Magic Johnson made his first fortune as a basketball superstar, before retiring after publicly admitting to being HIV-positive. Now he is making a second fortune in business. Larry Platt reports
Back in the mid-Eighties, Earvin “Magic” Johnson found himself holding the ball during a basketball game in front of Joe Smith of Elektra-Asylum Records and Peter Guber of Sony Pictures, both Los Angeles Lakers courtside season-ticket holders. Johnson had always been aware of the fates of black athletes in the past the fortunes lost by the likes of Jesse Owens, Joe Louis and Muhammad Ali. So before passing to a team-mate, he turned to the two moguls and asked: “How do I get into business?”
More than a decade later Johnson, now 41, stands in his bustling strip mall in the heart of South Central Los Angeles. Within this complex are his Starbucks and his TGI Fridays, and it’s only 6km to his state-of-the-art 15-screen multiplex. A parade of evening shoppers stop to hug or high-five Johnson.
By day, he’s Mr Johnson to his staff in the Beverly Hills office where he oversees a business empire that includes more than $480-million worth of property in previously depressed inner-city areas. But here, where he can be found three or four nights a week, he is Magic, the former basketball player, a charismatic figure who explains that he keeps coming around so his customers know he’s not just another athlete selling his name and likeness to white business people.
But he is also driven by an insatiable need for attention: one friend observes that he’s addicted to the spotlight, and Johnson himself admits that he feeds off the love he’s shown here. It’s as though he has found a way to extend the cheers of his playing days.
Some of those flocking to him offer thanks for rejuvenating a moribund neighbourhood that others have failed to resuscitate in the years since the Los Angeles riots. As Johnson heads toward Starbucks, a morose-looking youth on a cellphone passes by. Glancing up, he does a double take. “Magic Johnson!” he cries, handing him the phone, “say hi to my grandma!”
Johnson stops, his smile widening. “Hello, Grandma,” he says while the kid bounces on the balls of his feet, the scowl morphing into a grin. “Your grandson was thinking of you the first thing he said was, ‘Say hi to my grandma.’ So he presents himself well, which means you’ve done your job, Grandma. Who raised him?”
Johnson looks at the kid. “Well, you and Moms done your job. I love you, too, Grandma. OK, here he is.”
Inside Starbucks, Johnson’s gleaming face adorns one wall, and HIV and Aids brochures are at the counter.
“See, people say all kinds of things about black people, but look at this,” Johnson says, motioning toward the packed tables. At one, a young man works on a laptop. At another, a couple of college students pore over a stack of open textbooks. On the patio, fathers are teaching their sons chess. Johnson moves toward them, smiling, hugging his own upper torso. “Man, I want to cry every time I see that,” he says, before stage-whispering: “Because they never had this before here.”
Johnson employs about 3000 people who live in inner-city neighbourhoods across the United States. Over the next two hours, as Johnson sips herbal tea and tirelessly plays host, he talks about the satisfaction this brings.
In Harlem, Johnson’s multiplex, which opened in July, and the Harlem USA mall it is a part of, have sparked a renaissance. Last year, after the Harlem cinema hired 100 people from the 5000 who had queued to apply, Johnson decided that he wanted his new staff to have four weeks of rigorous training. On opening day, dozens of young men and women stood before him in pressed uniforms. “Just looking at those faces, the hope and pride,” he says, ‘”that may have been the best moment of my life, right there.”
Later, as he ambles toward his Bentley convertible, an elderly woman has him sign a paper bag that she says she will cherish forever. “We need a bookstore next, Magic,” she pleads, and the exchange is reminiscent of the genesis of his partnership with TGI Fridays. That deal was hatched last year after a seventysomething woman in Atlanta told him she’d never been able to get a salad in her neighbourhood.
Michael Jordan accumulated his wealth by simply selling his name. Johnson, on the other hand, is an entrepreneur with Rockefeller-like ambitions. He says he wants to do things no black man has ever done. He is becoming a role model for hip-hop jocks who reject the Jordan example and see Johnson as the walking embodiment of Malcolm X’s dream he is a black-run, inner-city business unto himself. And he predicts he’ll go public in the next five years.
He has cinemas in Los Angeles, Harlem, Atlanta, Houston and Cleveland, with more on the way. All rank among the US’s top 50 cinemas in gross sales. In the past year Johnson has taken part in a joint venture to create more than 20 Starbucks shops. All perform in the top five in their respective regions.
Johnson has also started a music label and a promotional arm that staged the recent Dr Dre and Eminem tour and that is readying Prince for the road. There are plans for six TGI Fridays and a string of Magic Clubs 24-hour inner-city fitness facilities. He also created a foundation that has raised more than $14-million for HIV and Aids awareness and that each year sends 40 disadvantaged high-school students to college.
