New Record Companies Scour the Globe in Hopes of Swinging on a Star : Entertainment: An array of well-financed labels has emerged at a time of flat sales. Their success will depend on developing new talent.

With the last of the major independent labels, Geffen Records, gobbled up in March, entertainment conglomerates have begun spending millions of dollars to hatch their own labels in an effort to develop talent for an industry that some say sorely needs stars with staying power.

The unprecedented emergence of seven well-financed, full-service labels, at a time of generally flat domestic music sales, confounds some observers, who doubt that there is a large enough market to keep them all afloat. Nevertheless, the prominent executives behind the new efforts are stirring high expectations.

“I don’t recall the last time there were that many potentially big labels (started) in one year,” said Abbey Konowitch, senior vice president of music and talent at cable TV’s 24-hour rock video channel, MTV. “Like any business, the strong will survive. But I think the consumer is the big winner here.”

With the exception of CBS Records’ Sony Classical label, the new efforts are all pop music ventures headed by some of the record industry’s most experienced music executives. They include:

Giant Records, a joint venture of Warner Bros. Records and Irving Azoff, former chairman of MCA Music Entertainment Group.

DGC Records, started by entertainment mogul David Geffen after his record company was acquired by MCA Inc.

Zoo Records, headed by former Island Records President Lou Maglia and backed by Bertelsmann Music Group.

Hollywood Records, a Walt Disney Co. label headed by former music industry lawyer Peter Paterno.

Charisma Records, headed by Phil Quartararo, a former promotion executive at the label’s parent company, Virgin Records, a London-based concern.

Cardiac Records--also backed by Virgin--is led by Cathy Jackson, a former executive at Island Records.

“The significance of all these new labels emerging at one time is that everybody . . . decided it’s much more cost-effective to start a new label than buy one,” said Azoff, whose Giant label this month will release its first record, by the Australian band Boom Crash Opera. “That, plus the fact that there is nothing else out there left to buy.”

Not since the early 1970s, when entertainment companies such as Gulf & Western, MGM and United Artists briefly entered the music business, has there been such a flurry of new record ventures, said Joe Smith, president of Capitol-EMI Records. Experts estimate that the new companies each are spending $6 million to $10 million yearly to hire staff, lease office space, conduct talent searches and sign acts.

For their huge investments, the record companies hope to emulate the track records of an earlier generation of start-ups such as Geffen Records, which since its founding in 1980 has produced 22 albums that have sold at least 1 million copies each. Many executives believe that they can imitate Geffen’s success by projecting the right kind of image--that of a “boutique” label that gives its artists more support and attention than older and larger recording enterprises.

Record conglomerates say new labels help diversify artist management. So if an act is dissatisfied with their label, they can switch to another at the same record company without leaving the fold. Having several labels also enables a record company to field more talent scouts as well as more promotional teams to persuade radio stations to play the record company’s music.

The explosion of new recording ventures comes despite the notorious absence of brand loyalty among record buyers, who usually act like moviegoers and book buyers in focusing on content. Classical music aficionados are a notable exception, often preferring labels known for superior sound quality.

In that respect, CBS Records’ launch of Sony Classical will be closely watched. With most classical music now being released on CDs, sound quality is not the issue it once was and collectors who once swore by labels such as Polygram Records’ Deutsche Grammophon are more willing to experiment, Sony officials say.

“CD has made everybody equal” in sound quality, said Harold Fein, vice president of marketing at Sony Classical. As a result, Fein said consumers will focus more on the performance and the artists associated with a label.

Backed by an expensive marketing campaign, Sony Classical has released 10 albums, Fein said. And one of the label’s first finds, Murray Perahia, has already progressed from prodigy to international star after winning a Grammy in February, 1989, for his duet with Sir George Solti on Bartok’s Sonata for Two Pianos and Percussion.

The backers of the six pop music labels, however, may face big obstacles in trying to uncover talent. Existing record companies have a head start, and the pop music market is becoming increasingly fragmented, as some grow disenchanted with the old ways of rock ‘n’ roll.

“The days of the long-haired guitar guys playing rock ‘n’ roll are dead,” said Joe Levy, music editor of the Village Voice, a New York weekly that is closely watched by the nation’s music critics. “It’s become a real producer’s business,” where the producers of singers Bobby Brown and Paula Abdul, for example, are as significant as the singers themselves, Levy said. In such an environment, he added, “it’s more difficult for artists to achieve real staying power.”

The new labels hope to change that with a massive talent search that has record executives traveling as far away as Europe, Australia and South America to audition new acts.

A talent scout at A&M; Records, who requested anonymity, said he once used to see just two or three other colleagues at clubs he visits in Austin, Tex. Recently, however, he has seen as many as 10 people from other labels prowling the clubs for new acts.

The bounty hunting has not gone unnoticed by performers, who have begun to flood talent shows and record offices with audition tapes in hopes of being discovered.

Louis Meyers, co-director of the South by Southwest Music and Media Conference, which showcases new talent annually in Austin, said nearly twice as many bands--1,500--as last year applied for the 400 performance spots in March. Similarly, the upcoming New Music Seminar festival in New York is expected to draw more than 250 bands July 13-18.

With new groups already getting signing bonuses and recording-fee advances of $100,000 or more, some experts worry that the new labels will get embroiled in a bidding frenzy for new groups. “My fear is that they could all end up paying too much for hot acts,” said Jerome N. Gold, national director of media and entertainment at the accounting firm Ernst & Young in New York.

Meyers reports that there have been no bidding wars yet in Texas. And Ron Oberman, a vice president of artists and repertoire at Columbia Records, said dollars don’t always sway groups. He noted that his company signed one group, Toad the Wet Sprocket, last June even though the quartet got higher offers from other labels. (Another industry source said the group sought higher royalty fees on their records rather than a large up-front advance.)

Meanwhile, John Andrew Frederick, lead singer of a Los Angeles band called Black Watch, said that despite “tons and tons of great press” from the Los Angeles music magazine BAM and other publications, his group hasn’t received a serious offer.

“I would encourage any band to release their own records on their own label rather than wait to be discovered,” said Frederick, who records for his own Eskimo Records label. “These labels all say they are into people with artistic integrity . . . but this is a business. I think you have to remember that.”

Indeed, even if an act is signed by a major label, the road to fame can be rocky.

All those new labels will make radio--the traditional outlet for new records--even tougher to crack, experts say. Top 40 radio stations typically add only two or three songs to their playlists each week.

“The creation of all these new labels is not going to expand the playlist,” said Alan Burns, president of the consulting firm Alan Burns & Associates in Oakton, Va. “There are only so many records an audience can handle at any one time.”

“It’s going to be very difficult for some of these labels to survive; I see only one or two lasting past three years,” said Charles Koppelman, chairman of SBK Records.

Smith of Capitol Records is also pessimistic but sees the struggle lasting much longer: “The prominent ones are all well-financed and there’s a lot of ego on the line,” he said. “I don’t think they will give up very easily.”