The lobby of the Sony building in New York is 70-foot high and heavy with music business ambiance - gold records, photographs and the ‘Sony Shop of New Technology’. Upstairs, the main reception area is like the lounge of an exclusive club. Young people, dreaming of stardom, stand in wonder breathing in the atmosphere, looking at memorabilia - platinum CDs, photos of stars, framed press reports, Billboard charts. For an aspiring artist or manager, just to step into the building is a thrill. The impression is of a corporation dedicated to the success of its artists, almost altruistic in its understanding of their needs.
Yet it's nothing but a flytrap. Aspiring artists go there dreaming of being signed. But for every ten artists signed nine will fail. And it’s always been like that.
A contract with a major record company was always a ninety per cent guarantee of failure. In the boardroom the talk was never of music, only of units sold. Artists were never the product; the product was CDs - ten cent’s worth of vinyl selling for ten dollars – ten thousand per cent profit – the highest mark-up in all of retail marketing. Artists were simply an ingredient, without even the basic rights of employees.
Imagine the outcry if people working in a factory were told that the cost of the products they were making would be deducted from their wages, which anyway would only be paid if the company managed to sell the products. Or that they would have to work for the company for a minimum of ten years and at the company’s discretion could be transferred to any other company at any time.
Recently, the Wall Street Journal investigated the industry and concluded, “For all the twenty-first century glitz that surrounds it, the popular music business is distinctly medieval in character: the last form of indentured servitude.”
As long as the major record companies controlled the music industry, artists had to accept these conditions. But the majors’ grip on things has almost gone. For years they saw it coming but did little to change things. Now each week brings them more gloom. CD sales are down on last year, which were down on the year before, which were down on the year before that. Sony and BMG amalgamated, but bought themselves little benefit in doing so. EMI and Warners tried to go the same route, but failed. So EMI got taken over by someone with no knowledge of the record business. He promised to increase sales but immediately dropped the company’s best-selling artist. Amongst company employees there’s little confidence he did the right thing.
But outside of the industry, who cares? Pop music has never sounded better or more vibrant, never been more easily available to the listener. The only people who are suffering are the people who bought it on themselves. The major record companies.
In 1966 I came into a business that was alive with excitement and optimism. I was one of a select group - the young managers, like Brian Epstein, Andrew Loog Oldham and Kit Lambert - who’d taken over the UK’s new pop groups - the Beatles, the Rolling Stones, the Who, the Kinks, the Yardbirds, the Animals. We young managers were on fire. We hustled, and we were free. We weren’t in any way associated; we weren’t even friends, yet we knew each other from hanging out at the Ad Lib club or the Scotch of St James. Despite enormous differences between us, we found one thing in common. We all saw our principal job as going to war with the record company.
The first record company I ever went to was Decca in London in 1964. It was a six-storey building on the South Bank of the river at Lambeth. The inside was painted in the same colour olive green as government buildings – like the labour exchange or the tax office. With a gruff commissioner on the door, it was pure bureaucracy, the civil service of the music industry. During the 2nd world war, Decca developed radar for the army. From the profits, its stuffy owner, Sir Edward Lewis, indulged his enthusiasm for recording classical music. For him, pop music was a necessary sideline, nothing to be too proud of.
At Decca they didn’t like young people. I was 25, but I managed to talk my way into seeing someone in A&R, a small mean-minded man who sat picking his nose while I played my record. It was a group I wanted to manage and I’d paid for them to make the record. The man was a pedant; a killjoy. “It’s dreadful!” he exclaimed. “The song’s not memorable and the musicians don’t catch the beat.” Then, surprisingly, he agreed a deal. It was a very small one, but I was delighted - my first step into the music business. But if the record was as bad as he’d said it was, why did he give me a deal? And if it wasn’t that bad, why had he said it was?
I left the building thinking, “What a wanker!” And it’s been difficult to think of A&R people in any other way since.
At that time Britain had four major record companies – Decca, EMI, Pye and Philips.
These last two were off-shoots of corporations that produced electronic hardware for home and industry. EMI, like Decca, manufactured high-technology equipment for the government, mainly for hospitals – brain scanners and the like. None of these companies had been set up first and foremost for music; they made records for extra profit. It was a wonderful trick they’d learnt. They bought vinyl cheaply; added a label, a song and a sleeve and sold it expensively.
