BIG M MUSIC WAS blowing up. Wall Street wanted in. Bertelsmann, a 151-year-old German book publishing company founded by a do-it-yourself printer named Carl, swooped in to buy RCA Records from General Electric for $300 million in 1986. Chief financial officers from all over the world were starting to look at record companies-or, even better, blowing up. Wall Street wanted in. Bertelsmann, a 151-year-old German book publishing company founded by a do-it-yourself printer named Carl, swooped in to buy RCA Records from General Electric for $300 million in 1986. Chief financial officers from all over the world were starting to look at record companies-or, even better, CD CD companies-as an easy and fun way to pump up their bottom lines. "The all-vinyl business had its ups and downs. This one, it just seemed to grow without any end in sight," recalls Bob Merlis, a former publicist and corporate spokesman for Warner Music. "That's when the multinationals got all excited about the music business. And that's when the business changed from this homegrown kind of thing to 'we have to do better this next quarter from the last quarter or our parent companies will be upset.'" companies-as an easy and fun way to pump up their bottom lines. "The all-vinyl business had its ups and downs. This one, it just seemed to grow without any end in sight," recalls Bob Merlis, a former publicist and corporate spokesman for Warner Music. "That's when the multinationals got all excited about the music business. And that's when the business changed from this homegrown kind of thing to 'we have to do better this next quarter from the last quarter or our parent companies will be upset.'"
RCA and its all-American logo-Nipper the dog looking quizzically into a phonograph-going to the Germans was one thing. Could CBS Records, the all-American home of the Boss and the King of Pop and whatever Barbra Streisand was, really go to the Japanese? That's what the trades were saying, and the rumors turned out to be true.
Walter Yetnikoff was the catalyst.
In 1988, the CBS Records chairman had two problems. First, his legendary consumption of drugs and alcohol prompted one of his biggest rivals, MCA's Irving Azoff, to declare in an industry speech that CBS had a drug addict at the helm. But Yetnikoff was perhaps even more addicted to power, and a straight-shooting New Jersey billionaire named Laurence Tisch was standing in his way. Two years earlier, Tisch, owner of the Loews Corporation, had taken over a controlling interest in the label's parent, CBS Inc. At first, Yetnikoff encouraged Tisch-even tried to charm him-because he couldn't stand his previous boss at CBS Inc., Thomas Wyman, the president. But as exCBS Inc. general counsel George Vradenburg recalls: "When Larry got in, Larry really did not talk to Yetnikoff, and Yetnikoff felt a bit betrayed. [Yetnikoff] ended up disliking Larry perhaps more intensively than he disliked Tom Wyman." Yetnikoff called Tisch "the Evil Dwarf."
Tisch never quite understood the record business. As head of CBS Inc., he thought he could plunge into the record label, sidle up to the top executives and managers, and work his influence subtly, from within. But Yetnikoff got in his way, preventing Tisch from getting close to anybody. "[Tisch] thought the business relied too much on personalities and loyalties, and he wasn't confident that he understood the business," Vradenburg says. "To some extent, he had that little concern at the back of his head that the business wasn't clean. The people in it were not people that wore three-piece suits. They had not come out of any business that Larry had been associated with. There was this sense that this business had problems with drugs, independent [radio] promotion and bribery and kickbacks. There wasn't anything specific.... But there was always that worry."
Yetnikoff was shocked to discover Tisch wanted to sell CBS Records to Nelson Peltz, another billionaire, whose fortune was not in music or entertainment but in the food business. Yetnikoff stomped into Tisch's office, employing some of his best expletives. Tisch calmly suggested that Yetnikoff could buy CBS Records for the same price he offered Peltz-$1.25 billion. In cash. The gears in Yetnikoff's law schooltrained brain started whirring. He knew he couldn't do anything without Sony, which had owned CBSSony Records since executives from the two companies established a joint venture in the late 1960s. That company was booming, thanks in part to the CD's popularity in Japan. So Yetnikoff contacted Mickey Schulhof, then the highest-ranking American official at Sony. Of course, Yetnikoff didn't like him either. He called him "Meekee."
Unlike Yetnikoff, Schulhof was not a record man. He had degrees in physics from Cornell, Brandeis, and Grinnell, but went into business at age thirty. His resume gave him the background for a manufacturing job at CBS Records, and he oversaw things like recording studios and inventory control-"the noncreative side," he says. Clive Davis, the CBS executive who'd hired him, realized Schulhof was up for something more technical and introduced him to Harvey Schein, then the US president for Sony.
Schein hired Schulhof as an assistant in 1974, and within three months, Sony's charismatic chairman, Akio Morita, was asking to meet this new American employee he'd been hearing so much about. Morita, too, was a physicist. The two men bonded. Per Morita's instructions, Schulhof successfully built a Sony speaker factory in Delano, Pennsylvania. He also bonded with Morita's number two, Norio Ohga, who, like Schulhof, was an amateur pilot. The executives became Sony's power troika for the next two decades, zooming around the world for business and personal trips on the company's various Falcon jets. "Whatever you discussed with [Schulhof], he could answer you like a specialist, a professional," Ohga says. "When you try to discuss music with most people, or airplanes with most people, the conversation doesn't go very far. With Mickey, if we spoke of airplanes he was on the level of an airline pilot, and since he was a real learner, if I asked him to look into something he'd come back in a flash with the most detailed report you can imagine. No matter what the subject, he'd be there and master it."
Yetnikoff, who was not so cultured but just as smart, was naturally threatened by this kind of personality, as well as by Schulhof's proximity to Japanese power players he, too, considered friends. Nonetheless, in spring 1986 he called Schulhof, suggesting Sony buy CBS Records outright. To his surprise, Schulhof responded positively. "I called Morita at home and he said, 'Of course. Now is the golden time. We know software is important,'" Schulhof recalls. Yetnikoff and Schulhof knew Sony was desperate to expand into the US music business. In part, this was because of the CD, whose profits were jumping at that time to previously unimaginable heights. But it was also because Sony was preparing to release hardware like Digital Audio Tape, or DAT, and the MiniDisc, and its executives believed these formats could be almost as lucrative as the CD. When Sony had gotten burned before, with the ill-fated Betamax format, it was in part because the electronics giant had no movie software to supplement its hardware. Sony executives didn't want to make that mistake again.
For the next year, Sony and CBS haggled. Schulhof met with a lawyer and a financial adviser at 7:30 one morning at the Mayfair Regis. The three then showed up at Yetnikoff's house on Fifty-sixth Street. Yetnikoff, who was given to all-night drinking, dragged himself out of bed at 8:30 a.m., put on a bathrobe, instructed his wife to prepare especially potent coffee, and proceeded to extract an agreement that would bring him a fee of something like $20 million. They were all set to pull the trigger. Then William Paley, the legendary chairman of CBS Inc., who was known for his whims, decided the sale wasn't such a good idea. He strongly discouraged CBS's board, including Tisch, from going through with it. They were ready to vote "no."
Fate intervened. On October 19, 1987-Black Monday-the stock market crashed. Billionaire Tisch freaked out, fearing his financial future wasn't so secure after all. Paley or no Paley, he called Schulhof the next day and wanted to know if Sony's offer-$2 billion-still stood. Schulhof called Morita. "He said, 'If the company was worth $2 billion yesterday, it's still worth $2 billion today. My opinion hasn't changed,'" Schulhof recalls. "We bought CBS Records." In 1988, Yetnikoff finally succeeded in his quest, as he put it, to have somebody "install me as Super Czar and make me superrich."
What Yetnikoff didn't know was that an old friend, hyper-ambitious Thomas D. Mottola Jr., was quietly consolidating his power at CBS, positioning himself to take over the moment Yetnikoff slipped. Given Yetnikoff's drug-and-alcohol problems and his increasing lack of public discretion, Mottola and his allies felt certain that time was coming-soon. It would be a monumental power grab, one that would shape the way Sony's music companies, Epic and Columbia, would operate for more than a dozen years.
AT EIGHT YEARS OLD, Tommy Mottola of New Rochelle, New York, was a talented trumpet player. It won him a private school scholarship, but then he got bored and switched to the guitar. He had a rebel spirit, ditching school and running away from the military academy to which his parents had sent him when he decided he wasn't a fan of attending his private school. Mottola's mom and dad finally gave in, letting him come home if he behaved. He didn't exactly keep his side of the deal, playing in a rock band, racing cars, and partying so hard that an old friend later called him "the baddest boy in New Rochelle." Instead of focusing on school, he focused on girls. He dated Lisa Clark, daughter of powerful ABC Records founder Sam Clark, in the highfalutin' neighboring town of Harrison, then married her in 1971. Through a connection with his father-in-law, Mottola snagged small parts in four film flops, then tried to make it as a singer under the name "T. D. Valentine." He was terrible, but the experience gave him connections in the music business, and he was working as a song plugger for music publisher Chappell when he got his first break.
It was in the form of a hunky but weirdly dressed duo-one short guy with dark hair, one six-foot-plus guy with long, wavy, blond hair and platform shoes-called Hall and Oates. They could sing sing. Using his newfound industry connections, Mottola promised Daryl Hall and John Oates a record deal if they dumped their current manager and hired him instead. Like many young stars in the history of the record industry, they quickly went into debt ($230,000 in their case) to the first label that signed them. Then they switched to RCA Records, borrowed some more money, and...well, anybody who listened to the radio in the 1980s knows the rest. They catapulted Mottola into the record business. He named his management company Don Tommy Enterprises, which some in the business speculated was due to Mottola's fascination with the Mob. (Mottola was said to have been introduced to infamous boss Vincent "the Chin" Gigante.) Either way, he wore gold chains and purple leather jackets and looked cool.
Mottola soon changed the name of his company to Champion Entertainment, and through Hall and Oates's lawyer, Allen Grubman, he befriended CBS chairman Walter Yetnikoff. Some in the company came to call him "Walter's personal valet."
Yetnikoff liked Mottola so much that he promoted him to take over CBS's US labels, replacing veteran Al Teller. "Al was a Harvard MBA, very uptight, businesslike-every 'T' crossed and 'I' dotted and all that sort of thing. Not the most loved guy, but he loved music," recalls Bob Sherwood, a longtime CBS executive who ran Columbia Records for a year and a half during the transition to Sony. "Tommy was a manager. Celine Dion owes a lot more to him than [to] her voice coach. He saw this rough-hewn woman from Canada and turned her into a superstar. Tommy and I worked well together, but he had been a very abrasive manager-which the successful ones ultimately are."
One night in 1988, while attending a party for CBS blues singer Brenda K. Starr, Mottola received a demo tape from a mysterious benefactor. He stuck it in his limo's cassette deck and immediately knew he was hearing a star. Eighteen-year-old Mariah Carey and her multi-octave* voice had already received an offer from Warner's Mo Ostin for $300,000. voice had already received an offer from Warner's Mo Ostin for $300,000.
But Mottola received authorization from Yetnikoff to up the offer by $50,000, and he signed Carey. He also pushed her then-boyfriend, a producer, out of the picture, although neither Mottola nor Carey has ever said how. Mottola was married at the time, but he nonetheless canoodled with Carey around New York nightclubs. Soon he was divorced.
