Toby Keith, cowboy capitalist: Country’s $500 million man

June 27, 2013, 1:40 PM EST Zack O’Malley Greenburg Forbes

With 70,000 fans awaiting him at the Houston Rodeo, the world’s largest, Toby Keith sits in his tour bus, as relaxed as the denim on his legs. He’s holding court with his usual crew — business partners, not groupies — and he’s mischievously daring me to eat the worm.

Bing: Toby Keith’s Oklahoma benefit concert

Half the size of a golf tee, the caterpillar-like creature floats beneath an inch of mezcal, tequila’s smokier cousin. Keith instructs everyone to raise their red Solo cups — which, unlike mine, are devoid of bug carcasses — and slam their shots in one go. “It might give you visions the first time,” he chuckles as I choke down the insect. “Goes down like protein, comes out like fiber.”

And with that, it’s showtime. After a buxom blonde rides a horse around Reliant Stadium, shooting fireworks from a bedazzled American flag, Keith leaves his rolling sanctuary. He wades through a scrum of screaming fans, pauses for a backstage chat with pal Roger Clemens, then swings up into a beefy silver Ford, which he drives over the mud and up to the stage. The opening song, which he belts over a deafening roar, is choreographed perfectly: “American Ride.”

There’s little about Toby Keith, in fact, that isn’t calibrated for maximum synergy. The mezcal — and the worm — were from the 52-year-old’s own liquor label, Wild Shot. His road trip to the stage is part of a multimillion-dollar endorsement deal with Ford, whose executives had filled his preshow tour bus, and once he’s up there, he makes sure to play “I Love This Bar,” a song after which he’s named his restaurant chain. The teens down in front with the Taylor Swift shirts? Keith owns a piece of Swift, too. The $1 million or so he’ll earn for the 90-minute concert itself feels almost incidental.

See the list: In Pictures: The World’s Most Powerful Musicians

Keith’s commercial chops, overlaying a wide patriotic appeal, have created the most vertically integrated performer in the music business — and a one-man cash machine. Forbes estimates that Keith pulled in $65 million over the last 12 months — more than any musician not named Madonna, Lady Gaga or Bon Jovi, and easily outpacing masters of product extension like Jay-Z ($42 million), Beyoncé ($53 million) and Jennifer Lopez ($45 million).

The long-term figures are even more impressive. Over the past five years, Forbes estimates, Keith has never earned less than $48 million in a year. His cumulative take over that period: $270 million. Over his entire career — Keith has written a No. 1 country hit every year for the past two decades — his total earnings surpass $500 million. “He’s built this little empire, and he did it kind of quietly,” says concert promoter Louis Messina. “Not many people have been able to pull it off as long as he has.”

So why don’t most Americans know much about Keith? Ask him, and he’ll frame it as something of a conspiracy: “Years ago politics branded me as a cat that was an extreme right-wing guy. Media doesn’t want to cover that.” The truth lies in more basic demographics. Country music has only 14 percent of the national radio audience, with a heavy regional tilt. Keith’s brilliance lies in recognizing that rather than try to appeal to everyone, he should leverage a base that is unusually loyal — a screaming, swaying annuity — and milk it for all it’s worth.

“A big rock station might play a hit 100-plus times per week,” says Keith’s manager, TK Kimbrell, who joined the singer’s team in 1995. “A country station might play it 50 times. But they’ll play it forever.”

Toby Keith’s airplane, a Lear 60, is painted in crimson and cream, the colors of his beloved Oklahoma Sooners, and fitted out with saddle leather. Unfortunately, it’s also in the shop. He’s renting a smaller Lear 45, which barely contains his 6-foot-4, 240-pound frame (he played defensive end in a semipro football league in his 20s). Luckily, it’s just a short hop from Houston to Norman, Okla., where he lives with Tricia, his wife of 29 years, and their teenage son (they also have two grown daughters; the younger one, Krystal, just released her first album on her dad’s label).