When I took over the management of the Yardbirds in 1964 I had to deal with EMI. By 1961, it had already become the biggest record company in the world, and that was before they signed the Beatles. There was an air of pomposity about the place. Artists were from the wrong class - they tended to cause problems. EMI preferred to deal with managers, especially if they were middle-class and public school. The people in the business affairs department were extraordinarily pissed off when I told them I considered their contract with the Yardbirds to be invalid. They doubted I was right, but were too scared to challenge me in case they lost the group altogether, so they agreed to negotiate a new deal. In order to bypass the company’s A&R department, I insisted the Yardbirds should produce their own records. I demanded the biggest advance they’d ever paid and the highest royalty - £25,000 and 12% of retail - and they gave it to me. If this was my entrance exam into management, I thought I’d passed with flying colours. I soon learned I’d failed.
EMI had simply advanced the Yardbirds their own royalties and included a host of tricky accounting clauses, for instance the artist was only paid on 90% of records sold (a hangover form the days of 78s, when records broke easily), and were not paid on ‘over-pressings’, although these were usually sold anyway. I asked the group’s lawyer why he’d let these things pass. “If I told my clients not to sign unfair contracts they’d never get a deal.”
Never mind! I’d learned the first golden rule of management - record companies are not to be trusted.
Management is a wildly up and down occupation. Sometimes - if you’re standing at the top of a stadium looking down on a hundred thousand people stomping and cheering at your artist, or popping another bundle of cheques into your bank account, or being hailed as the Svengali behind the new icon of youth culture – it feels good. Like standing at the back of the hall in Gaungdong during Wham!’s trip to China with the group being cheered back onstage for encore after encore after encore. But at other times - when your nitwit rock-star, out-of-his-head on drugs or drink or self-admiration, tells you to cancel the gig with a stadium full of expectant people waiting for the first chord, or wakes you in the middle of the night with a call from Sydney to say he can’t go on stage because he has no clean socks (as the lead singer of the Yardbirds once did) - it feels less so.
In the end, though, the artist and the manager have one great bond in common, to fight their common enemy, the record company.
Having got the contract with EMI sorted out, I decided to visit our American record company. In 1966 the US market was dominated by CBS and RCA, both of whom had the same civil-service atmosphere as EMI and Decca. Their principal business was broadcasting and they held government licenses which required them to keep high moral standards. The other major American companies were Capitol, which had been bought by EMI, and MCA, which had bought the American office of Decca. (Warners was still considered a minor off-shoot of a movie studio.)
The Yardbirds were with CBS whose New York headquarters was known as Black Rock - a gaunt, black-bricked, black-glassed, skyscraper. Its lobby was as austere as a high security prison and I was accompanied to the elevator by a guard. I was meant to be seeing Len Levy, the head of the Epic label but the company really didn’t want me there. They had the rights to the record, they were going to release it, they’d decided on the budget and they didn’t want the manager turning up demanding things.
“The Yardbirds’ manager is here.” “Aw Jesus, is he? Well Len’s out at the moment. Ask Ernie if he’ll have a talk with him. That should do the trick.”
So I saw Ernie Altschuler, one of their old time staff producers. He knew nothing about rock and roll or British pop or Swinging London; he produced Tony Bennett and Ray Conniff. But he was a charmer and we became immediate friends.
Ernie was twenty years older than me and wildly disillusioned with things. “I’ve made CBS more hits than any other producer but I’ve never been paid a royalty or a bonus. They see me the same way they see the artists – just part of the process.”
I wasn’t ready to believe such doleful news. I was excited, I was in the USA, I was managing a top band. America felt good. This was the real record industry – the corrupt, tough, no holds barred, American record industry - NOT the whingeing, always-changing-their-mind, record industry we suffered in the UK.
Nevertheless, I was totally in their hands. Here there were six thousand radio stations. Four thousand of them were said to have playlists under mafia control. To promote my group’s record would require cocaine and sex and suitcases full of cash. I hadn’t chosen to be with this company, that had been done by EMI. In America I had just one job – to persuade CBS the Yardbirds were worth promoting. But since that was already decided there wasn’t much left to do. So I went and had tea with Ahmet Ertegun.
