All Shook Up A New Mega-merger Is Causing Seismic Upheaval In The Music Industry, With Storied Labels And Veteran Artists Among The Casualties. But Record-buyers Are Not Likely To Respond The Way The Conglomerate Hopes.

Posted: March 07, 1999

Scenes from yet another global mega-merger: Seagram's, the Canadian beverage and entertainment conglomerate, buys the multimedia company Polygram for an estimated $10.4 billion in December, linking one massive music industry operation (the purchaser's MCA, Interscope, Universal and Geffen) to another (the purchased's Mercury, Island, Motown, A&M and Def Jam) to form the Universal Music Group. Thousands of executives and support staff lose their jobs. Managers attend ''integration'' meetings. Storied labels, with decades-long histories, are reduced to name only.

Wall Street nods approvingly.

But that's not the end. A second wave of downsizing begins, with repercussions that may not be quantifiable for years.

In this offstage scenario, recording artists are ''reevaluated'' and pruned from Universal's overgrown rosters - even if they have long histories, or their last projects were, by conventional measures, ''successful.'' Artists who have seen executives walk away with handsome severance packages wait months to learn their fate. Labels that commanded respect for their vision and artist-friendly policies get a crash course in the quarterly-earnings model, a system many believe is at odds with the cultivation of long-term careers.

And at the very moment the Universal behemoth is under construction, the industry's savviest players - from former record company presidents to artists to retailers - are following the advance of new business models and technology that bypasses traditional distribution routes. Surveying the carnage, they wonder if Universal has missed the point: Before long, the very notion of a mammoth, hierarchical record company could be an anachronism.

Shortly before getting fired as president of the now-gutted A&M Records, Al Cafaro sounded the alarm in an interview with the Los Angeles Times: ''The record business is changing fundamentally. . . . If the quake that devoured A&M and Geffen is a 6.0 on the Richter scale, there is a 7.0 coming in this industry. It's a Wall Street world now. Get ready.''

The Seagram's merger is the first big test of whether efficiency models can be imposed on the creative process. Universal Music Group officials refuse to elaborate on their plans publicly. But many others are doubtful that Universal's philosophy will work over the long haul: ''What we do doesn't always pay off from one quarter to another,'' says an executive who was downsized. ''It takes a dedication of resources over time to build artists.''

Consumers will experience the turmoil in waves. Soon, they will notice that some lower-profile acts - the kind with cult or regional followings - have been let go. Already dropped are Philadelphia's Huffamoose, an emerging act; the established singer-songwriter Rickie Lee Jones; and proven road warrior the Rev. Horton Heat.

Within a few years, record-buyers may find that the most interesting music is coming from upstart labels and self-marketed artists, which have proliferated in response to the risk-averse, star-driven major-label system.

In the short term, the Universal imprints are expected to generate nearly 25 percent of all U.S. recorded-music sales, and will wield massive power to shape tastes and influence radio and retail. The company's primary divisions - a Mercury/Island entity, and one that gathers Interscope, Geffen and A&M, called IGA - have undergone severe streamlining. Mercury lost 60 of its 150 employees, and is expected to shed at least 110 of its 140 acts in the next six months. Similar reductions are anticipated at the other labels, as executives slog through hundreds of demos and just-finished projects to determine which deserve the support of the new regimes.

As one downsized executive put it, ''They're going through everything that was in-process, every cynical signing. It can't be too much fun.''

Some superstars within the conglomerate's family of labels will ''float'' from one Universal entity to another: Boyz II Men, for example, has chosen to leave the decimated Motown (down from 75 employees to seven) for Universal. But the fatalities will continue to mount: All told, Universal's music operations expect to pare down by 3,000 jobs and more than 200 acts.

With luck, most will find new jobs, new homes for their creativity. Lost forever are the Universal-absorbed labels that had distinct personalities - the legendary Motown, alternative-rock pioneer Geffen, and the artist-friendly A&M, places known for their lasting commitment to musicians.

Not all is bleak, of course. Good music will continue to be made, even at the majors. And entrepreneurial music-makers and -purveyors have much to gain from the current mayhem. Bored by the Dionification of music, the public has already begun looking to independent labels and the Internet, where marketing and promotion are less stage-managed.

Hastening the democratization of the music industry will be Universal's greatest contribution, predicts an upbeat Al Teller, the former president of both Columbia and MCA Records, whose current endeavor is a music-driven Web site called Atomic Pop.

''At the same time you have consolidation going on at the [corporate] levels, there's the exact opposite going on at the basic level, where the artists are.'' There's a spirit of ''disintermediation,'' says Teller: ''Artists are communicating directly with the fans.''

Teller believes the Universal merger is a case of misdirected energy by executives who have failed to understand the way the Internet is revolutionizing music marketing: ''It's like buying a terrific chain of blacksmith shops as the first car comes rolling down the street.''