Johnson, who admits to being a “control freak”, is up at 6.30am during the week. First he downs his twice-daily protease-inhibitor “cocktail” though there is no trace of HIV in his blood, the virus lies dormant in his body and then he calls the East Coast for the previous day’s box-office receipts. Every Monday he holds a conference call with his cinema managers, during which he decides precisely how many screens will show each film.
Johnson has always harboured a business fantasy. As a high-school kid in Lansing, Michigan, he cleaned the offices of two African-American real-estate developers and would sit behind their desks when they weren’t around, pretending to be an executive.
It wasn’t until he talked with Guber and Smith however, who later introduced him to the Hollywood agent Michael Ovitz, that Johnson’s business career was set in motion.
Ovitz was initially grudging in his support of Johnson. He handed Johnson a stack of business magazines and told him he needed to get his “head out of the sports pages”. Ovitz was impressed by Johnson and agreed to mentor him, walking him through his first deal in 1988. “We had a meeting with the president of Pepsi-Cola,” says Ovitz. “And Earvin insisted on rehearsing. We threw questions at him, and he fielded them. When it came to the real meeting, he knocked their doors off.”
In the early Nineties, Johnson teamed up with Ken Lombard, an African-American investment banker, who secured a $50-million commitment from California’s largest pension fund for the purchase of three inner-city shopping centres.
Soon after, when Johnson approached Loews Cineplex Entertainment with the idea of an inner-city multiplex conveniently situated near his shopping outlets he was armed with research from Lombard. About 25% of all filmgoers in the US are African-Americans, Johnson pointed out to Lawrence Ruisi, the CEO at Loews, yet there are hardly any cinemas in African-American neighbourhoods. Ruisi was sold, especially when Johnson and Lombard explained that rental rates a square foot would be $13, compared with close to $30 in the suburbs; moreover, Johnson argued that even in bad economic times, “black people have always gone to the movies as a way to escape”.
On opening weekend Johnson fretted that there wouldn’t be enough hot dogs. The man from Loews told him not to worry. Sure enough, the hot dogs sold out by midnight on Friday.
“See, you’ve got to understand black people,” Johnson says. “I know my customer base, because I’m it. I told Loews, black people are going to eat dinner at the movies those hot dogs are our dinner. Same with the drinks. Our soda sales were just OK. I said black people love flavoured drinks, because we were raised on Kool-Aid. So we put some in and the numbers went through the roof.”
Though cinemas in the US are struggling four chains have filed for bankruptcy and even Johnson’s partner Loews is labouring Johnson’s are flourishing. In part, that’s because they cater to an underserved market, but as Johnson points out, it’s also because they have become de facto community centres, where visitors can get their blood pressure checked and parents can get free immunisation jabs for their kids.
Teenagers are welcome to hang out in the lobby and play video games as long as they don’t wear gang colours. It’s this sense of community that sold Howard Schultz, the chair of Starbucks.
Schultz had never taken on a partner before, but he agreed to meet Johnson and Lombard because, as a basketball fan, he couldn’t pass up the chance to meet Magic. “It became clear,” Schultz recalls, “that no one knows more about African-American spending power than Earvin. I was expecting a basketball player, but here was this businessman telling me there are 40-million African-Americans who spent over $500-billion last year.”
Schultz agreed to visit the South Central cinemas on a Friday night. “At Starbucks,” he says, “we talk about our stores being a third place for our customers between work and home, and I realised that’s what Earvin had done. He’d built a sense of community. I saw graffiti everywhere in South Central except on his building.”
Johnson told Schultz that his people hungered for meeting places. “If we build it, they’ll come,” Johnson pledged. Over the objections of many within his company, Schultz agreed to a 50-50 partnership with Johnson on seven stores a limited agreement that was expanded once the spectacular numbers started coming in.
Starbucks is fiercely protective of its brand, so Johnson had to persuade Schultz to tailor Starbucks’ product to the inner city. As a result, there’s a fast-selling sweet-potato pie and peach cobbler on the menu. Each Starbucks plays only CDs compiled by the company’s music department in Seattle; Johnson lobbied for a collection of African-American music. Now visitors to Johnson’s Starbucks shops hear Stevie Wonder or Miles Davis in the background, not James Taylor.
When expanding overseas, Johnson points out, companies don’t think twice about strategic partnerships with local experts who can navigate the cultural terrain. But chains haven’t done the same in urban US communities.