Since the mid-50s, a lot of small record companies had been growing up. The people who owned them also ran them. They gave a more personal service than the majors, made the artist feel cared for. The royalties were no more and the profit margins no less but there was a feeling of compromise between commerce and art. Four of them dealt only with black artists - Motown, King, Chess and Atlantic.
Atlantic was owned by Ahmet and Neshui Ertegun - sophisticated, jazz-loving, multi-lingual Turks. With a view to discovering more about the explosion of music coming out of London, Ahmet invited me for afternoon tea and muffins. I’d only been there five minutes when the door opened and Joe Tex, one of the biggest black recording artists in America, stuck his head in. “Ahmet, man, I was just wondering if you could loan me ten bucks.”
“You want ten bucks,” Ahmet told him. “Go downstairs to the studio, find a backing track you like and put your voice on it.’
An hour later we were still there when Joe came back. Ahmet buzzed the studio and asked the engineer if Joe had done a good vocal. Then he doled him out ten dollars and offered him a cup of tea.
When Ahmet left the room for a minute I asked Joe how much royalties he got. He wasn’t sure he got royalties at all. “I don’t know exactly how it works,” he confessed, “but Ahmet and Neshui are like brothers. Whenever I’m in New York I gotta place I can hang out. And I always come away with a few bucks.”
Ahmet and Neshui, by the way, were making themselves very rich.
Owners of other small companies were getting rich less pleasantly. For a while I was producing records with Ray Singer and we went together to see Roulette, rumoured to be connected with the mafia. People told us not to, but what the hell, we wanted all the work we could get and dealing with the mafia sounded fun. We arrived early and were shown to a waiting-room. Only when Ray wanted a pee did we notice there were no handles on the inside of the doors. He held it.
We were taken to meet the boss – Morris Levy – as famous as any of the heads of the majors, a Jewish record company executive with lots of Italian friends. His office was long with his desk at one end on a dais. We arrived before he’d finished with his last guest and Morris was standing mid-office. His hands were round the collar of a slightly-built black guy, lifting him off the floor, shaking him furiously. “You fucking black cocksucker. You promised to make me a hit record and you screwed up.”
The little black guy was shuddering from top to toe of his shaken body. Then we recognized him.
It was Micky Stevenson for God’s sake! One of the top black producers in the world. He’d written Dancing On The Street for Martha and the Vandellas and What Became of the Broken-hearted for Smokey Robinson. Now he was being shaken to death.
When Morris realised we’d come into the room he let go of Mickey who fell to the floor like an empty sack. While Morris motioned us to chairs by his desk Mickey crawled to the door and fled.
“So you want to make some records for me?” Morris boomed.
Ray and I eyed each other awkwardly. What we’d seen seemed accurately to portray how the American music business dealt with people who failed.
Extraordinarily, Morris Levy was hugely loved in the music industry. In 1973, when he was voted Man of the Year by the United Jewish Appeal, the entire hierarchy of the music industry turned out to his celebration party. Morris loved to play the mafia chief – he behaved the way all the other executives wished they were able to behave. Whenever artists asked Morris about royalties, he yelled at them, “Royalties? Try Buckingham Palace.”
Other small companies popped up all over the place. In the UK, there was Island Records, owned by Chris Blackwell, a white West Indian who spoke Oxford English and Jamaican patois with equal panache.
Charisma Records was owned by Tony Stratton-Smith who was much loved by his artists despite a lifestyle that revolved around fine wine, race horses and rent boys.
In California, trumpet player Herb Alpert started A&M Records which zoomed to success with the Carpenters and Carole King.
Jac Holzman started Elektra records specifically to sign non-mainstream artists like the Doors and Judy Collins. Like all the other owners of small record companies, he liked rock stars for what they were - self-obsessed and irrational. When he signed the group ‘Love’, he gave them a $5000 dollar advance ($100,000 in today’s money). There were five of them, all living together in a single hotel room and they needed transport to get them to gigs with their equipment. They took his money and went to buy something suitable. An hour later they came back with a gull-winged Mercedes capable of taking two. Jac shrugged and shelled out for a van. At a major no-one would have done that.
