Quick name five of L.A.’s top music executives.
Not so easy, is it? While most Angelenos are familiar with the players on the highest rungs of the movie and television industries, the record business tends to be a much murkier arena.
Even in a city obsessed with entertainment, music tends to be treated a bit differently, a neglected stepchild overshadowed by its more glamorous, attention-grabbing sibling in Hollywood. While studio and network brass often can be as famous as their on-screen stars, even the top music executives remain a comparatively anonymous lot.
But don’t let the relative obscurity fool you. While it may not generate the same publicity as movies, the $22 billion music industry is a major presence in Los Angeles, and has been for decades. Roughly half of the nation’s record companies are based here and with them, an equal share of the industry’s top executives. The others, by and large, are in New York, and the traffic between the two coasts is considerable.
The music and theatrical industries employ more than 42,000 people in L.A. County, and pumped some $7.3 billion into the local economy in 1997, according to the Economic Development Corp. of L.A. County.
And yet, few of the industry’s major players have much of a public presence at all.
Perhaps the most notorious music executive in Los Angeles is someone not exactly celebrated for his business savvy: Gangsta rap entrepreneur and Death Row Records founder Marion “Suge” Knight, who has been accused of using physical violence as a negotiating tool (which he has denied). He is currently behind bars for violating his parole.
Knight’s rise from the streets to control of a record company is extreme, but instructive. Compared to movies or TV shows, making records is a relatively inexpensive endeavor. As a result, the music business has had far fewer barriers to entry than nearly any other sector of the entertainment industry. And that means the ranks of music companies tend to be populated by people who might have a difficult time fitting in elsewhere in corporate America.
“Because you’re dealing with artists, you’re attracting a certain kind of people,” said Phil Quartararo, president of Warner Bros. Records and an industry executive for more than two decades. “So many people in this business who are considered successful are flamboyant or characters. That’s the beauty of the music industry. It’s the characters that make it go.”
At least, that’s how it used to be. The future, on the other hand, remains an open question.
The music industry is undergoing a major culture change these days. Following several years of consolidation, once-scrappy independent record companies increasingly have been integrated into publicly owned global conglomerates, beset with shareholders, boards, bottom-line pressures and the host of other headaches that are a way of life in corporate America.
Seagram Co. Ltd. President and Chief Executive Edgar Bronfman Jr. recently upped the ante even further, with his $10.6 billion agreement to purchase PolyGram from Dutch electronics giant Philips a deal that creates the world’s largest record company and gives Seagram, which also owns Universal Studios Inc. and its labels, as much as 25 percent of the global market share.
Such consolidation is taking place amid several disappointing years for the industry. Last year, the Recording Industry Association of America reported a 6.5 percent drop in overall shipments and a 2.4 percent decline in the overall value of those shipments. It marked the first negative year-end figures in 15 years.
The main reason for the drop: a 19 percent decline in shipments to special markets, such as record clubs suggesting that consumers have finished replacing their vinyl LPs with compact discs. Another reason? A major shake-up among the nation’s retailers, which saw the closure of 1,000 stores nationwide between 1993 and 1997.
There also is the increasingly heated competition from other forms of media, such as video games, the Internet and CD-ROMs, as well as demographic changes. Baby boomers, who kept the industry in the green through much of the ’60s, ’70s and ’80s, aren’t buying recordings the way they used to.
All those trends make the job of a record company executive more challenging than it’s ever been, said Ed Rosenblatt, chairman and chief executive of Geffen Records, part of the sprawling Universal Music Group.
“The big question that everyone is wrestling with is, can you run a business like this in a quarterly (financial) environment?” Rosenblatt said. “Do I go to the artist and say, ‘I have to get this (record) out because I put it in my budget?’ It is a difficult environment.”
Some critics note that the industry’s increasingly corporate nature bears responsibility for the slumping sales. Developing artists capable of connecting with consumers requires patience, they say a quality that is at odds with the need to show black ink every three months.
