POP MUSIC : 91 YEAR IN REVIEW : A Rock ‘n’ Roller Coaster : The state of the record industry is more frightening than anything in ‘Cape Fear’--and a lot more unpredictable

“I’ve been in the music industry almost 20 years,” the frazzled record executive said, staring in wonder at a recent issue of Billboard magazine, the industry’s leading trade weekly. “And I don’t think I’ve seen a year quite as scary and unpredictable as this one.”

Want to talk scary?

Tone-Loc’s last album--a 1989 collection that contained the blockbuster single “Wild Thing”--was one of the biggest hits in rap history. But his new album, “Loc After Dark,” has disappeared without a trace. Out for more than a month, it has never even made the Billboard Top 200.

Want to talk unpredictable?

Without any appreciable radio play, Nirvana’s debut Geffen album rocketed recently into the Top 10, where it’s not only gone platinum but has been outselling either of Guns N’ Roses’ new albums (here in California, it’s actually outselling both Guns N’ Roses albums put together).

Stunned by an 11% drop in sales during the traumatic first six months of 1991, by year’s end top label execs were slashing artist rosters, firing a host of employees and engaged in an unprecedented round of public backbiting and bickering.

If the economic news wasn’t bad enough, the industry was also rocked by an embarrassing sexual-harassment scandal and broadsided by a series of media debacles that have reinforced a public perception that the business is populated with the kind of bumblers and sleazeballs depicted in “Hit Men,” Frederic Dannen’s hotly debated 1990 record industry expose.

Barely a month after Spy magazine published a withering dismissal of Disney’s ill-fated Hollywood Records label (“Flopsville, USA”), a rival label executive leaked copies of an eight-page internal memo from Hollywood President Peter Paterno that prompted a storm of protest from industry peers. Giant Records chief Irving Azoff, for one, pronounced Paterno “brain-dead.”

In early November, the Los Angeles Times published a story that included charges of sexual harassment leveled against Marko Babineau, who had abruptly resigned in September as the top exec at David Geffen’s DGC label, and ex-Mercury Records co-president Mike Bone, who was fired shortly before the story surfaced. Entertainment Weekly followed with a similar story, which reported harassment accusations against former Arista Records exec Abbey Konowitch, now a top MTV executive, who has denied any wrongdoing during his Arista tenure. Earlier this month, the New York Times published a stinging profile of Sony Music President Tommy Mottola. It disputed Mottola’s claims that Sony Music’s profits had “nearly tripled” since he took over in 1988. It also featured unusually blunt criticism from such industry rivals as Warner Record Group Chairman Bob Morgado, who accused Mottola of a “conflict of interest” in negotiating expensive contracts with stars represented by Mottola’s personal lawyer.

But it has been more than a year of nasty press clips. From interviews with a wide assortment of industry insiders, it seems clear that many see 1991 as a time of pivotal, perhaps irrevocable change.

Here’s a look at a few of the most striking changes occurring across pop music’s 1991 landscape.

The Year of the Disposable Artist: Tone-Loc wasn’t the only rap act who couldn’t capitalize on his previous hit. Remember when Vanilla Ice ruled the charts for months? He made a movie this year, which stiffed, along with his soundtrack album. Young MC, Digital Underground and 2 Live Crew all suffered similar fates. Rap acts weren’t alone. Richard Marx’s last album went to No. 1. His new one has dropped to No. 53 after only five weeks on the Billboard charts. Why? Without the sizzle caused by a hit single, no one felt compelled to buy his album.

Pop music reflects a culture that now has an attention span of about 30 seconds. An entire generation of pop fans have grown up on MTV, a visual medium whose emphasis on passing trends and styles prevents fans from developing the deep, passionate bonds which nurture a pop career. Another reason: “Most of these acts aren’t career artists,” said one top manager. “They’re performers in search of an identity. They live or die based on the success of each new hit single.”

The Year of the Marketing Hook: Many of the year’s biggest successes were marketing triumphs. The most obvious example: Natalie Cole’s “Unforgettable” album. A collection of her father’s standbys, it revived her career (much as Linda Ronstadt’s collaboration with Nelson Riddle did years ago) by giving fans an emotional identification with her material.

Guns N’ Roses would have sold plenty of albums anyway, but its clever dual-album release scheme created enormous additional drama--and attention. Hammer turned himself into a one-man merchandising vehicle, complete with a Hammer doll, a TV cartoon show, a Pepsi commercial and a trio of songs in “The Addams Family,” a hit movie. (And can you remember seeing an NFL game where he wasn’t photographed on the sidelines?)

Soundtrack albums’ whole raison d’etre is as a marketing gimmick. They are increasingly expensive gambles, but expect to see more after Morgan Creek Records put itself on the map with “Robin Hood,” MCA got valuable exposure from “The Commitments” and Giant Records not only made money with “New Jack City” but spun-off a new hit act, Color Me Badd.

The Year of the Superstar Signing Binge: Once you realize the value of a good catalogue, it becomes easier to understand why Virgin would shell out $25 million for an over-the-hill gang like the Rolling Stones--and why Sony paid even more for Aerosmith, even though the group has to make two more albums at Geffen before it can record for its new label.

Both deals include much of the bands’ valuable back catalogue, which can be repackaged forever. (Aerosmith’s “Pandora’s Box” box set could easily sell 250,000 copies at $35 a shot, which equals the profits of a hit album by itself.) Also, with it becoming more expensive (and more difficult) to break new artists, a franchise band like Aerosmith becomes more of a rarity--and more of a valuable commodity. Virgin’s Janet Jackson signing was also a franchise deal. At 24, she may be just reaching her peak as a pop starlet. Sony’s Michael Jackson renegotiation is more of a cozy vanity deal, both for Sony and Jackson, since it’s hard to imagine Jackson approaching the “Thriller”-level sales figures he enjoyed in his heyday.