Yetnikoff continued to support his friend. He had given Mottola a $3 million bonus after just a few months in Teller's old job, and in 1990 arranged to have Mottola paid $15 million over five years, not counting bonuses. "One of the more interesting facts about Tommy is that he's extremely smart," Yetnikoff told a reporter. "He's hidden that from the world until recently." What Yetnikoff didn't know was that by the end of 1990, Mottola was fraternizing with his boss's long-term enemies. Yetnikoff was right-Mottola was extremely smart. He proved a master of power politics at Sony Music Entertainment. He saw cracks in the powerful chairman's foundation. For example, just two years after the Sony takeover, Yetnikoff was in rehab. He was in the process of divorcing his long-suffering wife, Cynthia. Warner had displaced Yetnikoff's previously dominant company in market share, building up new acts like R.E.M. and Anita Baker, whereas Sony's biggest labels, Columbia and Epic, relied on older stars like Jackson and Springsteen. And it wasn't like anybody had any sympathy. He'd built up incredible ill will over two decades of childish behavior, making enemies everywhere he went. Sometime back, Yetnikoff had supposedly pissed off fellow record mogul David Geffen by asking one of his assistants whether the openly gay Geffen would teach Yetnikoff's girlfriend the finer points of oral sex. Geffen started talking to his old friends, Bruce Springsteen's manager, Jon Landau, and Michael Jackson himself, pushing them farther away from Yetnikoff. Landau issued a statement: "Neither Bruce nor I have had a significant conversation with [Yetnikoff] in nearly two years."
Mottola formed an alliance with Geffen and Allen Grubman. The influential industry lawyer had recently tried to strong-arm Yetnikoff into signing a massive new contract for Michael Jackson, a client he'd recently taken over, but Yetnikoff blew up and banned Grubman, once his friend and confidant, from the building. (Jackson remained with Sony Music.) On advice from Geffen and Grubman, Mottola started schmoozing the Sony executives-most effectively, by befriending Akio Morita's aspiring pop-star goddaughter, Seiko Matsuda. Leaks appeared in the Wall Street Journal Wall Street Journal saying Yetnikoff was on his way out. Soon, Frank Dileo, a former Epic Records vice president of promotions, Yetnikoff's close friend, and Michael Jackson's manager, found himself the final link between Yetnikoff and his top artists. "Once they blow me out, Walter's vulnerable," Dileo remembers thinking. Shortly after that, Jackson abruptly fired Dileo. Yetnikoff suddenly had no artist connections. saying Yetnikoff was on his way out. Soon, Frank Dileo, a former Epic Records vice president of promotions, Yetnikoff's close friend, and Michael Jackson's manager, found himself the final link between Yetnikoff and his top artists. "Once they blow me out, Walter's vulnerable," Dileo remembers thinking. Shortly after that, Jackson abruptly fired Dileo. Yetnikoff suddenly had no artist connections.
Yetnikoff fell. Hard. Ohga, who had stayed at Yetnikoff's house and swam at his pool numerous times during his visits to New York, interrupted a vacation to meet with his Sony Music chief at his office. He patiently explained to Yetnikoff that he was tired of his public outbursts and lack of finesse with Sony's biggest stars. He put Yetnikoff on sabbatical, then pressured him to cut off his three-year contract. (Yetnikoff managed to retain $25 million in the settlement.) "I'm sorry, Walter," Ohga said, "but this hurts me more than it hurts you." Ohga did not shake his old friend's hand. After the Sony chief left with his attorney, a security guard showed up and asked Yetnikoff to leave through the side door. While Yetnikoff cleared out, Ohga was in the next room, symbolically handing over the reins to Mottola. (To Mottola's frustration, he wouldn't officially take over Sony Music until 1991, about a year after Yetnikoff left the company; at first, Ohga himself became chair of the music group and allowed Mickey Schulhof to run the daily operations as Mottola's boss.) After the purge, a reporter asked Yetnikoff what he would do. "Count my money," he replied. "And, believe me, that's going to take some time."
While Yetnikoff was counting, Mottola was spending. "He was riding that job for all it was worth," says an industry source from that time. Finally in charge of Sony Music, ex-manager Mottola gave Aerosmith, recently dropped by Geffen, a $25 million deal. He spent $800,000 to produce Carey's debut album, $500,000 to redo her first video, and another $1 million on general promotion. The New York Times New York Times called him "Sony Music's Mr. Big Spender" in a front-page headline. In June 1993, he married Carey in a massively overblown Manhattan wedding, in which the bride wore a 27-foot train and Springsteen, Tony Bennett, Ozzy Osbourne, and Robert De Niro were among the stars in attendance. The couple moved into a $10 million estate with a 20,000-square-foot house in Harrison, New York, surrounded by golf courses and country clubs. It was equipped with the works: shooting range, electronic security doors, 64-channel recording studio, indoor swimming pool, and Ralph Lauren as a neighbor. called him "Sony Music's Mr. Big Spender" in a front-page headline. In June 1993, he married Carey in a massively overblown Manhattan wedding, in which the bride wore a 27-foot train and Springsteen, Tony Bennett, Ozzy Osbourne, and Robert De Niro were among the stars in attendance. The couple moved into a $10 million estate with a 20,000-square-foot house in Harrison, New York, surrounded by golf courses and country clubs. It was equipped with the works: shooting range, electronic security doors, 64-channel recording studio, indoor swimming pool, and Ralph Lauren as a neighbor.
Well before the wedding, Sony Music Entertainment employees fired up their publicity, marketing, and promotion machines to focus almost exclusively on Carey. "The eight-hundred-pound gorilla in the room was the fact that they were having a relationship and everybody in the world knew it," Bob Sherwood recalls. "There's not anybody with a brain who wasn't going to put maximum effort into her." During a contract negotiation in the early 1990s, Michael Jackson called an old friend, Mickey Schulhof, to complain that his sales slump was due to Mottola putting disproportionate resources into Carey's career. Yet, as Sherwood points out, the Carey-Mottola-Sony triumvirate paid off. Her Sony CDs would sell 55 million copies in the United States alone, putting her in the Top 20 of all time.
By 1992, though, given the hits from Carey, Dion, and Michael Bolton, Sony had a pop-only reputation. Springsteen had split with the E Street Band. Disturbing revelations about dalliances with young boys were starting to dog Michael Jackson. Sony Music, once a giant in the form of CBS Records, looked weak compared to competitors like Warner and even EMI. It wasn't that Sony Music was doing poorly, in general. The company's operating profits, according to the New York Times, New York Times, jumped by 60 percent between 1987 and 1991. But its top rival, Warner, jumped by 60 percent between 1987 and 1991. But its top rival, Warner, doubled doubled its profits during the same period. This was unacceptable in a hyper-competitive business. Mottola would soon change all that. At one point Michele Anthony, the hard-nosed attorney for rock acts such as Guns N' Roses and Alice in Chains, told Mottola over dinner: "I wouldn't sign a rock act with Sony if my life depended on it. You guys are arrogant and out of touch, and your company has been living off the fat of its superstar roster for so long you don't have a clue how to develop a new act." Mottola hired Anthony, who started bringing hit rock acts to the label. Before long, Sony's high advances to top artists prompted huge bidding wars, helping to set the lavish new deals for Michael Jackson and Aerosmith as the industry standard. its profits during the same period. This was unacceptable in a hyper-competitive business. Mottola would soon change all that. At one point Michele Anthony, the hard-nosed attorney for rock acts such as Guns N' Roses and Alice in Chains, told Mottola over dinner: "I wouldn't sign a rock act with Sony if my life depended on it. You guys are arrogant and out of touch, and your company has been living off the fat of its superstar roster for so long you don't have a clue how to develop a new act." Mottola hired Anthony, who started bringing hit rock acts to the label. Before long, Sony's high advances to top artists prompted huge bidding wars, helping to set the lavish new deals for Michael Jackson and Aerosmith as the industry standard.
"Nobody likes to overspend when you're on the corporate side," Schulhof says. "But I knew what Tommy was spending. I never had a problem with it, and I don't think what he spent was disproportionate with what others were spending at the time in the industry."
Mottola's personal expenses, including travel, ballooned to $10 million a year. Three of his five assistants made $180,000 a year. Employees received $550 Gucci bags for the holidays. Mottola's brain trust, including Anthony and rising Columbia chief Don Ienner, rode to the top of the Sony Building in New York in a special freight elevator, and drivers shuttled them around the city in new Mercedeses. They became Mottola's famiglia famiglia, as New York New York magazine later put it in a profile. Jeff Ayeroff, a longtime Warner Music executive in LA who joined New Yorkbased Sony Music in 1994, as cofounder of the Work label, says: "It was sort of like the West Coast was liberal and the East Coast was take-no-prisoners. These guys were very aggressive and very smart and did whatever it took." When Work signed a young actress, Jennifer Lopez, Mottola instructed his people to open their wallets. "He let us spend more money on marketing than anybody else would have," Ayeroff recalls. J. Lo's 1999 debut magazine later put it in a profile. Jeff Ayeroff, a longtime Warner Music executive in LA who joined New Yorkbased Sony Music in 1994, as cofounder of the Work label, says: "It was sort of like the West Coast was liberal and the East Coast was take-no-prisoners. These guys were very aggressive and very smart and did whatever it took." When Work signed a young actress, Jennifer Lopez, Mottola instructed his people to open their wallets. "He let us spend more money on marketing than anybody else would have," Ayeroff recalls. J. Lo's 1999 debut On the 6 On the 6 went triple platinum. went triple platinum.
Nobody worried about money at Sony. "I didn't look at the financials. I wasn't entrepreneurial, and I wasn't running the company," recalls Michael Goldstone, a talent whiz who linked an unknown San Diego singer, Eddie Vedder, with an established Seattle rock band and signed them to Epic as Pearl Jam. "I was this A&R gunslinger going out and finding bands." Pearl Jam and another of Goldstone's discoveries, Rage Against the Machine, became superstars. So did Ricky Martin, J. Lo (who was rumored to have gone out with Mottola after he broke up with Carey), Destiny's Child, the Dixie Chicks, and Shakira. It didn't matter how much the label spent as long as the hits kept coming.
ALTHOUGH A VETERAN Sony executive described Mottola's company to Sony executive described Mottola's company to New York New York as "a real oligarchy," Bob Sherwood says the chairman and his people aspired to rebuild the label in Warner's laid-back image. "They wanted to move Columbia from being a New Yorkbased, relatively uptight, suit-and-tie kind of label to a more Warner look," he says. "Tommy brought lots of Warner executives. They liked a more free-flowing style." To be sure, Warner's chairman, the goateed and erudite Mo Ostin, had built a record label where freewheeling executives could thrive. None other than Frank Sinatra had hired Ostin in 1963 to run his new label, Reprise, and Ostin had spent the better part of three decades signing artists on instinct, including Jimi Hendrix, Joni Mitchell, the Kinks, Frank Zappa, and Neil Young, and letting them do their thing over time. "Mo loved talent magnets like Geffen, [Elektra chief Bob] Krasnow, and [longtime Warner Music executive Lenny] Waronker," writes retired Warner executive Stan Cornyn in as "a real oligarchy," Bob Sherwood says the chairman and his people aspired to rebuild the label in Warner's laid-back image. "They wanted to move Columbia from being a New Yorkbased, relatively uptight, suit-and-tie kind of label to a more Warner look," he says. "Tommy brought lots of Warner executives. They liked a more free-flowing style." To be sure, Warner's chairman, the goateed and erudite Mo Ostin, had built a record label where freewheeling executives could thrive. None other than Frank Sinatra had hired Ostin in 1963 to run his new label, Reprise, and Ostin had spent the better part of three decades signing artists on instinct, including Jimi Hendrix, Joni Mitchell, the Kinks, Frank Zappa, and Neil Young, and letting them do their thing over time. "Mo loved talent magnets like Geffen, [Elektra chief Bob] Krasnow, and [longtime Warner Music executive Lenny] Waronker," writes retired Warner executive Stan Cornyn in Exploding Exploding. "He collected them like his wife, Evelyn, collected fine scarves."
