Dr. Dre ranked second on last year’s Forbes Five list of hip-hop’s wealthiest artists with a net worth of $550 million. Yet a year later, after selling Beats to Apple for $3 billion, his fortune sits at $700 million in this year’s accounting.
To the casual observer, the math may not seem to make sense—particularly given that Dr. Dre anointed himself hip-hop’s first billionaire last May—so, in the interest of transparency and understanding, let’s take a closer look, starting at the very beginning.
Dr. Dre and Jimmy Iovine founded Beats in 2008 after the former suggested they start a sneaker line. “[Forget] sneakers, let’s make speakers!” replied Iovine, as the legend goes. It marked the beginning of the most lucrative collaboration between the two longtime friends.
Though the duo cofounded Beats, they would eventually give up large chunks of equity to a combination of different players involved in the company. Early endorsers of Beats received small stakes (LeBron James is widely believed to have received one); a double-digit percentage went to Universal Music Group, which allowed Iovine to insert Beats headphones into just about every Interscope music video (and took home about $400 million on the sale).
A series of major investments soon added vast sums to Iovine and Dre’s coffers–and the valuation of their company. In 2011, HTC paid $300 million for a 51% stake; the duo and their growing list of co-investors eventually bought that back, then sold an undisclosed stake in the company to Carlyle Group for $500 million in 2013.
By 2014, Dr. Dre’s stake had been diluted to about 25% and was worth roughly $400 million on paper, by our estimates. That number made up the bulk of his fortune, measured at $550 million on last year’s Forbes Five list.
When the Apple deal was initially reported in May, it seemed Beats was going to sell for $3.2 billion, or about twice its estimated value. On paper, that meant Dr. Dre’s stake was suddenly worth $800 million; indeed, that would have put him a rounding error away from being a billionaire.
But the deal closed at an even $3 billion in cash, and then Uncle Sam took his cut—an estimated 33%—leaving Dre with a $500 million payout for his Beats stake, only $100 million more than we’d figured it was worth before the deal.
That total, along with other earnings and proceeds from the sale of his Hollywood Hills home, lifted his total to $700 million this year. Dre has been celebrating in appropriately lavish fashion, buying Tom Brady and Gisele Bundchen’s Brentwood spread for $40 million after the Beats deal was announced.
Though Dre still trails Diddy by a hair for the No. 1 spot on the latest Forbes Five list, he has certainly come a long way–he’s nearly tripled his net worth since 2011, when he clocked in at $250 million. With a little luck and some savvy investing, he still has a decent chance of becoming hip-hop’s first billionaire. [Forbes]
