1998.12.21 - The New York Times - A Major Merger Shakes Up the World of Rock

A Major Merger Shakes Up the World of Rock

By Neil Strauss
Dec. 21, 1998

Right now is not a good time to be in a rock band. The reason is Seagram's $10.4 billion acquisition of Polygram from Philips, which became official on Dec. 10. In the process of consolidating Seagram's Universal Music Group with Polygram's music holdings (which jointly account for some 25 percent of the United States and European music markets), Seagram executives have pledged to unload enough assets to save $300 million a year.

In the process, buildings will be sold, some 3,000 employees will be let go, and record labels will be gutted. As a result, 15,000 Polygram and Universal employees and hundreds of bands will have an anxious Christmas, wondering whether they will still have a job or a career in the New Year.

Of the 200 bands estimated to be dropped from their labels, most of them will be rock performers who thought that signing a record deal meant they were on their way to stardom. Soon they will find themselves right back where they started. The remaining hundred or so more rock, pop and rap acts, including such well-known musicians as Sting, Sheryl Crow, U2, Hole, Beck, Elton John, Melissa Etheridge, Bon Jovi, Ice Cube, Hanson, Axl Rose and Amy Grant, will find themselves on a new record label. In most cases, the record-label personnel they had grown comfortable with -- the company heads, the radio promotions people, the artists-and-repertory executives -- will be gone.

Though labels routinely shed dead-weight bands and undergo structural changes after a new owner takes over, a reorganization on this scale is a first in the record business. The fallout will affect music for years to come, whether it means a flurry of short-lived pop bands that will help make a company's quarterly earning reports look good on Wall Street or a reactionary flowering of smaller, independent labels.

Under Universal's restructuring plan, two labels founded as artist-friendly havens but sold by their owners over the past decade -- David Geffen's Geffen Records and Herb Alpert and Jerry Moss's A&M -- will be collapsed into Interscope, the eight-year-old success story that achieved notoriety through controversial gangsta-rap and industrial-rock releases by acts like Tupac Shakur and Nine Inch Nails. In addition, Universal executives will merge Island Records (the 40-year-old label that got its start in Jamaica with reggae records before going on to make its money with U2, Dru Hill and the Cranberries) and Mercury Records (founded in Chicago in 1947 and now home to John Mellencamp, Hanson, and Kiss) into one label.

Making matters more confusing: two of the most lucrative rock and pop acts at these new companies, Sting (who is supposed to be on Interscope) and U2 (which is supposed to be part of the new Island Mercury), may not go with the program, causing some consternation for label executives. Spokesmen for both bands said they were exploring their options at other labels, with U2 in discussions with Interscope and Sting considering Island Mercury.

''We, like everyone, are concerned with how the whole thing comes down,'' said Miles Copeland, who manages Sting. ''A lot of it concerns how many releases Interscope has at the same time Sting wants to put his record out. Fortunately, Jimmy said that if there was another place that was better for us, he'd let us make that decision.'' (Jimmy is Jimmy Iovine, a chairman at Interscope Records).

Mr. Copeland added that he would wait until Inter scope made final its staff and roster next month or in February before making a decision about where to place Sting's album, which he expects to be ready for a June release. But a Universal executive speaking on condition of anonymity said that the label was not just going to let Sting go and open the floodgates for other acts to leave.

For the popular acts that are not trying to buck the system, the reorganization is still an inconvenience: acts like the Cranberries and Melissa Etheridge have been forced to delay the release of new albums until the dust has settled. For less popular acts, the situation is even grimmer. New groups that were signed to big deals at their old labels may find themselves forced to renegotiate their contracts for a less favorable ones in order to stay on Interscope or Island Mercury. And two-thirds of the rosters at each label will be dropped outright: for some bands this sudden independence will be a blessing; for others it will be a blow that could lead to their breakup.