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Keith’s success stems from the oil derricks around Norman. He’s a native of nearby Moore, the Oklahoma town recently leveled by a tornado — which narrowly missed his house and hit his sister’s (he’ll host a benefit concert for the town in July with Garth Brooks and Willie Nelson, among others). He planned to go to college and study petroleum engineering. But when crude soared past $100 per barrel in the late 1970s, he grabbed the fast money out of high school, earning $50,000 a year climbing rigs. The inevitable bust followed, and Keith scrambled for part-time work as a bricklayer. For extra cash he made $35 a night playing covers at local bars with the Easy Money Band, which he’d formed with four friends. They found more gigs in Texas and started making regular road trips. To cut costs, they slept two to a room in seedy motels.

One by one, his friends dropped out, and Keith made a fateful business decision: He replaced them with musicians who’d play for a salary instead of a share in the take. By 1990 he owned the whole act and was banking $60,000. Getting a record deal was a different story, as rejections piled up, most notably from one flunky who told Keith his songs needed to “go back to the woodshed.” Redemption came in the form of a stewardess, a Keith fan who gave Mercury Records chief Harold Shedd a demo tape on a flight to Nashville.

“It was mainly the quality of what he was writing,” Shedd remembers. “It was unlike anything on the radio at the time, and it was still really good country music.”

Keith’s lyrics have always been jingoistic. The son of a veteran, he neither apologizes nor minces words. After Sept. 11, 2001, for example, his hit “Courtesy of the Red, White and Blue” declared: “We’ll put a boot in your ass, it’s the American Way.” Such stridency doesn’t play with the NPR set (Natalie Maines of the Dixie Chicks declared the song “ignorant”), but Shedd correctly recognized the in-your-face appeal of Keith’s swagger (he responded to Maines by displaying a Photoshopped “family picture” of her and Saddam Hussein as a concert backdrop).

Shedd offered Keith a $20,000 record deal, which the singer accepted on the spot. His self-titled debut hit stores in 1993 and quickly went platinum. The album contained four No. 1 hits, all from his previously rejected demo, including “Should Have Been a Cowboy,” which would go on to garner more spins than any other country song in the 1990s. “Last I heard, the guy [who] turned me down was cutting grass for a living,” says Keith.

Releasing his major label debut at age 32, Keith made up for lost time. He scheduled 150 concerts that year from March to December alone, at $5,000 to $10,000 a night. When a second single hit the airwaves in the middle of the tour, venues began offering $20,000 per show, and Keith filled in all his off nights.

Starting in 1993, Keith released a new album every year through 2000, with each selling at least 500,000 copies. In 1994 Shedd launched Polydor Nashville and took Keith with him. But Shedd was eventually succeeded by Luke Lewis, who didn’t share his predecessor’s enthusiasm. “I don’t hear a hit on here,” Keith recalls Lewis saying when he heard the rough cut of his 1999 album, “How Do You Like Me Now?”

After two more songs were rejected, Keith went on the attack, displaying a shrewdness and willingness to bet on himself that’s remained a constant since the oilfields of Oklahoma. “Why don’t you just drop me?” he said. “You hate my music.” Keith eventually agreed to buy back the rights to the album for $93,000. He promptly flipped it to rival label DreamWorks for $200,000, and “How Do You Like Me Now?” went on to sell 3.1 million copies.

The saga wasn’t over. When, in 2004, Universal’s Interscope bought out DreamWorks and merged the imprint with Mercury, Keith was reunited with Lewis. “Here’s the deal,” he recalls saying. “I’m not working with this son of a bitch anymore.” When the label’s brass pointed out that Keith still owed two albums, the singer threatened to retire.

In the end Keith decided to stop being a well-paid employee of others and instead go into business for himself. In exchange for giving Universal a half-stake in his next album, plus a greatest hits compilation, Keith would be free to open his own label, Show Dog. Universal would distribute it. “To that I say, ‘Good luck,'” Lewis told Billboard in 2005. “The track record of artists running record labels is not that good.” (Lewis didn’t respond to multiple phone messages left by Forbes.)

Perhaps mindful of those precedents, Keith decided to share staff with another nascent label, Big Machine, run by an up-and-comer named Scott Borchetta. The singer bought a building in Nashville to house both labels. And rather than just operate like a co-op, Keith paid $400,000 for a stake in Big Machine that Forbes estimates remains around 10 percent.