Specifically, they lament the loss of the “record man” the passionate, savvy music executive equally attuned to the needs of the marketplace and the needs of the artist.
“The record industry has taken on the worst aspects of the film industry,” said Jac Holzman, a 40-year industry veteran who founded Elektra Records, Nonesuch Records and discovered or developed The Doors, Queen and Judy Collins. “The record man is beginning to disappear, being replaced by an executive who I’m not sure believes in anything except his own success.”
If that’s the case, it’s a far cry from the early days of L.A.’s music industry. For years, the West Coast had been ignored by much of the business, which was based around New York’s Tin Pan Alley.
That began to change in 1942, when a record store owner named Glenn Wallich (Wallich’s Music City) founded Capitol Records in Hollywood and began releasing music by local R & B; artists, scoring its first big success with Nat King Cole. That, in turn, attracted the attention of the major labels back East, which began sending scouts to California.
By the time of the folk and rock music explosions in the 1960s, the West Coast was the creative capital of the industry, spawning not only artists like the Byrds, the Doors and Buffalo Springfield, but entrepreneurs like David Geffen and Mo Ostin.
“Now, just like in Hollywood, there are so few mavericks left,” said Barney Hoskins, author of “Waiting for the Sun,” a history of popular music in L.A. “So many decisions are in the hands of lawyers and accountants that there’s no room for the breed of ‘record man’ who used to find and develop the great acts and make a ton of money.”
That’s not exactly true, says Val Azzoli, co-chairman/co-chief executive of the Atlantic Group, a division of Time Warner Inc. Rather than lamenting the loss of some mythic past, Azzoli, who himself has logged 23 years in the business, says it’s time for the industry to rethink itself. Passion about music and attention to the bottom line, he says, are not mutually exclusive.
That means putting more effort into developing fewer artists and scaling back the number of releases each year, he said.
In 1994, for example, Atlantic put out 150 new records. Last year, the label released just 60 including highly successful efforts by Jewel and Matchbox 20 and posted its second most profitable year ever, Azzoli said.
“The industry as a whole is healthy,” he said. “People are buying records. It’s the record companies that aren’t healthy. There are too many record companies signing too many acts and spending too much money signing and marketing them. Our margins are shrinking, and that’s not healthy.”
Wrenching as they are, mergers like Universal-PolyGram which is expected to result in the consolidation of a number of PolyGram divisions probably are a step in the right direction, said Steve Cessinger, an analyst with Greif & Co.
“When the top line is flat, one of the ways to grow the bottom line is through consolidation, and that’s what Universal is trying to do with PolyGram,” he said.
And there may be other reasons for optimism. Shipments for the first six months of 1998 were up 6.8 percent compared to the like period a year ago, according to the Recording Industry Association of America. What’s more, shipments of full-length CDs, the core of the industry’s business, were up 12 percent over the same period. Ratings on MTV also are up, suggesting that young people’s affection for music may again be on the rise.
Still, the question remains: Where are the next Beatles, Rolling Stones or even U2 or REM? Will an act like Matchbox 20 whose debut on Atlantic, “Yourself or Someone Like You” has sold 7 million copies be remembered even a year from now? And can a publicly held company, operating under shareholder pressure to produce a constant stream of profits, do much more than release movie soundtracks and other bits of ear-candy, rather than music with real staying power?
“There are those who believe that the answer is no, that it’s all about the hit song and instant gratification,” said Jay Boberg, who co-founded the 1980s independent label IRS Records and is now president of MCA Records. “I don’t believe that’s the case. You can develop career artists. But if all your artists take three or four years to develop, it’s going be impossible. You have to have a balance.”
If one thing is certain, it’s that the freewheeling days of yore never will return and that sparks regret in even the most business-savvy record exec.
“It’s just not as maverick and it’s not as loose as it used to be,” said Boberg. “But the ‘music business’ is two words.”
