, Khaled has called himself the “Quincy Jones of hip-hop.” As you probably know, Jones was the puppet-master who helped fuel Michael Jackson’s music career, the Fresh Prince of Bel-Air TV show, and countless other projects. Jones was the lead executive producer, but he hired folks to execute his vision. That’s how most executive producers operate.

In hip-hop, the lead producer and beatmaker roles are often merged. For instance, Timbaland and Pharrell often do both jobs. Khaled’s role—a lead who hires others to do the actual work— exists in countless other industries. It’s the fundamental management structure of the corporate world! This shouldn’t be all that surprising.

As Joe Budden has said on several occasions, Khaled is the best A&R in hip-hop. He’s spent years building the network and connections that he uses for each project. In recent years, Khaled has talked through his process of making a song. First, he secures the lesser-known artist, then uses that artist’s name to get bigger artists to drop guest verses, and so on. He followed this process with “Top Off,” where he got Future first, then got Jay Z to jump on, then asked Jay to ask if Beyonce could join. (Note, it’s also in Jay’s best interest to support Khaled. The producer is signed to a management deal with Roc Nation.)

‍Producers typically get paid in advances, a percentage of royalties, or a percentage of publishing. I don’t have specific data for Khaled, but according to Forbes, Mike Will Made-It earned 4.5% of royalties for a similar compilation album. If Khaled takes a similar cut from each album, that’s not a lot of money left over.

But it doesn’t matter that much. Khaled’s music is a loss leader for everything else he does.

Endorsement deals are where the money’s at

Khaled’s most powerful asset is his network. These compilation albums keep him relevant, which increases his endorsement deals and money he makes outside of hip-hop. He’s been a regular on Forbes’ Hip-Hop Cash Kings list. Last year, he made $27 million in large part to his endorsement deals with Weight Watchers, Apple, and Ciroc. The year before, he made his $24 million from his six-figure DJ gigs and deals from Champs Sports, Mentos, and Apple again.

Business leaders talk often about two things: working smarter not harder, and the value of strong networks. Khaled is a testament of both. He hustles his deep Rolodex of connections to make these records happen, which maintains momentum for his brand, which he makes millions off of endorsement deals.

Sure, Khaled also gets hated on because of his obnoxious personality. And the albums themselves usually have a lot of filler tracks, but I don't think he cares anymore. Khaled clearly figured out his gameplan regardless of what the haters say.

As he constantly says himself, “They don’t wanna see you win!” Maybe he’s right.