Whenever a rock singer experienced success, the ambition lobe in his brain seemed to develop a permanent, painful erection. Small companies understood how to deal with this, the majors hadn’t a clue. Seeking to solve this problem, CBS appointed a charismatic figure to head of the company, Clive Davis, a charming young lawyer. Clive camped it up, put on love beads and a hippy Nehru jacket and signed Scott McKenzie, Donovan, Laura Nyro and Blood Sweat and Tears. CBS’s market share suddenly shot up.
Warners were now close on their heels. Steve Ross, who’d made money from car parking and hobnobbing with the mob, headed an investment group which bought the company out for 50 million dollars. Free of all controls, and with no worries about radio licences, the new company could go hell for leather for profit and forget about the niceties. To run it, Steve Ross found a guy called Mo Ostin who had a talent for picking off-the-wall artists and standing by them – the Kinks, Jimi HendriX, Frank Zappa.
Steve Ross also took Warners on a buying spree and snapped up the best two small companies together with their owners; Elektra, with Jac Holzman, and Atlantic, with Ahmet Ertegun. Suddenly stuffy old Warners had become WEA.
At that time I was producing a lot of records for RCA. They too were trying the ‘friendly president’ approach but couldn’t get it right. Each time I visited them there was a new face at the top. Each new person signed new artists and stopped promoting the artists his predecessor had signed. Eventually RCA had over a 100 artists who were not achieving chart success so they had to hire yet another new president especially to fire them all. Still, they had the Elvis back catalogue to keep the cash-flow going.
By the mid-70s, in both the UK and the USA, there were six major companies – RCA, MCA, CBS, WEA, EMI, and Polygram (which was an amalgamation of Philips and the German company Polydor, with the addition of Decca and Charisma). In the UK, there were three new small companies - Chrysalis, Zomba, and Virgin who had signed my group Japan.
After four years Japan had finally broken in the UK so I decided to head for the States. Virgin had licensed America to CBS, who by now had fired their charismatic president Clive Davis in the wake of a payola scandal. The company was being run by two lawyers – Walter Yetnikoff and Dick Asher. I liked Walter but fell into the half of the company run by Dick Asher - a very dull man indeed.
I finally got a meeting with him but had no sooner arrived in his office than the buzzer sounded and his secretary's voice said: "Bob Dylan on line one."
"Can I call him back?" Dick asked.
"No. He says he wants to talk to you now."
Dick was about to have a conversation he didn't want. Eighteen months previously there had been publicity about Jewish-born Dylan becoming a born-again Christian. He’d made a couple of albums full of evangelical zeal but they’d bombed. Now his contract had come up for renewal. Dick especially didn’t want to have this conversation in front of me. He took the call anyway.
To begin with it wasn’t too interesting but then Dick suddenly yelled down the phone, “I’ve told you Bob – no fucking religion! If you can’t agree to that, the deal’s off…”
Bob was arguing the point but Dick was having none of it. "Look, I'm telling you. There'll be no fucking religion - not Christian, not Jewish, not Moslem. Nothing. For God's sake man - you were born Jewish, which makes your religion money doesn't it? So stick with it for Christ's sake. I'm giving you twenty million bucks - it's like baptising you, like sending you to heaven. So what are you fucking moaning about? You want twenty million bucks from us? Well you gotta do what we tell you. And what we're telling you is... No Torah! No Bible! No Koran! No Jesus! No God! No Allah! NO FUCKING RELIGION. It’s going in the contract."
As a devout atheist, I could hardly object, though it seemed tough that a contract should include such specific artistic restrictions. When we finally got back to the subject of my group Dick had rather lost interest. He eventually agreed to release one album. There were three to choose from, each a cohesive musical whole, but he wanted bits from each of them. It was like introducing a new film director with a composite of three of his movies - the album wouldn’t have a chance. And to make sure it didn’t CBS gave it no promotion. That way, Dick was able to tell me, “You see, I was right. There’s no market for a group like yours in the States.”
A year later I was back with Wham!. By now Walter Yetnikoff had seen off Dick Asher and taken the whole thing over for himself. He took artist friendliness to new levels. In his book Howling At The Moon, he describes his fifteen years at the top of the company. He was there, he explained, for the artists. He relates tales of sex and drugs spanning his entire period and how, as president, he hung out with his stars. Yet from beginning to end of the book, he only talks about seven artists with whom he spent time - Paul McCartney, Michael Jackson, Mick Jagger, Barbara Streisland, Paul Simon, Bob Dylan, and Labelle (and the latter only ‘cos he was screwing one of the singers).