To illustrate the point, one day in 1983, one of Krasnow's hotshot A&R executives, Michael Alago, walked into his office talking up a new, eardrum-shattering heavy-metal band that had almost zero chance of ever getting on the radio. Krasnow really had no idea what Alago was talking about, but he authorized him to sign Metallica anyhow. "He trusted my instincts. Sometimes he said, 'You're crazy, we're not doing it,'" Alago says. "But he knew that I knew we were on to something." Metallica's Elektra albums, beginning with Kill 'Em All, Kill 'Em All, would combine forces with Guns N' Roses to begin pushing hair metal off the charts. (Later, a succession of grunge bands would finish the job.) Although they started as long-haired teenagers hawking tapes, Metallica would sell 58 million albums by late 2008, just 2.5 million less than Michael Jackson, in the United States. would combine forces with Guns N' Roses to begin pushing hair metal off the charts. (Later, a succession of grunge bands would finish the job.) Although they started as long-haired teenagers hawking tapes, Metallica would sell 58 million albums by late 2008, just 2.5 million less than Michael Jackson, in the United States.
But Warner Music, by the early 1990s, was moving in a more corporate direction, just like every other major label during the CD boom. In this new world, patient, instinctive, aging talent aficionados like Ostin and Krasnow were rapidly becoming obsolete.
This Warner shift began, as most things at Warner did, with company chairman Steve Ross. Born Steven Jay Rechnitz in Brooklyn, son of Jewish immigrants, Ross married into money in 1954. He became the head of his father-in-law's company, Kinney Parking, as it was expanding from funeral homes to parking lots. By the late 1960s, Ross had made a lot of money, but he didn't want to spend the rest of his life worrying about funeral homes and parking lots. He identified a bunch of growth areas, and the one that interested him most was "leisure time." So he expanded, first by buying National Periodical Publications, the company that owned MAD MAD magazine, and then by acquiring a huge talent agency, WarnerSeven Arts. One of the company's most valuable assets was a record label, Warner Reprise. Another asset was Atlantic Records, owned by perhaps the most famous record industry talent scout ever, Ahmet Ertegun, who (thanks to a hefty paycheck) agreed to be part of the $400 million deal. (Sinatra, as founder of Reprise, received $22.5 million-his biggest-ever single check at that time.) magazine, and then by acquiring a huge talent agency, WarnerSeven Arts. One of the company's most valuable assets was a record label, Warner Reprise. Another asset was Atlantic Records, owned by perhaps the most famous record industry talent scout ever, Ahmet Ertegun, who (thanks to a hefty paycheck) agreed to be part of the $400 million deal. (Sinatra, as founder of Reprise, received $22.5 million-his biggest-ever single check at that time.) Ross's style was to pay top executives like Ostin and Ertegun lavishly and leave them alone. The company thrived this way for years, and employees of the Burbank record label grew to, if not exactly love, then respect New York Citybased Ross as a sort of benevolent corporate grandfather. "There were many people there in key positions that had been there a very long time," recalls Jorge Hinojosa, manager of Warner's first rap star, Ice-T. "Even the [Burbank] building was nicer than the other buildings. It was like this ski chalet-interesting wood and interesting design. It was a beautiful place."
So employees more or less trusted Ross when, in 1986, he started indulging merger pitches from Time Inc., the magazine empire. Ross was especially interested because of one of Time's assets, cable TV, which he saw as a growth industry at least as promising as "leisure" had been in the late 1960s. Time executives were impressed with moneymaking Warner Music. "At Time Warner, the record company was, cash on cash, the best business in the company," says Michael Fuchs, an executive of Time Warnerowned HBO who was instrumental in merging the companies. "Quarters when we used to make our presentation, the music guys would stand up and we'd go, 'Holy shit!' We couldn't believe it, how good their business was." After haggling for almost four years with Time executives, Ross agreed in 1990 to merge the two companies into Time Warner, with a stock market value of more than $15 billion and annual revenue of more than $10 billion. (The merger also started with $16 billion in debt.) Ross became CEO.
In late 1992, Ross, sixty-five, died unexpectedly of prostate cancer. Gerald Levin, a brilliant manager with a photographic memory, stepped in to become the company's chief executive officer. Levin, however, knew little about the record business. Pressured by debt, he and other corporate types started to demand that the music unit function like every other unit. "It was a pretty benign place when Steve Ross was alive and Mo reported to him," says Jeff Gold, Warner Music's executive vice president and general manager for much of the 1990s. "When they sold to Time, especially after Steve Ross died, all of a sudden people are looking at your quarterly results more closely.... If you sell fifty million records one year and seventy [million] the next year because of a couple of fluke records, then they say, 'All right, how are you going to sell eighty?' And it just wasn't a business that worked that way." Under Levin, corporate types like Robert Morgado began to rise at Warner Music, while longtime executives like Mo Ostin found their influence diminished, an irritating development for the company's lower-level but experienced record men like Doug Morris and Danny Goldberg of Atlantic.
Levin's vision for Warner Music was "do no harm." Every Time Warner executive understood cable TV was the Almighty Future, and all the music and movie divisions had to do was quietly make money and not create a ruckus.
So it was interesting timing when Warner artist Ice-T, one of the most profane, funny, and forceful rappers of all time, chose to make a heavy metal record with his new band, Body Count. One song on this record, "Cop Killer," juxtaposed chilling gunshot noises against first-person lyrics encouraging violence against police officers. "What do you want to be when you grow up?" Ice-T asked ominously. "Good choice." Of course, the song was political-a response to police brutality in LA, a problem that had recently caused public outrage with the videotaped beating of Rodney King at the hands of the LA Police Department.
The story of "Cop Killer" began when Ice-T dropped off his new Body Count Body Count record to Warner executives. To a person-well, except for Russ Thyret, the label's executive vice president of marketing and promotion, who worried about the response from police groups and radio programmers-the staff loved it. They were also fond of Ice-T, whose menacing public persona masked the warm, savvy, charismatic businessman who'd sold more than 2 million albums for Seymour Stein's Sire Records with little overhead. Back then, hip-hop was a street genre, and a few well-placed singles at key Los Angeles or Chicago radio stations gave artists the credibility they needed for heavy sales. Ice was a master of this approach, and he was also hot, having just coheadlined the first Lollapalooza festival around the United States in summer 1991. record to Warner executives. To a person-well, except for Russ Thyret, the label's executive vice president of marketing and promotion, who worried about the response from police groups and radio programmers-the staff loved it. They were also fond of Ice-T, whose menacing public persona masked the warm, savvy, charismatic businessman who'd sold more than 2 million albums for Seymour Stein's Sire Records with little overhead. Back then, hip-hop was a street genre, and a few well-placed singles at key Los Angeles or Chicago radio stations gave artists the credibility they needed for heavy sales. Ice was a master of this approach, and he was also hot, having just coheadlined the first Lollapalooza festival around the United States in summer 1991. Body Count Body Count came out March 30, 1992. The first single, "There Goes the Neighborhood," was about to hit MTV. came out March 30, 1992. The first single, "There Goes the Neighborhood," was about to hit MTV.
Then, in late April, a jury acquitted the three officers accused of beating Rodney King, and riots broke out all over Los Angeles. Racial tensions heated up across the country, and "Cop Killer" blew up into front-page headlines. It's hard to pinpoint the exact date that "the fucking 'Cop Killer' fuse gets lit," as Hinojosa remembers it, but he knows it was a few days before he and Ice boarded a private Warner jet to meet with label executives in New York to sign a new record deal. Madonna had just received $60 million for a multimedia deal including books and movies, and Ice-T and Hinojosa were fantasizing about a similar deal worth $10 million. But Warner executives' tone had abruptly changed. "By the time we land in New York, the talk [at the meeting with Warner] wasn't about 'how can we capitalize on this shit we're doing?' It was like, 'This "Cop Killer" shit is kind of messed-up,'" Hinojosa says. "We got dressed to go to a party. We didn't realize we were going to a funeral." Time Warner was in crisis management mode.
The controversy dragged on, through the end of 1992. Picketers marched in front of the company building, carrying "Time Warner Puts Profits Over Police Lives" signs. Warner Music execs received death threats. Police groups boycotted the company. Stockholder Charlton Heston stood up at a meeting and recited Ice-T lyrics such as "I'm 'bout to dust some cops off!" like Moses reading the Ten Commandments. His powerful peers threatened to withdraw stock. Ice posed in a policeman's uniform on the cover of Rolling Stone Rolling Stone. He provocatively asked reporters why songs like Johnny Cash's "Folsom Prison Blues," with the line "I shot a man in Reno just to watch him die," didn't get the same kind of response. At first, Time Warner supported Ice-T as an artist with the right to free speech. Then the company caved, putting out a version of Body Count Body Count (with Ice's authorization) minus the "Cop Killer" track. Executives backed off their impassioned free-speech defense. For the cover of Ice-T's (with Ice's authorization) minus the "Cop Killer" track. Executives backed off their impassioned free-speech defense. For the cover of Ice-T's next next album, album, Home Invasion Home Invasion, he wanted to use a cartoon design of a teenager listening to rap and enjoying Malcolm X's autobiography as exaggerated ghetto bad guys break into houses, brandish large guns, and grope scantily clad women. He brought it to Warner's cuddly, chalet-style offices in Burbank. Executives debated the cover but decided they couldn't support it. Ice-T knew what time it was. In a letter to Warner, he announced his split from the label. He put out 1993's Home Invasion, Home Invasion, provocative cover and all, on an independent hip-hop label, Priority Records. provocative cover and all, on an independent hip-hop label, Priority Records. Time Time's reviewer, a Time Warner employee, called the album "balanced and coherent."
Warner's capitulation to public pressure over a work of art was symbolic of larger problems within the company. Robert Morgado, whom Master of the Game Master of the Game author Connie Bruck described as Steve Ross's "hatchet man," was slowly flexing his muscle, pushing for changes at the various labels where Ross had been basically hands-off since, well, forever. "No one ever replaced [Ross] in terms of being able to balance the complex cast of characters-all of whom derived some sense of direction from him," remembers Danny Goldberg, who would briefly head the label after the Time-Warner merger. "Once [Ross] died, Morgado tried to make it a more conventional structure, with everyone reporting to him. And Mo never got along with him. And [Morgado] never got along with Doug Morris, either." author Connie Bruck described as Steve Ross's "hatchet man," was slowly flexing his muscle, pushing for changes at the various labels where Ross had been basically hands-off since, well, forever. "No one ever replaced [Ross] in terms of being able to balance the complex cast of characters-all of whom derived some sense of direction from him," remembers Danny Goldberg, who would briefly head the label after the Time-Warner merger. "Once [Ross] died, Morgado tried to make it a more conventional structure, with everyone reporting to him. And Mo never got along with him. And [Morgado] never got along with Doug Morris, either."
Ostin couldn't take it. In early 1994, he left the label after thirty-one years. Morgado initially promoted Morris from head of Atlantic to head of Warner's US operations overall, thinking he could control the younger executive. Instead, Morgado kicked off an epic, label-wide power struggle, which The Wall Street Journal The Wall Street Journal called "open warfare." Elektra's veteran executive, Bob Krasnow, not one to easily accept reporting to new people, raised a stink and left the company. The office shouting matches between Morris and Morgado reverberated along yards and yards of corporate hallways. The company divided into factions. In 1995, Time Warner's Levin felt Morgado had alienated too many of Warner's music executives and fired him. called "open warfare." Elektra's veteran executive, Bob Krasnow, not one to easily accept reporting to new people, raised a stink and left the company. The office shouting matches between Morris and Morgado reverberated along yards and yards of corporate hallways. The company divided into factions. In 1995, Time Warner's Levin felt Morgado had alienated too many of Warner's music executives and fired him.* Later, over lunch, Morris would tell Morgado he regretted the last eighteen months. The two shook hands. "To observers, it was like tacking a happy ending on to Later, over lunch, Morris would tell Morgado he regretted the last eighteen months. The two shook hands. "To observers, it was like tacking a happy ending on to King Lear King Lear," Stan Cornyn wrote. But it wasn't over yet.
