Azoff Resigns as Head of MCA Music Unit to Form Own Firm

Irving Azoff, one of the record industry’s best-known executives, resigned as chairman of MCA Inc.’s music entertainment group after months of speculation that he would leave MCA.

The outspoken executive was succeeded by Al Teller, a former CBS Records president who joined MCA last year as president and chief operating officer of the record group. Azoff said he is in talks with MCA and others about plans to form a music-oriented company with interests in film and sports.

The resignation capped a six-year roller coaster ride during which Azoff--a 41-year-old former rock band manager who joined MCA in 1983--returned the entertainment giant’s near-dormant MCA Records division to the major leagues. But he also became tangled in a troubling legal thicket that stemmed from the record company’s association with a figure who a government prosecutor alleged had ties to organized crime.

“This was basically a career decision. I wanted to be an owner again. It was (a question of) quality of life, as well as financially motivated,” Azoff, said in an interview at his Universal City office.

MCA President Sidney J. Sheinberg was en route to Orlando, Fla., and couldn’t be reached. In a prepared statement, Sheinberg said: “We are very hopeful that negotiations for us to continue to be involved with Irving in exciting new music entertainment undertakings will come to a successful and mutually beneficial conclusion.”

Azoff will continue to represent MCA in negotiations concerning the Los Angeles Memorial Coliseum, for which it is co-operator.

Entertainment industry observers judged Azoff’s departure to be a potential loss for the Universal City-based entertainment conglomerate. “MCA (Records) did very well with him at the helm,” said Harold Vogel, entertainment industry analyst for Merrill Lynch & Co. “Previously it had been foundering and floundering.”

Mara Balsbaugh, analyst with Smith Barney, Harris Upham & Co., concurred: “It’s a big loss, because my impression is Irving single-handedly engineered a turnaround at MCA Records. . . . The charts speak for themselves. And when other parts of MCA were doing poorly, that was the one division that kept up good earnings every quarter.”

A Sharp Turnaround

Azoff’s initial appointment to MCA in 1983 surprised the music industry. In his previous role as manager of such artists as the Eagles and Steely Dan, through his own Frontline Management, Azoff had been highly critical of the established record companies.

MCA’s record division posted an $8-million pretax loss in 1983 but by 1988 had operating earnings of more than $60 million on revenue of $661 million. Azoff streamlined the artist roster, signed new acts and revived the careers of old stars, but MCA also benefited from an industrywide boom in compact disc sales and video distribution fees collected by the record division.

Azoff boasted of having pushed the record company’s market share from as little as 1.5% of the U.S. market to at least 11%, while placing three albums recently in the top three positions of Billboard’s top-seller chart. Among MCA’s current hit artists are Bobby Brown, Fine Young Cannibals and Tom Petty. The company has seen particular success recently in the areas of country and black music--the latter boosted by the 1988 acquisition of Motown Records with investment partner Boston Ventures.

Azoff, too, profited from the stay. In 1988, he received $650,292 in salary and an additional $4.3 million in MCA stock, according to the company’s latest proxy statement. According to individuals close to the company, however, Azoff had been trying for a year or more, without success, to persuade top MCA executives to give him an additional stake in the equity or the appreciation in asset value of the record group.

In 1987, Azoff advanced a plan under which MCA Records would have sold 15% of its stock to the public, making it possible for him to become part owner of the record group. MCA Chairman Lew R. Wasserman, consistently opposed plans to give Azoff such a stake, according to company sources.

Wanted Out of Contract

Azoff was once seen as a possible heir to the MCA presidency, when and if Sheinberg, who is 53 years old, eventually succeeds Wasserman, who is 76. Azoff declined to discuss MCA’s corporate politics.

Individuals familiar with Azoff’s recent dealings, however, maintained that he was never seriously interested in the succession. He preempted any move to appoint him to the MCA board--even as film division head Thomas Pollock and company Vice President Charles S. Paul recently became directors--by pursuing a release from his contract, which had another year and a half to run.

Azoff said Monday that all five competing U.S. record distributors and several Wall Street investment groups have expressed interest in funding a new independent record company, should his talks with MCA fail to produce an agreement. To launch a new record label would require between $75 million and $100 million in funding, Azoff said.

Despite reportedly months of tense negotiations, Azoff seemed at ease as he discussed his decision Tuesday, sipping coffee, even cutting up his company credit card--a pointed goodby to the corporate world. He described his six-year tenure at MCA as both exhilarating and frustrating.

But he also acknowledged being impatient with his corporate responsibilities and aggravated at having spent months embroiled in a federal investigation and legal actions that grew out of the record company’s involvement with Salvatore Pisello.

Called ‘Witch Hunt’

Pisello, who represented MCA in the sale of discount records early during Azoff’s tenure, was subsequently convicted of income tax evasion and was identified in a government prosecutor’s sentencing memorandum as having longstanding ties to organized crime groups. No MCA executive was ever charged in the probe, and Pisello has denied the claims of organized crime ties.

“It was a witch hunt beyond my wildest dreams. The fact that it could happen is another reason not to hold a corporate job,” Azoff said of the investigation and related lawsuits.

But the affair seems to have had no lasting effect on either MCA Records or Azoff. “Periodically this aura came around,” said Smith Barney’s Balsbaugh. “But it never went far or deterred interest, at least from the financial world.”

Record industry sources have said Azoff was frustrated at MCA’s failure to purchase a stake in Polygram during the last several years, which might have beefed up its international presence, or to conclude other major corporate deals that might have pushed the record division into a stronger position against its competitors.

Polygram is currently in talks aimed at purchasing A&M; Records for a reported $500 million--a deal that appears likely to close, even though MCA made 11th-hour inquiries to A&M; about an alternate transaction under which it might acquire the label, according to industry sources.

Plans for New Firm

Teller, speaking by phone from MCA’s New York offices, said he does not expect to make major changes in the record operation. “I want to expand our market share in the U.S., become as successful in the rock side as we have been in black and country music,” he said. “And it’s very important to focus and formulate our international strategy. Of the companies in the U.S. considered major, we’re the only one without our own operation worldwide. That’s a major agenda item.”

Azoff said his future company would be based on the Westside of Los Angeles and would recruit several executives with more entrepreneurial verve than major record company experience. He also said the company would focus on both sound track albums and acts drawn from the “discards, rejects and second-stringers” cut loose by other record companies.

In leaving MCA, Azoff continued to display the sort of outrageousness that has been his trademark in the record business. In a letter to MCA Records employees, he thanked associates for helping him to “rape and pillage” competitors, and singled out one of his top administrators, Dan McGill, as “the financial community’s brightest media star since Barry Minkow, Jim Bakker and Mike Milken.”

This story was reported and written by Times staff writer Michael Cieply and free-lance writer Steve Hochman.