During that fifteen-year period perhaps seven hundred artists would sign to CBS, only ten per cent of whom would have hits. Six hundred and fifty others would see CBS as the dead-end that killed their career as a recording artist. Yet Walter saw himself as the man who nurtured artists – seven of them. In a greater or lesser way, that had been the ratio of care meted out to the recording artists by the major record companies since the beginning of time. Even so, the desire to get into the pop business was as great as ever.
“People are so anxious to record, they'll sign anything…” said singer Tom Waites, “…like going across the river on the back of an alligator."
They flocked to the majors asking for a chance. The failure rate was still the same. Count the names of every artist who appeared in the Top 100 from 1980 to 1990 – 1000 perhaps? Multiply by nine and that’s the number who signed to majors and were never heard of again.
By the mid 80s, WEA was as big as CBS, and Polygram wasn’t far behind. But as companies got bigger, everything grew more corporate and less personal. Ron Weisner, who managed both Madonna and Michel Jackson, told me, “The biggest frustration is always dealing with the record company - cajoling them, bullying them, charming them, threatening them. They’re totally insensitive to the artist or his well-being.”
At BMG, a company newly arrived from Munich, the insensitivity extended to their employees too. The company had burst on the scene when it acquired RCA. Now, in the newly taken-over building on 6th Avenue, German became the language spoken on the executive floor And in the canteen, lunch had changed from hamburgers to Sauerklopse mit Kartofflen.
Polygram got in on the act too. They bought up every small company left to buy. But they were no more subtle in dealing with American employees. At the annual conference the new German MD started his speech by saying, “The first time I saw America was through the periscope of a German U-boat”
In the UK, Chrysalis, Zomba and Virgin had grown fast and were opening offices in the States. At Virgin they were trying to boost income, waiting for someone to buy them, using age-old accounting tricks. On one occasion I noticed the royalty statements for Japan had arrived with the artist’s royalty less than it should be. It was because the company had first deducted the producer’s royalty of 4%. Lower down on the statement it stated the producer’s royalty as 4% and deducted it a second time. A call to the accounts office soon set things right but when the next statement came it was calculated in exactly the same way. A quick call round other managers established it was the same on their statements too.
Never mind, the company was soon hoovered up by EMI, as was Chrysalis. Meanwhile, Polygram grabbed A&M and BMG took Zomba. The majors were now being run by financial people. “Dinosaurs that are too big for their boots,” complained Rolling Stone Keith Richards. “Accountants may be good at adding figures but they know nothing about music.”
Ed Bicknell, manager of Dire Straits, said that dealing with Polygram altered his whole personality. “You sometimes do things you wouldn’t do to a mate. I had no compunction in screwing a corporation. I got through sixteen or seventeen managing directors… they’re incredibly inefficient and absolutely hopeless to deal with… it was a farcial way to run a business.”
Ahmet Ertegun was still at WEA, but hating every minute of it. “…they kept putting up people to run it who were non-music people… they would never take somebody from the cable division and let them run the movie division… but they would take anybody and let them run the music… there was no leadership from the top… it was everybody fighting everybody else…”
In 1993, WEA’s biggest artist, Prince, found it so frustrating he refused to record for them again even though he was still under contract. A couple of year later George Michael attempted to terminate his contract with Sony, who had now purchased CBS.
It was rumoured what had triggered George was hearing the company’s new president, Tommy Mottola, referring to him as a ‘limey fag’. If a Sony employee were referred to in the same way the company would probably end up in court and be fined. But an artist was not an employee, he was just an ingredient. Under advice from his lawyers George didn’t sue over this but instead claimed his contract was invalid. It didn’t win him his case but it told people a great many things they hadn’t previously known about the record business....
Artists had to pay their own recording costs yet record companies ended up owning the records. “The bank still owns the house after the mortgage is paid,” is how Senator Orrin Hatch described it. Could we imagine film stars having to pay the costs of the movies they starred in and then giving the rights in the movie to the company that distributed it?
Artists also had to pay a packaging deduction of around 15%. This, despite the fact that packaging rarely cost more than 5%. The remaining 10% was enough to pay the record company’s entire cost of manufacturing the record.