Michael Fuchs, a longtime HBO executive and Time Warner power player, took over. He started to see cracks in Warner Music's foundation. He had slightly more polish than Morgado, but he had a nasty habit of telling longtime record executives-including Morris-what they didn't want to hear. "When I got there [Warner Music], the wheels had begun to fall off a little bit," Fuchs says. "They'd had about ten years of the CD boom, and when the money rolls in like that there's a tendency to live big and everything seemed quite easy. I can't attest to what it was like before that. But when things began to slow down, it became evident that these businesses were not being run very tightly." Fuchs started "moving the furniture around right away," as he puts it. He fired Morris, shut down expensive label experiments-like a direct-mail operation that never really went anywhere-and made cutting fat out of budgets a hallmark of his leadership. But he got no further than Morgado. Levin fired Fuchs, too, in November 1995, after six months.
Just before he left, though, Fuchs helped Levin make a historic decision. It seems quaint today, after fifteen years of explicitly violent and sexual hip-hop from Snoop Dogg to Young Jeezy, but in 1996, Time Warner was unwilling to irritate its moralistic shareholders in the post"Cop Killer" era. C. DeLores Tucker, spotlight-loving head of the National Political Congress of Black Women, made sure of that. She owned ten shares of Time Warner stock and showed up at a May 1996 shareholders' meeting at City Center in New York. In a seventeen-minute speech that made headlines everywhere, Tucker denounced Interscope Records, a division of Warner Music, for its violent and misogynistic hip-hop music. A third of the crowd spontaneously applauded, including Henry Luce III, son of legendary Time Inc. founder Henry Luce. Under pressure, Levin and Fuchs divested from Interscope. Jimmy Iovine and Ted Field, owners of the hip-hop label, bought their 50 percent stake back from Warner, then turned around and sold the label to MCA for $200 million. "[Warner Music] couldn't take the heat and decided to get rid of Interscope," says Roger Ames, who became Warner Music chairman in 1999. "Certainly, for that period, their record company suffered by being owned by Time Warner."
As for Interscope, it would fare quite well, breaking artists like Eminem, 50 Cent, Gwen Stefani, and The Game over the next decade.
BY THE EARLY 1990S, it was getting harder for anybody to compete with major labels like Sony and Warner, who were spending tens of millions of their massive CD profits to turn talented new artists into Michael Jacksonstyle hit machines. Even A&M, the independent label that had started in Alpert's garage in 1962, was struggling. "Big advances were starting to be more of a key fix in this game," recalls Jerry Moss, the label's cofounder.
In 1989, Moss and his partner, Herb Alpert, decided twenty-seven years of independence was enough. Their storied label was in the midst of a dismal year-its biggest single was "Rock On," a cover song by hunky The Young and the Restless The Young and the Restless star Michael Damian. Moss was friendly with the head of PolyGram, David Fine, and he approached him about buying A&M. star Michael Damian. Moss was friendly with the head of PolyGram, David Fine, and he approached him about buying A&M.
Fine was receptive. After buying troubled Casablanca Records in the late 1970s, PolyGram had spent much of the postdisco crash in free fall. But the CD bailed out the company, in part because the public was suddenly eager to buy old content-from the Supremes to Bob Marley to A&M stalwarts like Joe Cocker and the Police. PolyGram became the proverbial big, hungry fish. It ate Island Records, the maverick record company that had turned Bob Marley and U2 into stars. It ate Motown, which no longer resembled the legendary Detroit company of Marvin Gaye and the Supremes but still had a huge catalog. And it ate A&M, for a reported $500 million in 1989. "We had the opportunity to get fresh new repertoire in the company," says Jan Cook, PolyGram's finance chief at the time. "A&M had a whole catalog roster that was not to be sneezed at."
The sale wasn't supposed to change much at A&M. Jerry Moss stayed on, working with his friend David Fine, and theoretically he would continue to bring Stings and Janet Jacksons onto the roster. But Moss and Friesen started to feud more than usual. Over twenty-five years, they had drifted to their own sweet spots within the company, Friesen with marketing and day-to-day management and Moss with sales. Often, though, Moss would pop up out of nowhere to undercut a Friesen decision. "From my perspective, Gil was a terrific leader, very involved, very forward-thinking, very engaged-and really had to work around things. It was not unusual for Jerry to sort of stick his nose into Gil's office and just question what was going on," recalls Al Cafaro, who would later run the company. "I think that was something that Gil struggled with." After the PolyGram sale, the long-standing relationship between Moss and Friesen changed. Moss became PolyGram's official contact at A&M. Friesen, who had essentially been running the company forever, chafed at the new structure. The company divided into Moss factions and Friesen factions. Friesen approached PolyGram execs and declared he was in charge. According to one insider, Moss interpreted this move as disloyal. By the end of 1990, Friesen had resigned, under pressure from A&M's board, which included Jerry Moss and Herb Alpert.
Neither Moss nor Friesen is willing to go into much detail about this period. "We had a different philosophical approach to where the company should go," Moss says. They remained estranged until the Rock and Roll Hall of Fame inducted the Police in 2003. "That was great fun," Moss says. "I'll always give old friends the benefit of the doubt."
Moss, too, left A&M after PolyGram's leadership changed. David Fine was out. French record executive Alain Levy was in. "All of a sudden I had a new boss, who wasn't laughing at my jokes," Moss says wryly. The company heated up again, briefly, under Cafaro, as Soundgarden, Janet Jackson, and Sting took off, but A&M would never regain its former glory as the weird hit indie label that grew out of Herb Alpert's garage.
A&M was hardly the only independent to sell out during the CD boom. In 1990, David Geffen sold his namesake record label to the music-and-movies corporation MCA for $545 million. Later that year, Sony's Japanese competitor, Matsushita, bought its own software company-MCA-for $1.6 billion. Nirvana's Kurt Cobain may have worn a "Corporate Rock Magazines Still Suck" T-shirt on the cover of Rolling Stone Rolling Stone in 1992, but Nirvana's record label, Geffen, was being rolled up into bigger and bigger corporations. in 1992, but Nirvana's record label, Geffen, was being rolled up into bigger and bigger corporations.
Edgar Bronfman Jr., a songwriter and longtime music and movie fan, paid close attention to these mergers. Bronfman was the third-generation heir of the Seagram Co., the massive Montreal distillery of Chivas Regal, Crown Royal, Captain Morgan rum, and Tropicana fruit juice. At first, Bronfman chose not to follow his father, Edgar Bronfman Sr., into the family business. Instead, he wrote songs with a partner, Bruce Roberts, including Dionne Warwick's soupy 1985 ballad "Whisper in the Dark." (Bronfman Jr.'s nom de rock nom de rock was "Junior Miles," and he gets several songwriting credits on was "Junior Miles," and he gets several songwriting credits on Intimacy, Intimacy, Roberts's 1995 album for Atlantic Records.) Bronfman also dabbled in Hollywood, producing movies like 1982's Roberts's 1995 album for Atlantic Records.) Bronfman also dabbled in Hollywood, producing movies like 1982's The Border The Border, which flopped despite costars Jack Nicholson and Harvey Keitel. That same year, with no entertainment successes to speak of, Bronfman finally accepted a job from his father to be Seagram's assistant to the office of the president. Within a few years, his father made him chairman.
So Bronfman accepted that his destiny was not to be the next Neil Sedaka. But there was still a chance to be the next Steve Ross. Bronfman waited for the right moment to jump in. He focused on the storied MCA, which owned masters by the Who and B.B. King but had in recent hitless years earned a reputation as the "Music Cemetery of America." In March 1995, Bronfman pushed the Seagram board to buy MCA for $5.7 billion. This was not, as some have speculated, because Bronfman the songwriter wanted a pathway into the music business. Bronfman says he merely wished to diversify the company into a more stable North American industry. "As far as I know, the board at Seagram may have been entirely and blissfully ignorant of my songwriting career," Bronfman says today.
BRONFMAN STRIPPED OFF the MCA name, which he deemed overly corporate, and replaced it with a more familiar one that symbolized his rebuilding efforts-Universal. Hollywood jeered-what business did this entitled liquor-and-oil baron have in movies and music?-but Bronfman wasn't finished. The Seagram tycoon also had his eye on PolyGram. the MCA name, which he deemed overly corporate, and replaced it with a more familiar one that symbolized his rebuilding efforts-Universal. Hollywood jeered-what business did this entitled liquor-and-oil baron have in movies and music?-but Bronfman wasn't finished. The Seagram tycoon also had his eye on PolyGram.
Purchasing A&M, Island, and Motown, in addition to reaping big European profits off its vast classical music catalog, made PolyGram the world's biggest music company by 1998, with hits by country star Shania Twain, rappers Jay-Z and DMX, and teen pop trio Hanson. But its young film division had not quite turned the corner to profitability. And the company's chief executive, Alain Levy, believed film was the future. Levy had convinced Jan Timmer, head of his parent company, Philips, that PolyGram should invest heavily in building a credible film division. But Timmer retired in 1996, and his successor, Cor Boonstra, who came from the international food conglomerate Sara Lee, didn't know from the film business. "Levy took the position that 'I'm doing a great job with the biggest record company in the world, this is what I'm doing, these are the reasons I'm doing it, leave me alone,'" says Al Cafaro, the A&M chief who worked for Levy after PolyGram bought his company. "And Boonstra didn't like that."