It was one of the great investments in recent music history. Borchetta went on to sign Rascal Flatts, Tim McGraw and, most notably, Taylor Swift. Now Keith gets paid whenever Swift does. “Toby’s a really smart businessman,” says Borchetta, who knows because “I send him checks.” How big are the checks that Swift generates for him? “I know there’s an extra comma,” smiles Keith, “if you added up all the money I’ve ever made.”

Keith’s evolution from music act to entertainment mogul deepened when casino executive Don Marrandino came to him with a proposal. He wanted to put a Toby Keith-themed bar inside Harrah’s in Las Vegas. They’d call it I Love This Bar and Grill, tacking “and Grill” to the end of one of Keith’s latest hits.

As Marrandino prepared to open the first location, Keith gave the chef a list of his favorites for the menu: hand-cut French fries, hush puppies, corn bread — and, most important, fried bologna sandwiches. But when he arrived to preview the restaurant with a dozen suits, the bologna had been replaced by fancier fare. “My peeps aren’t gonna come in from Texas or Florida or wherever into my bar and grill and look for pecan-crusted catfish,” he said.

Keith understood his market, and the menu was fixed (active military members get a free burger and beer). The restaurant tripled its opening month’s revenue target. By the end of 2005, the eatery was among the top-50-grossing restaurants in the U.S. That same year Keith opened locations in Oklahoma City and Kansas City. Others followed in Phoenix, Minneapolis, Tulsa and 11 more cities.

The ownership structure of I Love This Bar and Grill differs from restaurant to restaurant. For some, like the one in Oklahoma City, 20 minutes from his house, Keith owns a big chunk of both the land and the eatery. For others he strikes licensing agreements with large operators for a flat fee, a cut of revenues or both. (“‘Gross’ just has a lot better ring to it,” says Kimbrell.) Forbes estimates Keith pulls in $12 million a year from his restaurants. The number-one menu item? The fried bologna sandwich.

As we touch down in Norman, you can see, literally, that Keith is to this area what Elvis is to Memphis. Above Interstate 35, a 100-foot water tower, which survived the tornado rampage, proclaims: “MOORE, Home of Toby Keith.” And the singer has still bigger fingerprints across the entire region. The success of the label and the restaurant gave Keith the confidence in his business judgment that he’d always had in his lyrics.

So over the past five years he’s embarked on a whirl of entrepreneurship. There’s the horse farm, a Starbucks and an apartment complex. His foundation is backing a $16 million expansion of the local children’s medical center, and he spends most free afternoons working on his swing at the swanky Belmar Golf Club, which he bought in 2002.

When I arrive at the golf clubhouse, the topic quickly turns to something else Keith owns: Wild Shot. He got the idea from his rocker friend Sammy Hagar, who launched Cabo Wabo tequila in the late 1990s and sold 80 percent of the company to beverage giant Gruppo Campari for $80 million in 2007. He used to warn Keith, the ascendant capitalist, about “competing with me on my tequila.”

But Keith, who grasped the money to be made from his hard-drinking loyalists, saw the potential in expanding into liquor. (Industrially produced spirits can fetch margins of 40 percent to 50 percent.) Bourbon was his first instinct, but barrel sourcing made it hard to scale. Tequila was off the table, given his friendship with Hagar, and it seemed every celebrity already had a vodka line or a wine label. Mezcal? That was a drink he could fashion in his own image.

He quickly secured distribution, via the giant Southern Wine & Spirits, and began sampling the flavors of family-run mezcal distilleries, finally landing on something he liked. He’d let them make the booze — Keith’s value-added came through logo and packaging (including that perennial test of potable manhood, the worm in every bottle). He launched Wild Shot in March 2011. By the end of the year it was the No. 1 premium mezcal in the U.S.

The mezcal was the last piece in a pretty tight puzzle. He plans to have 26 restaurants up and running by the end of this year, each serving Wild Shot and each with its own music stage featuring new acts from Keith’s label. “I can put them on that 30-city tour. I don’t have to look for a place to play. It’s cost-effective as crap,” says Keith. “They’re in Toby’s house. They’re drinking Toby’s liquor. That’s Toby’s act. And then we’re moving to the next town.”

Thus, even when Keith unwinds at home, Keith Inc. is on perpetual tour, minting money all the way