That may be changing. After it was announced that Johnson’s cinemas and a Starbucks were coming to Harlem, other stores followed: HMV, Disney, Old Navy, Modell’s Sporting Goods. It raises some vexing questions for Johnson. For all his egalitarian talk, his strategy pushes corporate commercialism, and it hasn’t jump-started an empowerment trend either. Instead, he has enriched the bottom lines of traditionally white companies, easing their expansion into urban areas. So he recently talked to Sean “Puff Daddy” Combs about opening an uptown restaurant and to hip-hop impresario Russell Simmons of Def Jam about bringing his retail clothing store to Harlem. “Now white Americans are buying up Harlem brownstones,” Johnson laments. “Black people have been conditioned to live for today. I’m helping to rebuild Harlem, but we as a people won’t own it.”
Magic Johnson is about to do something few business people and even fewer athletes do: endorsing a candidate for public office. In the foyer of his theatres, he stands before television cameras next to Jim Hahn, the Los Angeles city attorney and Democratic candidate for mayor. Johnson settled on Hahn, who is white, in part because Hahn grew up in South Central. Hahn is standing against current Republican mayor Dick Riordan in the June election.
Thirty years ago, it was not uncommon for black athletes, led by Ali, Jim Brown and the Olympic sprinters John Carlos and Tommie Smith, to wade into politics. But as athletes have risen to the pinnacle of commodity culture, they have been less willing to speak out. Asked a few years back why he didn’t endorse Harvey Gantt, a credible black challenger to the ultra-conservative Senator Jesse Helms in his home state of North Carolina, Michael Jordan replied: ‘”Republicans buy Nikes, too.”
Johnson’s smile may engender Jordan-like “crossover” appeal, but his warmth masks a more radical agenda that dovetails with his business interests unlike Jordan, he’s not selling anything to suburban Republicans. So Johnson plays to the cameras and endorses a white candidate, all the while embracing Dr Dre and the corn-rowed, tattooed, gangsta-rapping Philadelphia 76ers star Allen Iverson.
Yet Johnson’s support of hip-hoppers makes ideological sense, given that they revolutionised the music business by insisting on owning their master recordings, something that crossover artists such as Marvin Gaye never did. And like the rappers, Johnson doesn’t mince words for fear of offending white sensibilities. At a panel discussion at the University of Southern California during the Democratic National Convention last year, Johnson said of the Republicans, “They didn’t want us before; they don’t want us now.” And about the Democrats he said, “People, we’ve got to make sure [Al] Gore follows our plan the black plan.”
For Johnson, the black plan is about ownership. “Black people, we don’t own nothing,” he said. “They’ll let us entertain them. We have always been the best at that. But we don’t own teams, we don’t own record companies, we don’t own movie studios. Now I employ 3000 black people.”
Johnson is trying to spread that empowerment gospel to a generation of athletes who have come to see themselves not only as entertainers, but as entrepreneurs as well. “When I first met Magic,” recalls Shaquille O’Neal, arguably the biggest current superstar of American basketball, “he said: ‘Getting your name in the paper is fun, but you’ve got to own things and employ our people instead of just taking money.’ That’s stuck with me.”
The roots of Johnson’s economic populism can be traced to the moment in 1991 when he announced that he was HIV-positive. He remembers puttering around the house in the days that followed, aware of the silent phone, supported only by members of the South Central church that he and his wife, Cookie, attended. “After the whole myth of being an athlete stops, the only people left are the people in the community,” he says. And he remembers the companies that rushed to sever ties with him.
Johnson says: “When you’re playing ball, there’s a tendency to be politically correct, to not do or say anything that will turn off endorsers”. Though he explains that deep down he always wanted to take stands on issues important to black America, it wasn’t until his experience with HIV, when he realised he had nothing left to lose, that he was spurred into action. In 1992 he not only resigned in protest from then president George Bush’s Aids commission, he also publicly lambasted Bush for fighting the disease with “lip service and photo opportunities”.
Johnson’s smile is his unique brand, and it is more iconic even than Jordan’s Nike-devised leaping silhouette. The smile sells both him and what he’s selling, be it a money-making venture or a tough-minded prescription for African-American empowerment. It’s there while Johnson talks about how, though the way he got the disease was not heroic, he decided to try and deal with it heroically. And it remains on his face when he gives voice to his latest mission.
“Now I’ve got to teach these young brothers that you don’t have to sell out to do good,” he says. “I tell those guys all the time, you don’t realise how much power you’ve got. Use it in your community. You can make money and keep it real back home and lift all of us up.”
This article first appeared in Observer Sport Monthly, March 2001