One day in 1998, Hollywood-obsessed Levy flew from London to Los Angeles to meet with Bronfman. They were to discuss PolyGram buying Universal's film division, owned at the time by Bronfman's Seagram Co. Bronfman, however, may have known something Levy didn't know. At that very moment, Seagram was in the process of buying PolyGram. "I don't think [Boonstra] had Alain Levy much in the loop," says a source close to the negotiations. Although Bronfman says he's pretty sure Levy knew he was buying the company when he first met him, many PolyGram executives of the time had no idea the cataclysmic merger was coming. "We were certainly taken by surprise," recalls longtime PolyGram finance chief Jan Cook.*
At the time, Cook was fifty-nine. He had been planning to retire within the next four or five years. He was at his second home, in Portugal, when he received a call from PolyGram's president: Could you fly to New York City right away to complete some paperwork? Seagram just bought the company. Could you fly to New York City right away to complete some paperwork? Seagram just bought the company. "Using private jets and the Concorde and such things, I was able to get there in thirty-six hours," Cook recalls. He did the due diligence, but he wasn't happy about it. To Cook, the company had been sold out from under him. Seagram offered him the chief financial officer position with its newly renamed Universal Music Group. "But what you get with this merger, all the people were going to be axed," he says. "And I didn't want to be the guy who was doing that to my colleagues and the employees I'd worked with and trusted to build the company. I said, 'No, thank you very much,' and retired." Seagram fired 980 PolyGram employees and cut 200 acts from its music roster. The company abruptly closed fifty-three-year-old Mercury Records, former home of Dinah Washington and Bon Jovi, and merged Geffen and A&M with Interscope, the onetime gangsta rap pariah label. "They swallowed up my company, and I was gone," says Mark Kates, the Geffen A&R executive who worked with Nirvana, Teenage Fanclub, and Sonic Youth and signed Beck and Weezer. "Seagram is a company based on selling the same amount of fluid to the same part of the world to the same amount of people every year. That's great, but the record business could not be more different than that." Geffen had been the most successful rock label of the early 1990s, but it was no longer the future. That belonged to hip-hop and pop. Interscope Records. And Universal. "Using private jets and the Concorde and such things, I was able to get there in thirty-six hours," Cook recalls. He did the due diligence, but he wasn't happy about it. To Cook, the company had been sold out from under him. Seagram offered him the chief financial officer position with its newly renamed Universal Music Group. "But what you get with this merger, all the people were going to be axed," he says. "And I didn't want to be the guy who was doing that to my colleagues and the employees I'd worked with and trusted to build the company. I said, 'No, thank you very much,' and retired." Seagram fired 980 PolyGram employees and cut 200 acts from its music roster. The company abruptly closed fifty-three-year-old Mercury Records, former home of Dinah Washington and Bon Jovi, and merged Geffen and A&M with Interscope, the onetime gangsta rap pariah label. "They swallowed up my company, and I was gone," says Mark Kates, the Geffen A&R executive who worked with Nirvana, Teenage Fanclub, and Sonic Youth and signed Beck and Weezer. "Seagram is a company based on selling the same amount of fluid to the same part of the world to the same amount of people every year. That's great, but the record business could not be more different than that." Geffen had been the most successful rock label of the early 1990s, but it was no longer the future. That belonged to hip-hop and pop. Interscope Records. And Universal.
If ever there was a record label built for economic success in 1998, it was the Universal Music Group. Bronfman's wheeling and dealing put him in control of some of the most storied record labels of all time-A&M, PolyGram, Island, Geffen, Interscope, and Motown, to name a few-stocked with modern hit makers from U2 to Dr. Dre and a catalog including Bob Marley, Nirvana, the Supremes, the Who, and Hank Williams Sr. He also had two of the top music executives. "These are record men like the old days," former RCA president Bob Buziak says. "Doug Morris and Jimmy Iovine, you could say, are the Jerry Mosses and Ahmet Erteguns." In other words, nothing could go wrong at the Universal Music Group, as long as CDs kept selling. And what could possibly stop them?
Big Music's Big Mistakes, Part 2Independent Radio PromotionThe 1960 payola scandal that wrecked pioneering rock 'n' roll DJ Alan Freed's career-he and seven others were indicted for bribery, and he died five years later-was hardly the end of payola. Federal laws regarding this kind of bribery were weak and almost impossible to enforce, and in 1979, the Federal Communications Commission watered them down even more, decreeing that "social exchanges between friends are not payola." So record companies kept doing it-spending more and more money every year.The indie promo racket attracted very questionable characters to the music business, which had never exactly had a squeaky clean reputation. One was Fred DiSipio, a skinny, 5'7" Philadelphian with a high-pitched voice and a gigantic bodyguard known as Big Mike. Nobody Nobody crossed DiSipio and Big Mike. DiSipio had been a war hero on the USS crossed DiSipio and Big Mike. DiSipio had been a war hero on the USS Gambier Bay Gambier Bay during World War II, and he started his career managing singers like future talk show host Mike Douglas and crooner Al Martino. during World War II, and he started his career managing singers like future talk show host Mike Douglas and crooner Al Martino.In the 1980s, DiSipio was a key figure in what record label types called "the Network," a loose affiliation of indie radio promoters who took payments of $60 million to $80 million a year from major labels and used them to lean on radio program directors. In this way, hits were made. But it was an expensive way-according to Fredric Dannen's investigative classic Hit Men, Hit Men, the record industry spent more than 30 percent of its pretax profits on independent radio promotion. the record industry spent more than 30 percent of its pretax profits on independent radio promotion.Hit Men opens with a 1980 experiment by Dick Asher, then CBS Records's deputy president. Asher was an ex-Marine. He was practical. He liked balanced budgets. He had been head of CBS's international division for years, signing smash artists such as Julio Iglesias. The company's top executives brought him over to cut costs. And he couldn't help but notice the annual millions in the indie promo column. Asher chose one of the biggest rock bands in the world, Pink Floyd, as an unwitting guinea pig. Asher decided not to pay the Network to push Pink Floyd's sure-thing single, "Another Brick in the Wall, Part Two." It wouldn't matter, he figured. opens with a 1980 experiment by Dick Asher, then CBS Records's deputy president. Asher was an ex-Marine. He was practical. He liked balanced budgets. He had been head of CBS's international division for years, signing smash artists such as Julio Iglesias. The company's top executives brought him over to cut costs. And he couldn't help but notice the annual millions in the indie promo column. Asher chose one of the biggest rock bands in the world, Pink Floyd, as an unwitting guinea pig. Asher decided not to pay the Network to push Pink Floyd's sure-thing single, "Another Brick in the Wall, Part Two." It wouldn't matter, he figured. The Wall The Wall was huge, even without radio play, and Pink Floyd's concert tour was setting sales records. But guess what? Nobody played the song. Eventually Pink Floyd's manager contacted Asher and begged for mercy. A moral crusade was well and good, but was huge, even without radio play, and Pink Floyd's concert tour was setting sales records. But guess what? Nobody played the song. Eventually Pink Floyd's manager contacted Asher and begged for mercy. A moral crusade was well and good, but where was the radio hit? where was the radio hit? Asher backed down. Floyd got its smash single. Asher backed down. Floyd got its smash single.For this and other crusades, Asher walked into a feud with his boss, Walter Yetnikoff, who knew many of the promo men personally and looked the other way at the gigantic budget items. Tension between the two stubborn men blew up into profanity-laced shouting matches at the CBS offices and soon led to Asher's downfall. Yetnikoff fired him in 1983. "I wasn't a whistleblower. I wasn't," says Asher, a retired music business consultant who lives in Boca Raton, Florida. "I reached a point where I didn't want CBS involved in something. If any part of CBS were caught in any illegal activity, the government could pull their licenses."On February 24, 1986, DiSipio showed up on television-for the wrong reasons. For months, NBC Nightly News NBC Nightly News had been investigating independent radio promotion and its alleged ties to the Mafia. A month earlier, reporter Brian Ross had been the beneficiary of one of the more remarkable coincidences in TV journalism history. Ross was sitting in the lobby of New York's Helmsley Hotel, waiting to interview a source, when Mafia figures John Gotti, Joseph N. Gallo, and Frank DeCicco suddenly appeared before him, bodyguards in tow, and took the elevator to a penthouse room. Following not far behind were two of the biggest members of the Network-Joe Isgro (the West Coast man) and Fred DiSipio (East Coast). Ross frantically called his producer, Ira Silverman, and they managed to snag the live footage of Isgro, DiSipio, and the Mob figures coming back out of the hotel. It would dominate the network's report a month later. had been investigating independent radio promotion and its alleged ties to the Mafia. A month earlier, reporter Brian Ross had been the beneficiary of one of the more remarkable coincidences in TV journalism history. Ross was sitting in the lobby of New York's Helmsley Hotel, waiting to interview a source, when Mafia figures John Gotti, Joseph N. Gallo, and Frank DeCicco suddenly appeared before him, bodyguards in tow, and took the elevator to a penthouse room. Following not far behind were two of the biggest members of the Network-Joe Isgro (the West Coast man) and Fred DiSipio (East Coast). Ross frantically called his producer, Ira Silverman, and they managed to snag the live footage of Isgro, DiSipio, and the Mob figures coming back out of the hotel. It would dominate the network's report a month later.Predictably, NBC Nightly News NBC Nightly News's "The New Payola" freaked out the industry. It became an albatross, something record executives had to answer for at shareholder meetings. When the story broke, label executives said they were shocked-shocked-that people would believe such a thing went on in their companies. Privately, many of these executives were psyched. They suddenly had a moral and legal reason to kill their outlandish budget items for indie promo. Yetnikoff, who had helped squash an internal Recording Industry Association of America investigation on the same subject, defended indie promotion in several interviews. He thought the whole business was funny and arranged to have the theme from The Godfather The Godfather playing at a CBS function. "I'm not saying no indie [radio promoter] ever did anything wrong, but there's nothing inherently bad about trying to playing at a CBS function. "I'm not saying no indie [radio promoter] ever did anything wrong, but there's nothing inherently bad about trying to influence influence, is there?" Yetnikoff told Esquire Esquire in an extraordinary article in which he slams cocktails at a nightclub with Mick Jagger and the Eurythmics' Dave Stewart. Payola ended in a cluster of late-1980s grand jury and Senate hearings, some led by Al Gore. As always, though, pay-to-play bounced back. Only the names changed. in an extraordinary article in which he slams cocktails at a nightclub with Mick Jagger and the Eurythmics' Dave Stewart. Payola ended in a cluster of late-1980s grand jury and Senate hearings, some led by Al Gore. As always, though, pay-to-play bounced back. Only the names changed.*Born and raised in Cincinnati, Bill Scull had answered a newspaper ad in 1970 for a job involving records. He thought it meant financial records. But the job was with an independent record distributor, one of those guys who bought crates of vinyl records from labels like Columbia and Epic and sold them to music stores. Every city had an indie distributor at the time-big ones like Cleveland and Chicago had two. Unassuming, of medium height, sporting square glasses and slicked-back hair, Scull turned out to be good at shaking hands, making connections, and turning business contacts into lifelong friends. "He's always doing promotion, no matter what it is," says Craig Diable, who worked Warner Music radio promo in the Midwest for years. "If he meets the chef of a restaurant, the next thing you know, Billy's like, 'You need tickets? You need CDs? Let me know.' The guy says, 'You don't call for reservations-you call me me.' And this guy's got him all set up. That's what Billy does."Scull's next job was at a small label, Metromedia. A colleague quit and Scull wound up with the Miami account. Before long he represented the South, too. He'd fly into his towns, and indie distributors would pick him up and show him a good time. Scull climbed the ladder of record labels, from Metromedia to Polydor to Elektra to Arista. Then he started to meet guys in Cincinnati and Cleveland who worked in independent radio promotion. They took payments from record labels and gave some of it to radio stations.Scull was tight with these radio program directors in the Midwest. He had partied with them for years. In 1980, Scull decided to switch from record promotion to independent radio promotion. Instead of pulling down a salary from labels to push records directly to station programmers, he'd work for himself. He'd be a middleman. "I thought, 'There's no independent promotion person in Cincinnati. I've been doing this ten years. I'm going to take a shot,'" he recalls. He opened his business in his upstairs bedroom, with one telephone. Ariola Records, a small label, was the first to pay him-$1,000 for adding Amii Stewart's "Knock on Wood" to a local playlist. More and more small labels started hiring him. Soon he decided to hit up the big-time labels-Capitol, Columbia, Warner.And that's when a record executive told him he'd better check in with Fred DiSipio. "I called Fred," Scull recalls. "Turns out he not only had Capitol, he had Columbia, Epic, Warner Bros. All of a sudden, I had a whole lot of records and ten or fifteen stations. Fred started sending me a lot of money. FedExed every week. It was awesome. Beyond my wildest dreams. I would get, like, $10,000 or $15,000 depending on what kind of a week it was. And that's how it got started."Scull was well positioned throughout the NBC Nightly News NBC Nightly