Label Seeks New Talent for Sagging Rock Roster

Keynote speeches at record company conventions are often shameless exercises in cheerleading, with the boss seeking to pump up his staff by trumpeting chart achievements and sales breakthroughs.

Joe Smith, president and CEO of Capitol-EMI Music, did his share of cheerleading in keynoting a Capitol convention last year, but he also struck an unusually sober note.

Smith, a respected industry veteran who had been hired in February, 1987, to revive the long-sluggish company, pointedly reminded the staff that Capitol’s London-based parent, Thorn-EMI, expected results after spending so much in the previous year.

“It’s been a stiff price for those people to pay and they’ve got every right to expect and demand terrific improvement,” he said. “Our careers, our salaries, our future, is ours to win or lose in this next year. I want you to leave here with a sense of urgency, a sense of intensity, a sense of determination, and even a little desperation.”

One year after issuing that blunt directive, Smith believes that Capitol has made some progress but that the resurgence isn’t happening fast enough. As a result, he called for the resignation Thursday of Capitol’s president since 1987, David Berman. It took effect Friday.

“You operate your company according to how you stand in the business,” Smith said, sitting in his Beverly Hills home over the weekend before a round of one-on-one meetings with Capitol executives.

“We’re on the outside moving up so we go to the whip a lot more than the guy who’s in front. We have to have that sense of urgency much more than the company that’s on top.”

That sense of urgency, Smith suggested, has been lacking at Capitol. “There was a feeling that we weren’t moving as decisively as we should be,” he said. “It came from above, yes, but it also came from within the ranks of the company and I had it as well.”

Still, Smith said that Capitol made positive strides under Berman. While declining to reveal specific figures, he said that 1988 was the first year in several years that Capitol-EMI Music turned a profit in North America. And he said that 1989 is looking even better. Smith said that for the fiscal year which began April 1, Capitol-EMI is 35% ahead of projections in both sales and profits.

Smith added that the progress extends beyond the balance sheet to the arguably more difficult task of restoring Capitol’s credibility in contemporary music. Though Capitol was once the home of such superstars as Frank Sinatra and the Beatles, it has fallen out of touch in recent years.

“(Berman) inherited an artist roster that certainly wasn’t representative of where we’re going in music,” Smith said. “But now you have an M. C. Hammer and a Megadeth, which would have been unthinkable here before.”

M. C. Hammer is a rapper whose “Let’s Get It Started” album has topped the 1-million sales mark. Megadeth is one of several heavy-metal bands on Capitol, along with Great White and Poison (which was acquired through a distribution deal with Los Angeles-based Enigma Records).

But those contemporary music successes have been overshadowed by Capitol’s involvement in reviving veteran acts from the ‘60s and ‘70s. Six of the 10 albums that Capitol has on Billboard magazine’s pop album chart this week are by recycled veterans: the Beach Boys, Bonnie Raitt, the Doobie Brothers, Paul McCartney, Joe Cocker and Donny Osmond.

The revivals have helped Capitol’s chart share but they haven’t done much for its credibility within the industry, which regards the breakthrough of important new artists as the real test of a label’s vitality.

“I feel the same sensitivity to the charge, ‘What kind of company are you: an old folks home, recycling everybody?” Smith said. “I don’t want the outside world to think ‘OK, you’re making money, but maybe that’s just because of all the recycled acts and the CD sales of the Beatles catalogue.’ I hope to sweep those reservations away.”

Smith also acknowledged that Capitol needs to shore up its rock ‘n’ roll credibility. The label is home to Bob Seger and Billy Squier, but otherwise has little presence in this crucial area of the music business.

“We’re well-represented in metal, and we’ve had a big lift in black music and jazz, but I wish we had more mainline rock ‘n’ roll,” he said.

Smith denied that Berman’s ouster was a reaction to the disappointing showing of Paul McCartney’s “Flowers in the Dirt” album--which outsold the ex-Beatle’s previous collection but fell far short of industry expectations.

“It didn’t help, but underlying (the ouster) was not the performance of any one record or artist,” he said. “Underlying it was a feeling at the company that we could do better and should do better.”

Smith said that he is pleased with progress being made at Capitol’s smaller sister label, EMI Records. The New York-based company, headed by president Sal Licata, recently landed a No. 1 album and back-to-back No. 1 singles by Richard Marx. EMI has also scored with Top 10 hits by Bobby McFerrin, Robert Palmer, Natalie Cole and Roxette.

Smith, who began his career as a popular DJ in Boston, said that he expects to fill in as Capitol president until the end of the year, when he will name a new president. He envisions no other staff changes.

“That’s the anomaly,” he said. “I think that Capitol Records, individual for individual, is as strong as any record company. It’s the job of pulling it together into a well-focused record company where we haven’t done it. That’s where we have the crying need.”

The Capitol-EMI Music job marks Smith’s third time at bat in running a record company. He was president of Warner Bros. Records from 1968 to 1975, where he worked with the Doobie Brothers, James Taylor and Black Sabbath. And he was chairman of Elektra from 1976 to 1983, where he worked with the Eagles, Linda Ronstadt and Queen.

Though he was out of the business for just four years before being named to his current post by Capitol-EMI Music chairman Bhaskar Menon, Smith said that things are a lot different than they used to be.

“This is a very different business than it was when I left it in 1983,” he said. “You’ve got to go fight for everything. The competition is murderous. Everybody knows what everybody is doing and we’re all out there battling.”

Smith said it’s harder to turn a company around than it was a decade ago: “The cost of doing it is so enormous now. And the competition doesn’t give you any room. There are no weak spots. Everybody is in there firing away with all their guns.”

But, he said, the hardest part of turning Capitol around has been “chipping away” at the company’s conservative structure.

“It has not been easy changing the philosophy of a company that operated for 45 years pretty much the same way--as a buttoned-down, marketing-oriented company,” Smith said. “A number of people who had been there a long time refused to accept that we were going to do something a little differently here: get more aggressive and shake off some of the old ways.”

Smith has sought to add to Capitol-EMI Music’s overall sales volume through purchases of Chrysalis Records and Enigma Records and the launch of a new label, SBK Records.

But in his first 18 months on the job, Smith was largely preoccupied with eliminating areas he viewed as unprofitable.

“In the first year-and-a-half I had to sell off a tape manufacturing business, close down a video distribution business, get out of a home-video operation and close down a label,” he said.

Through his years at Warner Bros. and Elektra--both successful, prestigious companies--Smith cultivated the image of a winner. In his current job, he’s been cast in the role of scrapper. Is he happy in that role?

“I’m happy in that role now that we’re on the road back,” he said. “It killed me at first to see brackets down at the bottom of the ledger sheet, which said, ‘No, you’re not doing it.’ You can’t turn companies like this around on a dime, but now I think we’ve got everything in place to do it.”

CAPITOL-EMI’S PRECIOUS METALS

Platinum Gold 1985 6 13 1986 6 8 1987 7 14 1988 5 12 1989 (to date) 4 11

Capitol-EMI Music’s tally of platinum albums (1 million sales) and gold albums (500,000 sales) for the last five years. Source: Recording Industry Assn. of America.