All in all it meant an artist who sold 200,000 copies of a first album would still owe the record company although the record company had made a profit of a million.
But the worst thing about being signed to a major was that you lost the freedom to run your own life. It put you totally out-of-control of your own career. And though top artists could sometimes re-negotiate an unfair contract, it soon became clear that in the music business you didn’t get out of an unfair record contract to get into a fair one, you get out of an unfair contract to get into another unfair one, but with slightly better terms.
Irving Azoff ran MCA Records for ten years. Talking about “time-honoured accounting traditions in the record business” he tells of a music-business auditor who did 3,000 audits on record companies. “…in 2,998 of them the artist was underpaid.”
Everyone had the same story.
"Systematic thievery" said the Dixie Chicks in their writ against Sony.
“Intentionally fraudulent,” claimed U.S. music lawyer Don Engel.
“Makes Enron look like amateur hour," wrote music journalist Dave Marsh.
Azoff changed sides. He decided to head the American Artists’ Association and sue all the major record companies on behalf of its artists - from Led Zepelin to Elton to the Eagles to Sheryl Crow. But he was pessimistic about their winning much; the majors were going under too fast.
“The big boys swooped in and bought all the great, historic, artist-friendly, independent labels… A&M, Geffen, Interscope, Island, Chrysalis… The multinationals rationalized these purchases based on growing cash flows that don’t exist anymore. Now they are busy trying to defend failed business plans.”
So what have the major record companies done to try and solve the mess they bought into?
Firstly they chose to attack their own customers by suing people who downloaded files from Napster. Then Sony amalgamated with BMG and everyone enjoyed the show as top executives fought with each other over who should be made redundant. The joint company has seen no improvement in sales but had a disastrous set back when it attempted do stop the copying of records by secretly putting a code into CDs which had the unintended effect of making people’s computers more vulnerable to viruses.
EMI and Warners tried to amalgamate but were stopped by the EEC monopolies law. Warners is floundering, not breaking new artists, not succeeding with old. EMI is being run by Guy Hands, a man with no music business experience, which is exactly the downward route the majors all took in America during the nineties. He seems to have a penchant for upsetting artists and let Radiohead leave the company. They then made more money releasing a new album themselves through the internet than they could ever have made releasing it in the conventional way with EMI.
Meanwhile, two of Britain’s recent big successes, Arctic Monkeys and Franz Ferdinand, broke by signing to an independent company, Domino, famous for being run on a shoestring and giving its artists fairer deals. Forced to finally accept downloads into the singles charts, the majors watched as Arctic Monkeys got eighteen of their songs into the Top 200. Once, that would have given a major half-a-million opportunities to sell a penny’s worth of vinyl for a pound.
At Domino the deals with artists are more like partnerships and other independent companies are following suit. But the problem with signing to any record company is what might happen if they sell out to a major.
It’s clear. The majors should become ‘music companies’. They should find new artists, develop them, promote them and participate in all aspects of their earnings. The artist, rather than the record, should be the product. Artists should be developed for longevity, not for quick profit.
Universal, Sony and EMI all claim to be heading in that direction, but the problem is, nobody believes them. They still sign contracts of crushing length complete with the traditional clauses that allow them to avoid paying correct royalties. As always, the biggest problem with signing to a record company is the bottomless pit of commitment. When your record flops, how do you extricate yourself? And with new contracts often being for nothing more than a couple of songs available on download, the majors get you tied up for a bargain price. So what do you get back?
In the UK a downloaded single is 79p. Of that 40% goes to the record company and 10% to the artist. It’s the same old scam. A group signs to make two singles and gets an advance to pay for its recording costs. If the single is a hit with 200,000 downloads the group will still be in debt to the record company. But the record company will have made £100,000.
For fifty years the major record companies have set the tone of the music business. Their stranglehold on it has been the stranglehold of corporate deception. They’ve thought of themselves as guardians of the music industry, in fact they’ve been its bouncers. Getting into the club used to be highly desirable. Now it doesn’t matter anymore.
For artists and their managers this is the moment to take things into their own hands. Money can be raised and recordings made for release on the internet. Artists no longer need to be held for ten years and they no longer need to sign away ownership of their recorded copyrights. These days, an artist working closely with his manager can ensure that everything is done in the artist’s best interest.
Major record companies have never done that. And never will.