News debacle, which extricated DiSipio and Isgro from the music industry for good, give or take a few lawsuits and harsh words. He had kept a low profile in Cincinnati, opening Tri State Promotions and building up clout over time with his radio connections. In Chicago, Jeff McClusky, whom the debacle, which extricated DiSipio and Isgro from the music industry for good, give or take a few lawsuits and harsh words. He had kept a low profile in Cincinnati, opening Tri State Promotions and building up clout over time with his radio connections. In Chicago, Jeff McClusky, whom the Chicago Tribune Chicago Tribune called "an earnest, non-blustery, teetotaling family man who works 12-hour days and knows just about everybody who matters in the industry," became Scull's biggest rival. "Fred went away. The old guys that had been doing this-they all kind of went away. Their business was a different business. They had a handful of people who they had these relationships with," Scull says. "It became a lot more corporate and a lot more aboveboard. And Jeff McClusky and our company really became the large companies." McClusky went so far as to contact FCC attorneys, making sure his business model as a middleman was legal. What he did, he says, was no different than a peanut butter manufacturer paying for positioning at a grocery store. In any event, Congress never intervened. called "an earnest, non-blustery, teetotaling family man who works 12-hour days and knows just about everybody who matters in the industry," became Scull's biggest rival. "Fred went away. The old guys that had been doing this-they all kind of went away. Their business was a different business. They had a handful of people who they had these relationships with," Scull says. "It became a lot more corporate and a lot more aboveboard. And Jeff McClusky and our company really became the large companies." McClusky went so far as to contact FCC attorneys, making sure his business model as a middleman was legal. What he did, he says, was no different than a peanut butter manufacturer paying for positioning at a grocery store. In any event, Congress never intervened.In fact, Congress relaxed its radio restrictions during the mid-1990s, allowing fewer and fewer media companies to own more and more of the stations. By 2001, three giant broadcasters, Clear Channel, Citadel, and Cumulus, owned 60 of the top US stations. The indie promoters started going straight to the companies, rather than the individual program directors. McClusky, for example, arranged an exclusive deal with Cumulus Media, which reported revenues of more than $1 million a year it received from record companies via indie promoters in its annual reports. In 2001, Bill McGathy, another indie promoter, successfully bid $3.25 million for the rights to represent Clear Channel and the hundred-plus US stations it owned. "Drugs and hookers are out; detailed invoices are in," wrote Eric Boehlert, an investigative music business reporter for Salon.com who covered indie radio promotion extensively. Scull, McClusky, and the others in the indie promo racket would take as much as $300 million in "legal payola" every year from record labels by the late 1990s. They'd turn around and give program directors money and record labels access to the program directors. Once, McClusky paid $2,000 out of his own pocket for fifty premium seats to a Backstreet Boys concert in Buffalo, New York. He snagged the tickets through his connections with the Boys' management company, the Firm. He then gave them to a Top 40 program director in Rochester, New York, to build a lasting relationship and open the door for future single "adds."It was not uncommon for Scull to make $50,000 in a week from record labels, 60 or 70 percent of which he would give to radio stations. That's almost $1.7 million every year in profit-not as much as the $27 million DiSipio was said to have amassed in Hit Men Hit Men, but still a decent living. "From the mid-'80s to the late '90s, the labels were really, as we say, 'donkey strong.' They were full of cash. They were at their peak," Scull says. "Because they had the money, they signed more acts than any time previously. The large labels, because they had the catalog, were the rich ones-the Sonys, the RCAs, the Capitols." The labels couldn't figure out how not not to pay him. "Probably [labels'] biggest expense was indie promotion," says Tim Hurst, a former Midwest radio-promo man for Warner's Reprise Records. "The labels just thought they had to keep up with the Joneses. If the next-door neighbor had indie promotion, and they didn't, they would have gotten screwed." to pay him. "Probably [labels'] biggest expense was indie promotion," says Tim Hurst, a former Midwest radio-promo man for Warner's Reprise Records. "The labels just thought they had to keep up with the Joneses. If the next-door neighbor had indie promotion, and they didn't, they would have gotten screwed."Whether teetotaling Jeff McClusky or allegedly Mob-tied Fred DiSipio was at the center of the action, indie promo was like a drug for the labels: They were addicted to paying multimillion-dollar chunks of their annual budgets to these middlemen, and they couldn't figure out how to stop it. This worked out just fine in the donkey-strong music business economy, but when the money ran out, it was a disaster. Labels managed to extricate themselves from their arrangements to pay promoters like McClusky and Scull tens of millions of dollars a year. Big radio companies, like Clear Channel, decided they didn't need the hassle of being linked to pay-to-play in the public eye. So in the early 2000s, the indie promo men finally went away, for the most part. But that created a problem: The radio people at major labels found themselves with no legal, reliable means of getting songs on the radio. (They didn't have Bill Scull's connections with program directors, for example.) And they couldn't keep their jobs without a steady stream of hit radio singles. They were trapped. Left to their own devices, many of them resorted to bribery. It took a crusading New York attorney general with gubernatorial ambitions-Eliot Spitzer, who, as it turned out, had a dirty secret of his own-to remove pay-to-play for good from the record industry. In the process, Spitzer killed pay-to-play. And he further crippled the business.Big Music's Big Mistakes, Part 3Digital Audio TapeFor decades, the Recording Industry Association of America, or RIAA, had a simple job: certifying records that sold 500,000 copies as "gold," and records that sold 1 million as "platinum." The trade group for the major labels changed with the times, though, and by the late 1970s it had a fulltime staff devoted to fighting counterfeiters and bootleggers. By the end of the next decade, news reports estimated losses to music, video, book, and software piracy were $270 billion in a year. It was typical for RIAA officials to work with police on raids-like one in 1985 on a printing plant in Bell, California, outside Los Angeles, which captured 160,000 bogus labels for hit groups like Air Supply and Kool and the Gang. The counterfeiters had intended to affix these labels to inferior copies of records and sell them on the streets-potentially taking away as much as $1 million from the music business, executives said. Three men at the plant were arrested.Into this paranoid world stumbled the Digital Audio Tape.Developed by Sony Corp. in the mid-1980s, DAT was to the clunky old cassette what the CD was to vinyl. Like the CD, the magnetic tape was digital, which meant sound was recorded in a series of ones and zeroes, eliminating cassette hiss. Sony was in a hurry. Its executives perceived the DAT, as well as spinoff formats like its own MiniDisc and Philips's Digital Compact Cassette, as the future of the record business. Selling one format-CD-was working just fine. Selling two two products-CD and DAT-would make everybody even richer. Preparing for a 1987 launch, Sony lined up support from Denon, Matsushita, and others and released players for $1,000 to $1,500. products-CD and DAT-would make everybody even richer. Preparing for a 1987 launch, Sony lined up support from Denon, Matsushita, and others and released players for $1,000 to $1,500.But there was a problem, which boiled down to one verb: record record. The major labels didn't like that word very much. They hadn't liked it with the cassette, either, but cassettes made inferior copies of records and CDs, and "copying the copy" with tapes was a recipe for frustratingly sludgy sound. By contrast, the DAT was digital, so it could make a perfect copy every time. Sony marketers were proud of their sleek, easy-to-use, high-sound-quality tape, and they rolled out a campaign similar to the one that had worked so well for the CD. They were met not with hugs and flowers but with glares and threats from the labels. "They proceeded to claim that DAT would be the end of the world, cause cancer, and create global warming," says John Briesch, president of Sony's consumer audio-video group.The biggest label cheeses-CBS's Walter Yetnikoff, Warner's Mo Ostin, Arista's Clive Davis-flew to Canada to meet with electronics-industry bigwigs for a summit on the new technology. This would become known as the "Maneuver in Vancouver." Unbeknownst to "the Japanese," as then-EMI executive Joe Smith refers to the electronics reps, CBS Records's high-tech people had come up with their own solution to the DAT problem. They created Copycode, a tiny circuit that would cut notes out of the music if anybody tried to record a CD onto a DAT. The electronics reps were told all DATs must come equipped with this new copy-protection technology. Or else. Or else. Miffed at this crude display of record industry clout, the Japanese walked out. In response, the labels refused to license their music to DAT. Nobody would be able to buy a Springsteen or Madonna DAT in a store. Miffed at this crude display of record industry clout, the Japanese walked out. In response, the labels refused to license their music to DAT. Nobody would be able to buy a Springsteen or Madonna DAT in a store.Sony pressed on, but the DAT wasn't about to get anywhere without the record industry's support. So in 1989, reps from consumer electronics companies met label executives in Athens, Greece, to hammer out a compromise-nobody would have to pay labels a royalty if they sold a DAT device, but they would have to equip them with a widget known as the Serial Copy Management System. This would allow people to copy music-once. What they couldn't do was copy the copies. In 1990, the world's biggest publishers-songwriters and other businesspeople who make money off songwriting royalties-piled on. Led by Sammy "High Hopes" Cahn, a group of one hundred prominent publishers filed suit against Sony, demanding royalty payments for the devices. Sony had no choice but to concede. Thus did Congress pass the Audio Home Recording Act, riddled with loopholes, which President George H. W. Bush signed in early 1992. By then, though, the DAT had lost excitement in the marketplace. "We killed the DAT machine," Joe Smith recalls.But there is an important footnote to the DAT's tragic story. When Congress was working with the recording industry to create the Audio Home Recording Act, lawyers for computer companies demanded an exemption. Americans, they said, had the unalienable right to back up data on CD-ROMs. "I said, 'Here's the deal: You either cut us out of this, or we're going to throw our bodies across the tracks,'" says Jim Burger, a lawyer who represented Apple Computer and other high-tech companies at the time. The record industry fiercely opposed this exemption, but its lawyers and lobbyists realized the legislation wouldn't pass without a compromise. So it was decided computer companies could sell PCs with built-in recording devices. IBM and the others would pay no royalties to record labels, nor would they add a chip restricting the number of copies. "They blew it," Sony's DAT marketer, Marc Finer, says of label lobbyists who allowed the exemption without a major fight. "Completely."It took a few years for the implications of this loophole to sink in. In 1994, Andy Schneidkraut, owner of Albums on the Hill, a twenty-year-old record store at the bottom of a staircase at the University of Colorado in Boulder, had his best year ever. He sold 1,800 copies of the Dave Matthews Band's Under the Table and Dreaming Under the Table and Dreaming CD to legions of college students. Life was good. But his exuberance was short-lived. By the end of the 1990s, he was lucky to sell 200 copies of CD to legions of college students. Life was good. But his exuberance was short-lived. By the end of the 1990s, he was lucky to sell 200 copies of any any record. Why? Two words: record. Why? Two words: ripping ripping and and burning. burning. CU students began to show up on campus with their own PCs, all equipped with the CD-rewrite drives exempted by the Audio Home Recording Act. No longer did every Dave Matthews Band fan drop by Albums for a $16.99 CD. CU students began to show up on campus with their own PCs, all equipped with the CD-rewrite drives exempted by the Audio Home Recording Act. No longer did every Dave Matthews Band fan drop by Albums for a $16.99 CD. One One fan would drop by for the CD and burn copies for the other fifty kids on his dorm hall. Schneidkraut considered selling those ubiquitous packages of CD-Rs, which seemed to get cheaper and cheaper every day. But he couldn't bring himself to do it. "It was like a knife in my back-if someone would come up and say, 'I'd like the new Dave Matthews, and can I get twenty-five blank CDs please?'" says Schneidkraut, who still holds court behind the counter at Albums, where annual revenues have dropped from $600,000 to $240,000. "It was too painful." fan would drop by for the CD and burn copies for the other fifty kids on his dorm hall. Schneidkraut considered selling those ubiquitous packages of CD-Rs, which seemed to get cheaper and cheaper every day. But he couldn't bring himself to do it. "It was like a knife in my back-if someone would come up and say, 'I'd like the new Dave Matthews, and can I get twenty-five blank CDs please?'" says Schneidkraut, who still holds court behind the counter at Albums, where annual revenues have dropped from $600,000 to $240,000. "It was too painful."It was particularly galling to Steve Gottlieb, president of the independent label TVT Records, to walk down the aisle of an Office Depot or Best Buy and find a row of name-brand, Microsoft Windowsequipped personal computers containing CD burners and storage capacity to hold thousands of songs. "It was clear that the computer companies-Dell, Apple, Compaq-had done market research and determined that a great way to reinvigorate laptop sales and computer sales is to bundle them with the implicit proposition that you could have all the music you want, free," Gottlieb complains. "And what's the music industry response to this? 'We don't sue big companies.'" But before the implications of ripping and burning truly sank in-for better or for worse-the record industry would enjoy another renaissance. For a few glorious years, in the late 1990s and early 2000s, it seemed like teen pop would last forever.