''It's an odd situation,'' said Elliot Roberts, Neil Young's manager since 1968. ''It's the first time in all my years that this has ever happened on this scale. If I had a band that was a borderline band, I'd be losing sleep right now.''

For bands on the borderline -- with moderate sales but the potential to be more popular -- the waiting period can be difficult. Geffen acts like the bass-heavy rock group Girls Against Boys and the former 'Til Tuesday singer Aimee Mann are in the midst of recording new records using advance money from Geffen. If they are dropped from the label, Interscope would not only still own the music they have already released on Geffen but also the new music they are working on. (A Universal executive, speaking on condition of anonymity, said that in most cases the band would have the option of buying its new music back.)

Michael Hausman, Ms. Mann's manager, said: ''I think this situation is really going to affect her career. We would have delivered her record now, and it would have come out in March or April. Now, I'm not really sure what's going to happen.''

An even more potent source of anxiety is that in some cases Inter scope and Island Mercury will prolong their decisions on whether to keep an act until after it turns in its next record.

''I think that we're a band that, if they broke down the numbers and looked strictly at the sales figures as we expect them to do, they'll decide to shed us,'' said Johnny Temple, the bassist in Girls Against Boys, a band that turned down Interscope to sign a big deal with Geffen two years ago. ''On the other hand, people in the company could decide that we have a certain underground following and artistic integrity.''

''We stepped into the whole process with a very optimistic yet cynical perspective,'' Mr. Temple continued, ''and we understood the corporate nature of the beast that we were doing business with. What we don't want to happen is just to end up in some limbo land. We want them to keep us or drop us. We don't want them to say, 'Let's hear some demos.' ''

Robbie Fulks, a singer-songwriter who chose to sign with Geffen last year despite interest from four other labels, used to talk to executives at Geffen every day. Now, he said, it's gone silent, with ''secretaries over there giving me the impression that it's like Dresden after the war.''

With the loss of financial, administrative and tactical support from his label, Mr. Fulks has been promoting on his own the record that Geffen released in September. ''I'm not doing as many shows as I'd like to now, just what I can afford,'' he said. ''There are some places where I can make money, other places where if I play without a band I can make some money. It's not nearly as much as I'd like to be performing, but I'm not going to just wait around and see.''

As detrimental as the interim period has been to some bands, an additional setback has been for groups that released a record on Geffen, A&M, Island, Mercury or even Interscope in the fall. Many of them feel that their records could have sold better or been on the radio more if they received the label's full attention.

A Chilling Effect On the Prospects

Christopher Sabec, who manages Hanson, also works with a new band on Mercury called Swirl, a pop band led by two brothers that many thought had hit written all over it. Perhaps the prophesy would have come true already, Mr. Sabec said, if not for the sale of Polygram.

''This merger threw a tremendous wrench in the whole thing,'' he said, of Swirl's stillborn marketing campaign. Both Hanson and Swirl, officials at Universal said, would make it into the new Island Mercury group.

Neil Young's manager, Mr. Roberts, also works with a rock band on Geffen, the Eels, who seem likely to get accepted into the Interscope fold. But in the meantime, the ambitious record they released in September, ''Electro-Shock Blues,'' is suffering. ''Half the people there don't know whether they will have jobs come Jan. 15,'' Mr. Roberts said, referring to the date when many believe a mass Universal firing will take place. In actuality, it is the date that the heads of Interscope and Island Mercury will meet with Edgar Bronfman Jr., the president of Seagram, to present their plans for their expanded labels.

''Do you think they'll be worried about promoting a single, or how they're going to take care of their house payments?'' Mr. Roberts continued. ''We were ready to go with a second single, but we don't have one because most of the people who have to pick it don't know if they'll still be working and can't focus.''

Similarly, the punk band MXPX put its career on hold to wait out the transition. It chose to have its record label, A&M, stop promoting its single, the appropriately titled ''The Downfall of Western Civilization,'' because it felt employees were not motivated, said the band's manager, Creighton Burke.