For artists, the immediate consequence of the merger is that there are fewer corporate doors to knock on. Indie labels abound, but, says an artist manager who requested anonymity, ''the days when you could go to one of these boutique-majors, like A&M, and rally the entire company around an artist who will never sell a million records but deserves to be heard, are over.''

Jerry Moss, a founder of A&M Records, agrees. After selling A&M to Polygram (for a reported $500 million) in 1989, he and partner Herb Alpert launched the small, artist-oriented Almo Sounds. Though distributed by Universal, the label is autonomous.

Looking at the current business climate - which has been evolving for several years - Moss says he's not optimistic for artists who are the equivalent of publishing's ''midlist'' authors, the writers with loyal constituencies but no best-sellers.

''With A&M we often tried two or three records [before encountering success with an act],'' he says. ''It takes a lot of time and attention to bring some artists to the attention of the public. It's very expensive now to spread a record around so the consumer can find it easily in a retail store, so those types of artists are only getting a single shot.''

The result has been a stream of underdeveloped talents thrown into a snakepit of a marketplace, each hoping it will survive long enough to catch the fancy of an increasingly fickle audience. Many have been mediocre, admit label executives. One talent scout, who works for a Universal competitor, contends that the cutbacks might actually be good for music: ''There's been a lot of marginal [acts] out there, signed quickly and rushed out before they were ready, before they ever performed live.''

It wasn't always that way. Such frantic releases were rare in the heyday of A&M (which nurtured the Police, Sheryl Crow and Cat Stevens) and Geffen (Nirvana, Hole, Gun 'N' Roses). There, an artist's reputation rested on the quality of a career's worth of work, and executives were artists' advocates.

''When things were really going, in the early '90s, what made Geffen work was the fact that every decision revolved around the artists and the albums,'' recalls Mark Kates, president of Grand Royal Records and a former Geffen executive whose signings included Beck.

''When Seagram's came in, there was no appreciation of that culture. They're not in that business, they're in the quarterly-earnings business. What people who sit on the board at Seagram's don't get is that the [record-buyers] understand these things.''

At Grand Royal, distributed by Capitol, Kates and a small team work just a few records a year. Each gets an extended marketing and promotion campaign that begins months before the release. And once records are in stores, the label can react quickly to any hint of a breakthrough.

That's how it used to be at Geffen, ''but in the last few years, that changed. Suddenly you had to get 30 people up the line to sign off just to make one little thing happen.''

That flexibility is just one reason independent labels are looking more attractive to artists. ''For artists with a fan base that's passionate, there are advantages to being on an indie,'' says artist manager Ken Levitan, who handles A&M artist Patty Griffin and others. ''With the majors, it's a little bit like roulette: People are changing jobs; you don't know who you're signing with. The whole notion of developing an artist gets lost in that kind of environment.''

Michael Rosenberg, who heads the distribution arm of Koch International, says his outfit's independent label has nearly doubled its staff in the last year, partly in anticipation of further chaos on the major-label level.

''We think other majors are likely to follow and start trimming rosters back. . . . [That] will be good for the indie community. You'll see well-known artists signing to independent labels and happy to be there, because they'll be partners in longer-term development.''

Enterprising performers can avoid the label system entirely, thanks to a range of marketing techniques, from do-it-yourself mail order to newly developed programs at large retailers such as, which are designed to spotlight independent artists.

Newer still are elaborate Web showcases that dispense digital-quality music via the MP3 software system, which allows anyone with a fast modem to download audio relatively quickly. As the major labels address the problem of digital duplication - last month, the Recording Industry Association of America convened a group to establish an industry standard for copy protection - many artists have begun to utilize MP3 as a promotional tool. And others have already embraced it as a delivery system, charging fees on a per-song basis.

Teller, whose Atomic Pop Web site offers some free downloads, believes that making music available on the Internet is invaluable to an artist.

''What we've said to artists is that, if you begin the enthusiasm online, you can start to chip away at the traditional bottlenecks, like radio. . . . Eventually, the Internet will bypass some of those completely,'' he says. He notes that L7 and other established acts have entered into partnerships with Atomic Pop and expects other artists - including ''names familiar to a reasonably large slice of the population'' to follow.

But Michael Timmins of the Cowboy Junkies, which was dumped from Geffen as a result of the merger, points out that the Internet helps only an artist with name recognition: ''That underground marketing thing can work wonders if people find their way to you. They can't do that if nobody knows you.''

Even the most avid supporters of e-commerce believe that the major labels will be in the hunt for a long time - if for no other reason than that they are the only ones with pockets deep enough to finance the mammoth campaigns that spawn the Marilyn Mansons of the world.

It's even possible, says Almo's Moss, that the majors could do what they once did - expose compelling talents. ''There are still bright, intelligent people at these labels, and some of them are committed to artist development. . . . At every one of those [labels] there's a sensitive person who's doing the job because of the music. If the artists find them, they'll be OK. If not, they're bound to run into trouble.''

comments powered by Disqus