Chapter 3.
19982001 The Teen Pop Bubble: Boy Bands and Britney Make the Business Bigger Than Ever-But Not for Long THE MOMENT Erik Bradley knew boy bands were taking over the world came on June 28, 1998, at the New World Music Theatre near Chicago. 'NSync, the hunky young pop stars who'd just had a radio hit with "I Want You Back," were opening the outdoor show. Bradley was backstage. The band was hanging out in its trailer before its brief set. Bradley smelled something odd. It seemed to be coming from a large metal fence, covered with a blue plastic tarp, which separated the fans from the performers. Then he realized desperate fans were using lighters to Erik Bradley knew boy bands were taking over the world came on June 28, 1998, at the New World Music Theatre near Chicago. 'NSync, the hunky young pop stars who'd just had a radio hit with "I Want You Back," were opening the outdoor show. Bradley was backstage. The band was hanging out in its trailer before its brief set. Bradley smelled something odd. It seemed to be coming from a large metal fence, covered with a blue plastic tarp, which separated the fans from the performers. Then he realized desperate fans were using lighters to burn holes burn holes in the tarp so they could get a better look at Justin Timberlake, Lance Bass, and the rest. "It was in the tarp so they could get a better look at Justin Timberlake, Lance Bass, and the rest. "It was maniacal maniacal," says Bradley, program director for Chicago's B-96, a Top 40 radio station that played the crap out of boy bands for the better part of four years. "It shows you how bad they wanted to see them. It was really, really huge."
For Tom Calderone, the moment was April 14 of the same year, during 'NSync's first MTV appearance, set in a new Times Square studio. The channel was still ensconced in grunge and hip-hop, and this squeaky clean group of dancing white kids wasn't exactly what producers craved for their new countdown show MTV Live. MTV Live. "We were like, 'All right, they seem to have a track record with Disney, they're female-themed, let's give it a shot,'" says Calderone, then the channel's executive vice president for music and talent. "All I remember was five thousand kids outside on the sidewalk screaming. We got a phone call from HR saying, 'The "We were like, 'All right, they seem to have a track record with Disney, they're female-themed, let's give it a shot,'" says Calderone, then the channel's executive vice president for music and talent. "All I remember was five thousand kids outside on the sidewalk screaming. We got a phone call from HR saying, 'The New York Times New York Times is complaining because it's so loud-how long is this show going to last?'" is complaining because it's so loud-how long is this show going to last?'" A long time A long time, as it turned out. Within five months, MTV Live MTV Live would morph into would morph into Total Request Live Total Request Live and become the primary outlet for 'NSync, the Backstreet Boys, Britney Spears, Christina Aguilera, and their vast battalions of sign-painting teens. and become the primary outlet for 'NSync, the Backstreet Boys, Britney Spears, Christina Aguilera, and their vast battalions of sign-painting teens.
The B-96 Summer Bash and MTV Live MTV Live were just the beginning. From roughly 1997 through 2001, teen pop was a massive worldwide record industry sales machine. The Backstreet Boys' 1999 album were just the beginning. From roughly 1997 through 2001, teen pop was a massive worldwide record industry sales machine. The Backstreet Boys' 1999 album Millennium Millennium set an all-time record by selling 1.13 million copies in its first week; Britney Spears's set an all-time record by selling 1.13 million copies in its first week; Britney Spears's Oops!...I Did It Again Oops!...I Did It Again leaped over that mark a year later, selling 1.3 million; and 'NSync would establish a new first-week record, once and for all, in late 2000, with 2.4 million. All told, these three acts alone would sell 96 million CDs in the United States-more than the Eagles, the Rolling Stones, or Michael Jackson. The CD boom of the 1980s and 1990s peaked spectacularly during this era. "People keep asking me, 'What are you going to do when the pop bubble bursts, as it always has in the past?'" complained Larry Rudolph, Britney Spears's manager and attorney, to the leaped over that mark a year later, selling 1.3 million; and 'NSync would establish a new first-week record, once and for all, in late 2000, with 2.4 million. All told, these three acts alone would sell 96 million CDs in the United States-more than the Eagles, the Rolling Stones, or Michael Jackson. The CD boom of the 1980s and 1990s peaked spectacularly during this era. "People keep asking me, 'What are you going to do when the pop bubble bursts, as it always has in the past?'" complained Larry Rudolph, Britney Spears's manager and attorney, to the Los Angeles Times. Los Angeles Times. At the time, the answer seemed obvious: At the time, the answer seemed obvious: Never gonna happen. Never gonna happen.
Yet teen pop, by its very nature, is destined to crash after a few years, when its fans go to college, get jobs, raise families, and tear down their boy-band posters. It happened with Paul Anka, Fabian, the Bay City Rollers, New Kids on the Block, and Debbie Gibson, and it would happen with Backstreet Boys and 'NSync. There were a few structural problems within the record industry, too. 'NSync's "Bye Bye Bye," the Backstreet Boys' "I Want It That Way," and Britney's "Oops!...I Did It Again" were breezy and lovable bubblegum singles, worthy of airplay in any era, but there were just two or three of these on every big teen pop album. At the time, labels offered no cheap single format. A Backstreet fan had had to buy the $15 to buy the $15 Millennium Millennium CD in 1999 to own "I Want It That Way." (Just as a hip-hop fan had to buy Nelly's entire CD for the "Country Grammar" single or Sisqo's entire CD for "Thong Song.") It was no coincidence, then, that Napster, the free file-sharing service, popped up on the internet at precisely this time. The least frustrating way to obtain "I Want It That Way" in 1999 or 2000 was to download it for free. Illegally. CD in 1999 to own "I Want It That Way." (Just as a hip-hop fan had to buy Nelly's entire CD for the "Country Grammar" single or Sisqo's entire CD for "Thong Song.") It was no coincidence, then, that Napster, the free file-sharing service, popped up on the internet at precisely this time. The least frustrating way to obtain "I Want It That Way" in 1999 or 2000 was to download it for free. Illegally.
Labels had been expanding-hiring new staff, spending unprecedented millions on bands-throughout the 1980s and 1990s. They had no reason to think it would stop during the teen pop era, which made everybody rich, not just the executives who worked with Britney and Backstreet. Eminem, Shania Twain, Celine Dion, and Limp Bizkit took off in this period, Carlos Santana came back, and even artists better known for their concerts, like Phish and the Dave Matthews Band, were able to go multiplatinum. Labels were fat and happy, although some executives worried about a market peak. "You have the huge infrastructure of people...on a ton of different floors and all of a sudden you're stuck with these huge costs. And it's harder to cut people than it is to hire them," says Lyor Cohen, chairman of the Warner Music Group. "All these companies did was try to find fabricated shit* so they didn't go through having to let people go. Then you go into an era of fabricated, highly promoted, highly advertised stuff-it's very flimsy, it sells very quickly, and we're also hurting our credibility with the long-term music lover. And then [the fans] go away to college." Teen pop was one last squeeze of the sponge to get the world to spend millions and millions of dollars on compact discs. It wouldn't last. so they didn't go through having to let people go. Then you go into an era of fabricated, highly promoted, highly advertised stuff-it's very flimsy, it sells very quickly, and we're also hurting our credibility with the long-term music lover. And then [the fans] go away to college." Teen pop was one last squeeze of the sponge to get the world to spend millions and millions of dollars on compact discs. It wouldn't last.
Just before it self-destructed, though, two men would make a lot lot of money off boy bands and Britney Spears. Their names were Lou Pearlman and Clive Calder. When teen pop inevitably crashed, one survived. The other did not. of money off boy bands and Britney Spears. Their names were Lou Pearlman and Clive Calder. When teen pop inevitably crashed, one survived. The other did not.
LOUIS J. P J. PEARLMAN and Clive Calder had a few things in common. They both played in rock 'n' roll bands as teenagers. They both were self-made men with a talent for recognizing what sells-Pearlman as a blimp manufacturer, Calder as a record label talent scout. They both liked to talk. A and Clive Calder had a few things in common. They both played in rock 'n' roll bands as teenagers. They both were self-made men with a talent for recognizing what sells-Pearlman as a blimp manufacturer, Calder as a record label talent scout. They both liked to talk. A lot. lot. "As busy as [Calder] was, you couldn't get him off the phone in under half an hour," remembers Gary Stiffelman, attorney for Justin Timberlake. "It was amazing-he could talk your fucking ear off. All I could think of was, 'Doesn't he have something better to do?'" They both had thinning hair as they approached middle age in the late 1990s. Pearlman's red locks were turning wispy, complementing the multiple chins that made him look like a roly-poly cartoon character. Calder's bald pate, with gray on the sides, gave him a comforting, charismatic dignity. Most important, both Pearlman and Calder saw the teen pop boom coming and invested in acts such as the Backstreet Boys, Britney Spears, and 'NSync before anybody else. "As busy as [Calder] was, you couldn't get him off the phone in under half an hour," remembers Gary Stiffelman, attorney for Justin Timberlake. "It was amazing-he could talk your fucking ear off. All I could think of was, 'Doesn't he have something better to do?'" They both had thinning hair as they approached middle age in the late 1990s. Pearlman's red locks were turning wispy, complementing the multiple chins that made him look like a roly-poly cartoon character. Calder's bald pate, with gray on the sides, gave him a comforting, charismatic dignity. Most important, both Pearlman and Calder saw the teen pop boom coming and invested in acts such as the Backstreet Boys, Britney Spears, and 'NSync before anybody else.
In almost every other aspect, however, they were completely different. Pearlman craved the limelight, posing in magazines with his hunky proteges, transforming himself into a personality every bit as big as that of Justin Timberlake or Nick Carter. Calder, meanwhile, was pathologically private. In thirty-three years in the music business, he gave only one interview, in 1996, to the British trade Music Business International. Music Business International. Where Pearlman used shady accounting to afford his living-large lifestyle, Calder kept meticulous records and was, to others in the business during the CD boom, shockingly frugal. "Clive was more no-frills, no-bullshit, just get it done. Lou was more 'Heeeey, everybody, let's have a good time!'" says David McPherson, a former A&R executive for Jive Records, who worked closely with both men during the teen pop boom. "Lou was the happy, jolly guy, nonthreatening, just a nice guy that you didn't want to let down or piss off. I've never seen him mad. I've never seen him yell at anybody. Whereas Clive-I've seen him mad, I've seen him just Where Pearlman used shady accounting to afford his living-large lifestyle, Calder kept meticulous records and was, to others in the business during the CD boom, shockingly frugal. "Clive was more no-frills, no-bullshit, just get it done. Lou was more 'Heeeey, everybody, let's have a good time!'" says David McPherson, a former A&R executive for Jive Records, who worked closely with both men during the teen pop boom. "Lou was the happy, jolly guy, nonthreatening, just a nice guy that you didn't want to let down or piss off. I've never seen him mad. I've never seen him yell at anybody. Whereas Clive-I've seen him mad, I've seen him just yell. yell."