Despite the anxiety the changes are causing for bands and staff, there is a reason these labels are getting trimmed. A&M and Geffen, in particular, have both suffered from budget crunches and unproductive band signings over the past few years; neither of them have any records now in the Billboard top 40. Many of the acts being transferred say they may be going to a better place, one willing to spend more money and time to help them grow.

Jordan Schur, the owner and president of Flip Records, had been unhappy from the beginning with the way things were working out for two of the new bands he made deals with through A&M: Big Hate and Cold. When the label was shut down, things only got worse, he said. He describes Cold's career as ''a car shut off in midgear.'' But, like others who work with rock bands in waiting, he knows that if Interscope chooses either of his bands, there's no better place they could be. ''What Interscope is good at is taking bands that other people wouldn't work with'' and making them successful, he said.

Nonetheless, by moving bands around like corporate pawns, the Universal consolidation is not making major labels look good. Rival companies and independent labels seem likely to benefit from the fallout: some have already got in touch with the managers of bands who seem likely to be dropped. Acts like Mr. Fulks said that if they did not make the cut, they probably would not subject themselves to the major label process again.

''We wouldn't chase anyone while they're still signed,'' said Jeff Rougvie, the head of artists and repertory at Rykodisc, a leading independent, who has received inquiries from worried managers of Polygram and Universal acts. ''But a lot of those bands are really talented ones with loyal audiences, so it would be crazy for an indie like us not to look into them if they're dropped. It could really enhance our artist roster.''

Interestingly, the Polygram labels that specialize in country and urban music will not be going through major changes. Mercury Nashville, home to Shania Twain, will undergo little change. Motown will be made stronger, with Universal acts like Erykah Badu being let into the fold. And Def Jam, in which Polygram owned a 60 percent stake, will stay more or less untouched. It is one of the only Polygram-related labels releasing a major record in the interim period, a rap release by DMX to go on sale tomorrow.

Def Jam had one of its most successful years in 1997, by its own account taking in $190 million, and though Universal has offered to buy the remaining 40 percent of the label, at present the owners do not intend to sell it.

The hands-off attitude toward these labels, some in the industry say, is not just a sign of the prominence of urban and country music on the charts but also of the inadequate understanding the corporate structure has of markets other than rock. In fact, executives at Universal expressed disappointment at the small number of rap and rhythm-and-blues acts at Geffen, A&M, Mercury and Island, which is one reason why it is the rock bands on these labels that will be the hardest hit. An executive at Universal said that Island Mercury would try to set up its own urban music subdivision next year.

While things look bad for rock bands, they look slightly better for rock bands whose singers have just gone through an emotional breakup. Executives at Universal said that they were relying on a lot more than album sales figures to make their decisions, despite claims by bands and managers to the contrary.

They said they would listen to a group's records multiple times, check out current studio recordings, talk to band managers and artist-and-repertory executives, meet with group members and even try to see a show when possible to make sure no potential hit slips through their hands.

Making the Grade With a Breakup

Bands whose singers recently went through a distressful period that could affect their work positively, they said, would be more likely to make the grade than singers who have lost interest in what they are doing.

At present, however, they said that their first priority was a more stressful job: cutting staff, which will be as many as three-quarters of the employees of some labels, including well-known and respected record company chairmen like Danny Goldberg at Mercury, Al Cafaro at A&M and Ed Rosenblatt at A&M. Though executives at Interscope and Island Mercury have been meeting with the top acts coming into their labels, they have only just started scrutinizing the less established bands. Their final decision will be made over the next two months, they said.

''We're going to take our time,'' said one Universal executive who spoke on condition of anonymity. ''At the end of the day, we'll be fair to both the acts we let go and the ones we keep. For the ones we keep, we'll be able to focus on them. And for the ones we let go, they've probably already been dragged over the coals by a record label that can't do the best job for them.''