Magic Johnson Builds an Empire

The former Laker great is dragging white businesses into inner cities, fulfilling what he calls his 'black plan.' By LARRY PLATT









Photograph by Rishad Mistri for The New York Times.

round the time his teammate Kareem Abdul-Jabbar declared bankruptcy in the mid-80's, the Los Angeles Lakers star Earvin (Magic) Johnson found himself inbounding the ball during a game right in front of Joe Smith of Elektra-Asylum Records and Peter Guber of Sony Pictures, Lakers courtside season-ticket holders. Johnson had always been aware of the fates of black athletes past -- the fortunes lost by the likes of Jesse Owens, Joe Louis, Muhammad Ali. So before passing the ball to a teammate, Johnson turned to the pair and asked, "How do I get into business?"

ore than a decade later, Johnson, now 41, stands in his bustling strip mall in the heart of South Central Los Angeles. Within this complex is his Starbucks and his T.G.I. Friday's, and it's only four miles to his state-of-the art 15-plex movie theater.

A parade of evening shoppers stop to hug or high-five Johnson, who is wearing a Fubu jersey and jean shorts. By day, he's Mr. Johnson to his staff in the Beverly Hills office where he oversees a business empire that includes more than $500 million of property in heretofore 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 businessmen. 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 neighborhood that others have failed to resuscitate in the years since the Los Angeles riots ravaged these very streets. As Johnson heads toward Starbucks, a baggy-pantsed, backward-capped, morose-looking teenager on a cell phone passes by; glancing up, he does a double take. "Magic Johnson!" he cries, handing the phone toward the former player. "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, Grandma. I love you, too, Grandma. O.K., here he is."

Larry Platt last wrote for the magazine about the apparel and footwear company And 1.





Inside Starbucks, Johnson's gleaming face adorns one wall, and H.I.V. 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 schooling their sons in 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 roughly 3,000 people who live in inner-city neighborhoods across the country. Over the next two hours, as Johnson sips herbal tea and tirelessly plays host, he talks about the satisfaction of employing people. In his recent venture in Harlem, Johnson's multiplex, which opened in July, and the Harlem USA mall it is part of, have sparked a renaissance of 125th Street. Last summer, after the Harlem theater hired 100 people from the 5,000 who had waited in line to apply, Johnson decided that he wanted his new staff to go through 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, remembering the scene, "that may have been the best moment of my life, right there."

Also in This Issue Lonely Gay Teen Seeking Same

How Jeffrey found friendship, sex, heartache -- and himself -- online. Life After Death Row

For these men, sentenced to death and then freed, the outside world has offered more misery than happiness. The Billion-Dollar Shack

The remote Pacific island of Nauru couldn't make it in the global economy. So the country has found its niche by learning a different kind of trade -- money laundering.

Later, outside, as he ambles toward his black Bentley convertible, an elderly woman has him sign a paper bag that she says she'll cherish forever. "We need a bookstore next, Magic," she pleads, and the exchange is reminiscent of the genesis of his partnership with T.G.I. Friday's. That deal was hatched last year after a 70-something woman in Atlanta told him she'd never been able to get a salad in her neighborhood.

He gets in the car. "A bookstore," he says softly. "O.K. We're going to look into that now."

hough Michael Jordan is celebrated for his boardroom moves, he accumulated his wealth by simply selling his name. Johnson, on the other hand, is an entrepreneur with Rockefeller-like ambitions who says he wants to do things no black man has ever done. He is becoming a post-civil-rights-era 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. In addition to his theaters in Los Angeles and Harlem, there are others in Atlanta, Houston and Cleveland, with more on the way. All rank among the nation's top 50 theaters in gross sales. In the last year, Johnson has taken part in a joint venture with Starbucks to create more than 20 Starbucks shops. All perform in the top five in their respective regions; the South Central store, for example, where lines snake out the door on weekend nights, is among the most profitable of Los Angeles's 400-odd stores. In addition, Johnson has started a music label, in conjunction with MCA, 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 T.G.I. Friday's and a string of Magic Clubs -- 24-hour inner-city fitness facilities. He also created a foundation that has raised more than $15 million for H.I.V. and AIDS awareness since 1991 and that each year sends roughly 40 disadvantaged high-school students to college for four years.





Johnson at a Starbucks store he co-owns on 125th Street. Photograph by Rishad Mistri for The New York Times.

A self-described "control freak," Johnson is up every weekday morning at 6:30. First he downs his twice-daily protease-inhibitor "cocktail" -- though there is no trace of H.I.V. in his blood, the virus lies dormant somewhere in his body -- and then he calls back East for the previous day's box-office receipts. Every Monday, just before eating a salad for lunch at his desk in his sparse, meticulously organized office, he holds a conference call with his theater managers and Loews representatives, during which he decides precisely how many screens will show each film.