Born in Johannesburg, South Africa, in 1946, Clive Calder, who is white, grew up fascinated with black music during apartheid. In the 1960s, he wore sideburns and played Motown covers in white bands such as Calder's Collection and the In Crowd. He performed for five hours almost every night. He convinced the Johannesburg office of EMI Music, the British major label, to give him a job in A&R. Being a South African talent scout was a hard way of life, especially given the complications of apartheid: When EMI tried to sell made-in-America records to South African buyers, the label had to remove photos of black musicians from the album sleeves. And Calder took heavy risks finding singers to make new records. "There are many cities in South Africa where I never knew the white areas, but I knew every shebeen, every hall, every club in the black areas," Calder said in his one interview. At age twenty-four, he was, according to Rolling Stone Rolling Stone, "fanatically self-disciplined, socially remote, charming when he had to be, ruthless when he didn't." He didn't drink or dance. Tax manuals made up his bedside reading.
Calder was a long-haired hippie in the most reactionary country in the world. There was no flower power in South Africa in the 1960s. He signed bands to EMI and branched into concert promotion. The police and right-wingers harassed him and his psychedelic-rock clients, breaking up an outdoor festival he organized. Malawi, a nearby African country, wouldn't allow his rock tour to cross the border unless he cut his hair; immigration officials watched as a roadside barber did the job. His love of Motown, combined with the twisted laws of South Africa, moved him to switch from rock to soul music. At the time, blacks were allowed to listen only to black music and whites only to white music. Music by black Americans was the only exception, giving US soul megastars such as Percy Sledge a disproportionate level of local stardom.
Calder met a kindred musical spirit, Ralph Simon, keyboardist for a rival band known as the Bassmen, in the late 1960s. The two formed CCP Records around 1970 to focus on local singers. They put out "Candlelight," a catchy, English-language pop single by a black singer, Richard Jon Smith, and radio censors had to admit it was so bland it didn't violate any rules. The song went to No. 11 in South Africa, and soon Calder had recruited an entire hit factory worth of black pop singers who wore Afros and platform boots and looked like they could have been in the Jackson 5. David McPherson, one of Calder's A&R men years later, believes Calder honed his gold-standard "ears" at this time, creating South African hits under elaborate restrictions.
"South Africa was segregated. At the time, black artists kind of had to use the studio when whites had to go home at night," recalls Jonathan Butler, a Cape Townborn singer who recorded for Calder when he was twelve, then moved to London and earned a Grammy nomination for his 1987 soft-R&B hit "Lies." "At night time, when I went to a colored neighborhood, Clive goes to his white area and that's it. At midnight, if a black guy was found in that neighborhood, you'd probably be arrested. It wasn't so for the whites-the whites could come into any neighborhood and drive around.
"Many of us were excited about living our dream," he continues. "Clive and Ralph were very liberal in their views and the way they ran their company. They were visionaries."
They met another visionary, although he didn't look like one: Robert John "Mutt" Lange, a long-haired Rhodesian producer who had recorded cover songs for one small discount label. Calder became his manager. The ambitious trio-Calder, Simon, and Lange-decided in 1974 they had to get out of South Africa. "We were politically very much opposed to the old apartheid regime," Simon recalls. "That really led to literally giving up everything-and with what little money we had scraped together, buying airline tickets to go to London." Having left their families behind, Calder and Simon opened the Zomba Music Group in 1976, named after a Malawi town, and they found themselves at ground zero of the British punk rock movement. They didn't exactly fit-Simon Draper, a cofounder of Virgin Records, told Rolling Stone Rolling Stone Calder was "slightly off the pace, a little uncool, didn't dress quite correctly, hadn't exactly got the tempo." But he was quite good at networking-and making money. Calder was "slightly off the pace, a little uncool, didn't dress quite correctly, hadn't exactly got the tempo." But he was quite good at networking-and making money.
Calder and Simon decided publishing-the part of the music business that takes a tiny songwriter's cut for every song sold via album or single-was where the money was. They set out to find songwriters. The first came from a French producer, Henri Belolo, who delivered a group he helped create, the Village People, after twelve UK labels turned them down. Zomba became the disco stars' British sub-publisher. Calder and Simon agreed they had to keep as much control of Zomba as possible and use major labels simply to distribute records. It helped that Mutt Lange was the real thing-a big-time producer who worked with new wavers Boomtown Rats and Graham Parker before producing AC/DC's 1979 classic Highway to Hell. Highway to Hell. Zomba used its Lange connection to meet and manage a wide range of producers and songwriters, and asked every performer who came through to sign a publishing deal. Zomba used its Lange connection to meet and manage a wide range of producers and songwriters, and asked every performer who came through to sign a publishing deal.
In 1977, Calder and Simon opened a New York City office. One of the first people to respond to their inquiries was Clive Davis, the legendary record executive who had been fired from Columbia and recently formed the smaller Arista Records. He gave the South Africans a distribution deal. They signed singer Billy Ocean. Their songwriters started to hit big. Publishing profits kicked in. Zomba built a studio and expanded into gospel labels, marketing, distribution, and music equipment. By 1990, Zomba was worth $225 million, with fifty companies, including fast-growing Jive Records. In contrast to the rest of the record business at the time, frills were verboten. "The Jive offices were crummy, cardboard desks," says attorney Gary Stiffelman. "They just really did everything on the cheap." Eventually, Calder came to see Ralph Simon as a frill. Calder and his old South African mate had a "very bad" falling-out, Simon remembers. Simon would later tell Forbes Forbes his partner "has a ruthlessness that knows no boundaries." Today, this is all he'll say by way of specifics: "For a variety of reasons we had different views on ethics." his partner "has a ruthlessness that knows no boundaries." Today, this is all he'll say by way of specifics: "For a variety of reasons we had different views on ethics."
That was around the same time Calder took a chance on a style of music everybody else in Big Music was ignoring: hip-hop.
In 1982, Calder, the longtime aficionado of hit black music, agreed to meet with a young, just-out-of-college clubgoer named Barry Weiss. His father, Hy Weiss, had been one of those 1950s New York indie label owners who stuck $50 in his palm and gave nudge-and-a-wink handshakes to payola-accepting radio programmers. Calder liked Barry Weiss right away. For his job interview, Calder made Weiss take him out for a night on the town. Weiss stepped up. He knew bouncers and doormen at gay clubs, hip-hop clubs, and black clubs all over the city, and he scored admissions for the duo all night long. He was hired. Weiss had a knack for scouring record-sales charts in cities all over the United States and coming across regional talent that hadn't yet broken around the country-rap pioneers like DJ Jazzy Jeff and the Fresh Prince, Boogie Down Productions, Kool Moe Dee.
"Do you know any rappers?" Calder asked Weiss one day. Weiss didn't, but he knew about Mr. Magic, a well-known New York DJ who was instrumental in breaking the genre on the air. Calder asked one of the writers for his publishing company, Thomas Dolby (later famous for "She Blinded Me with Science"), to create the catchy, repetitive part of the song known in industry parlance as "the hook." Mr. Magic was to rap on the track. But the DJ called at the last minute because he got a job on WBLS and his agent told him he couldn't rap and DJ at the same time. Weiss, still twenty-three and new to the company, freaked out. Fortunately, Mr. Magic knew another guy.
An unknown, Jalil Hutchins, agreed to take Mr. Magic's place in the studio. Further raising Barry Weiss's stress level, Hutchins showed up with no rhymes and another unknown rapper, simply called Ecstasy. It took two days, but Jalil and Ecstasy came up with "Magic's Wand," which turned into a huge hit single. Weiss named the group Houdini. Calder changed it to Whodini. Weiss booked them for a concert in Akron, Ohio. He served as their road manager. "We had rooms next to each other, and all I know is there was noise all night," recalls Weiss, today the top executive for Sony's BMG-turned-Zomba Music. "I heard champagne popping. I was not invited."
Calder flew Whodini to London to record an album. "I never had been on a plane in my life life," Hutchins says. "In '82, no cats in my neighborhood were going to London. London." Then Calder sent the band, now a trio with DJ Grandmaster Dee, to Germany to record with the great producer Konrad "Conny" Plank, who had started out as a sound man for Marlene Dietrich but had recently made albums with Devo and Ultravox. A stream trickled underneath Plank's studio. Platinum albums lined the walls of the bathroom. These were luxuries Whodini had never seen before, and the trio was shocked. Calder occasionally dropped in, wearing jeans and a dress shirt, sharing his own ideas, but he left the band to its creative instincts-and Whodini came through with "Rap Machine" and "Nasty Lady," two songs from their classic debut Whodini. Whodini. But the experience ultimately killed the band. "I got a big problem in my career now, from the way Clive Calder developed me," Hutchins says today, with dashed hopes of expensive German studios and hotshot producers evident in his regretful voice. "Because he spoiled me. And nobody else does it like that." Hutchins's primary regret is not buying stock in Zomba when he had the chance. Today, Whodini tours sporadically on the old-school circuit. But the experience ultimately killed the band. "I got a big problem in my career now, from the way Clive Calder developed me," Hutchins says today, with dashed hopes of expensive German studios and hotshot producers evident in his regretful voice. "Because he spoiled me. And nobody else does it like that." Hutchins's primary regret is not buying stock in Zomba when he had the chance. Today, Whodini tours sporadically on the old-school circuit.
Hip-hop was well and good, but Calder quickly realized that to really really make money he needed something else. He needed pop stars-big ones. He needed Lou Pearlman. make money he needed something else. He needed pop stars-big ones. He needed Lou Pearlman.
LOUIS J. P J. PEARLMAN started his career as a rock star, albeit a small one. His parents took him to his first concert when he was thirteen-the Doors opened for Simon and Garfunkel at Forest Hills Tennis Stadium, near his hometown of Flushing, New York, in 1967. He was there to see his cousin, Art Garfunkel, but what really blew him away was the Doors. Inspired, the young guitarist and his pals at J.H.S. 185, Edward Bleeker Junior High School formed a band. They were called the Starlighters, then Flyer, and they played Doors and Beatles covers and an especially grooving version of Iron Butterfly's "In-a-Gadda-Da-Vida." They recorded a few tracks, but broke up in 1971 because every member wanted to be the lead singer. started his career as a rock star, albeit a small one. His parents took him to his first concert when he was thirteen-the Doors opened for Simon and Garfunkel at Forest Hills Tennis Stadium, near his hometown of Flushing, New York, in 1967. He was there to see his cousin, Art Garfunkel, but what really blew him away was the Doors. Inspired, the young guitarist and his pals at J.H.S. 185, Edward Bleeker Junior High School formed a band. They were called the Starlighters, then Flyer, and they played Doors and Beatles covers and an especially grooving version of Iron Butterfly's "In-a-Gadda-Da-Vida." They recorded a few tracks, but broke up in 1971 because every member wanted to be the lead singer.
Pearlman's dad was a Brooklyn dry cleaner who delivered clothes in a red-and-white Dodge station wagon to customers all over Long Island. Herman "Hy" Pearlman just barely made enough money through Pleasant Laundry to support his family of three in a one-bedroom apartment. Lou started working at age eight, with a $20-a-month lemonade stand, then graduated to bike repair, paper routes, and coffee-and-donut delivery.