Johnson has always harbored a business fantasy. As a high-school kid in Lansing, Mich., 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. But it wasn't until he talked with Guber and Smith, 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. The agent handed him a stack of business magazines and told Johnson that he needed to get his "head out of the sports pages." When Johnson approached the periodicals the way he had always approached playbooks, Ovitz was impressed and agreed to mentor Johnson, walking him through his first deal with Pepsi-Cola in 1988. "We had a meeting with the president of Pepsi-Cola," says Ovitz. "And Earvin insisted on rehearsing before the meeting. We threw questions at him, and he fielded them. When it came to the real meeting, he knocked their doors off." The arrangement with Pepsi, 25 percent ownership of a Maryland distribution plant, marked Johnson's first foray into ownership.



Johnson persuaded Starbucks to put sweet-potato pie on the menu in his stores and to play Miles Davis and Stevie Wonder instead of James Taylor.







In the early 90's, Johnson teamed up with Ken Lombard, an African-American investment banker who is the president of Magic Johnson Development. Lombard secured a $50 million commitment from California's largest pension fund for the purchase of three inner-city shopping centers. 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. Twenty-five percent of all moviegoers are African-Americans, Johnson pointed out to Lawrence Ruisi, the Loews C.E.O.; yet there are hardly any theaters in African-American neighborhoods. Ruisi was sold, especially when Johnson and Lombard explained that rental rates per square foot would be roughly $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 at the theater's concession stand. The Loews concessionaire 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 today. "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 O.K. I said black people love flavored drinks, because we were raised on Kool-Aid. So we put in punch and strawberry soda and orange, and the numbers went through the roof."

Though the theater industry is struggling -- four chains have filed for bankruptcy and even Johnson's 50-50 partner Loews is laboring -- Johnson's theaters are flourishing; by year's end, they will have served their 10 millionth customer. In part, that's because the theaters cater to an underserved market, but as Johnson points out, it's also because they have become de facto community centers, where visitors can get their blood pressure checked and parents can periodically get free immunization shots for their kids. Teenagers are welcome to hang out in the lobby and play video games, even if they're not seeing a film -- as long as they don't wear gang colors.

It's this sense of community that sold Howard Schultz, the chairman of Starbucks. Schultz had never taken on a partner before, but he agreed to convene with Johnson and Lombard because as a longtime basketball fan he couldn't pass up the chance to meet Magic. "It became clear," Schultz recalls about that first meeting, "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 theaters 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 realized 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. And since each Starbucks comes equipped with a custom-made CD player that plays only the music 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. (There is no rap music -- Johnson knows it's not palatable to all generations.) 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 communities.

That may be changing. After it was announced that Johnson's theaters 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 and so far has been little more than the lead blocker for white-owned chains, easing their expansion into urban areas. So he recently talked to Puffy Combs about opening an uptown restaurant and to the hip-hop impresario Russell Simmons about bringing Simmons's 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."

agic Johnson is about to do something few businessmen and even fewer athletes do: endorsing a candidate for public office. In the lobby of his theaters, he stands before TV cameras in September 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.

Thirty years ago, it was not uncommon for black athletes, led by Ali, Jim Brown and the Olympic sprinters John Carlos and Tommy 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 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 revolutionized the music business by insisting on owning their master recordings, something that crossover artists like Marvin Gaye and Stevie Wonder 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, 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 Gore follows our plan -- the black plan."

For Johnson, the black plan is about ownership. "Black people, we don't own nothing," he said at U.S.C. "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 3,000 black people-" many in the crowd started cheering -I'm not saying that for applause. There are about 5,000 black athletes in all of sports. If you multiply that by 3,000, where are we at? One-point-five million employed 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, "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."

O'Neal has become a businessman in his own right, choosing Compton as the location for his record label, T.W.IsM. (The World Is Mine). Every week, athletes ranging from the football star Bruce Smith to the basketball player Patrick Ewing seek Johnson's business advice. Iverson sought Johnson's counsel a couple of years back, when Iverson decided to jettison his agent, David Falk, the man who first brought Nike and Jordan together in the 80's. Iverson and other young players, Johnson says, often ask him how he made the transition from court to boardroom. "I tell them I showed up on time to every meeting. I didn't come in wearing all the jewelry. And I surrounded myself with people like Ken Lombard who were smarter than me."

he roots of Johnson's economic populism can be traced to the moment in 1991 when he announced that he was H.I.V.-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, like Nestle, that rushed to sever ties with him.

"When you're playing ball, there's a tendency to be politically correct, to not do or say anything that'll turn off endorsers," Johnson says later in his trailer a couple of hours before a star-studded fashion show in front of 4,500 kids to benefit H.I.V. and AIDS research. 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 H.I.V., when he realized he had nothing left to lose, that he was spurred into action. In 1992, he not only resigned in protest from President Bush's AIDS commission, he also publicly lambasted Bush for fighting the disease with "lip service and photo opportunities."

On the way into the fashion show, Johnson models a leopard-skin overcoat, basking in the attention of a rapt crowd. Then he watches the show enthusiastically, cupping his hands to his mouth and yelling, "This is old school!" when a Motown tune comes on, languidly grooving his shoulders to the beat. His 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 realize 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."





Table of Contents

December 10, 2000