The Year of the New Billboard Charts: In just six months, Billboard’s new SoundScan charts have already radically changed the way labels market new releases. The days of slowly building momentum are over. Now superstars leap to No. 1 immediately, forcing record companies to “open” their albums the way movie studios open films in their first week of release.

With the availability of instant sales figures, public perception is focused on a record’s immediate performance, not its long-term progress. The result? In the old days, record labels manipulated the charts. Now they hype the charts, hoping to ride a blast of publicity to No. 1.

The game can backfire.

When Michael Jackson’s “Dangerous” opened at No. 1, but sold less albums in its first week than expected (and less than an unheralded band like Metallica did in its first week) the headlines read disappointment, not triumph. Studio execs know that many moviegoers choose to see a film simply because it is a perceived success--i.e., the box-office hit of the week. If album buyers adopt a similar attitude, it will force labels to up the ante, spending huge marketing dollars on name artists that could have been saved for developing acts.

Fueled by the CD revolution, the $7-billion-a-year industry had enjoyed several years of uninterrupted growth and prosperity. It’s important to remember that CDs were more than just a technological advance. They were a brilliant marketing ploy--they encouraged many consumers to buy a new copy of a record they already owned. This radically altered purchasing habits. Older consumers, who traditionally lost interest in new music, began replenishing their collections by buying CD copies of albums they’d bought years before.

Of the labels that turned a significant profit this year, most were aided by catalogue sales--purchases of older albums by artists who either have a brand-name reputation with consumers (like Barbra Streisand or Led Zeppelin) or have a current hit or are out on tour. Execs say that at some labels, especially ones with few hits this year, catalogue sales could make up more than half of the label’s profits.

“We’re in the Modern Popular Library era of rock ‘n’ roll,” says Peter Philbin, who has a new Capitol Records-affiliated label, Signal Entertainment. “As the pop audience gets older, they want to reach back into the past for more familiar pleasures. People are going to repackage the Rolling Stones for each new generation the way the book business has repackaged Shakespeare, F. Scott Fitzgerald and J.D. Salinger.”

CDs provided another rarely noted boon for record companies: higher profit margins. According to a recent Entertainment Weekly study, CD manufacturing costs, which initially ran as high as $4 in the mid-1980s, have fallen to anywhere between $1.10 and $1.65. (Albums had cost about $1.) Yet consumers still pay between $12 and $15 for a CD, considerably more than albums ever cost. Even if you include increased marketing and distribution costs, CDs remain an attractive profit center.

So what went wrong in 1991?

Perhaps the biggest problem was the fallout from increased competition. Nearly a dozen new labels came into being over the past few years, each with highly paid staffs and expensive artist signings. Unfortunately, with rock radio ignoring new artists and MTV geared toward hit artists, each label had to spend enormous amounts of money to build any awareness for their new artists. And even when labels did have hits, fueling the hit machinery became increasingly expensive.

An example cited by many industry execs was SBK Records. One of the industry’s few new-label success stories, SBK put itself on the map, breaking new artists and landing Top 10 hits. But it still lost money, largely because it spent so much to break its artists and had no catalogue to cushion the losses.

“The equation is pretty simple,” says Cliff Burnstein, co-manager of Metallica, Def Leppard and Queensryche. “You had lots of new labels. But they were all competing for the same amount of record buyers. The market didn’t expand.”

As sales remained sluggish, record execs were forced to reverse direction. Last month, EMI Music consolidated a trio of labels--EMI, SBK and Chrysalis--forming one centralized record company while axing as many as 140 staffers. Atlantic, which had created a new label, EastWest, was forced by year’s end to merge EastWest with Atco and lay off 25 staffers, with more cuts expected in the future. Mercury and MCA Records have also laid off staffers. (MCA also just fired its head of promotion.)

The biggest immediate casualty: young, unproven artists. At least half a dozen major labels have instituted major roster cuts, jettisoning what will eventually amount to hundreds of money-losing pop and rock acts.

Just look at the numbers. If there are about 25 different label A&R; departments, each with four execs signing four or five acts each year, that comes to 400 artists being signed.

“History tells us that only 10 or 12 of those acts will show any sign of making it each year,” says one executive. “The rest is an incredible waste--of money and resources.”

As 1992 arrives, the industry faces several major challenges, both for its economic future--and its shaky public image:

* It’s no secret that the series of stories about sexual-harassment charges gave the industry a black eye. But is any label taking the initiative to face up to the problem? And if the industry is serious about cleaning up its act, why doesn’t it start with getting rid of all the tacky, cheesecake ads it runs in trades and tip sheets to promote female artists?

* Will feuding record companies ever agree on a replacement for the CD long box, which is an ecological embarrassment. Despite promises that it would be phased out by 1992, it is still the chosen package at every major label, largely because record companies refuse to get tough with retailers who have refused to carry CDs without a long-box style package.

* With rock radio ignoring new artists, can record labels respond with some imaginative marketing ideas to replace the easy fix of Top 40 and AOR radio play? EMI is planning to use its publishing company to help promote its current artists. MCA persuaded its sister Cineplex Odeon Theatres to play Tom Petty’s last video in front of millions of young moviegoers (all potential Petty record buyers). Talk about free advertising! But is the industry willing to experiment with fresh ideas--or is it too closely wed to stale formulas?

“With everyone assuming the economy will stay depressed through next year, I think the prevailing attitude is going to be ‘less is more,’ ” says A&M; chief Al Cafaro. “You’re going to see us releasing a lot fewer marginal albums. If you’re investing heavily in a new band, then you better believe in them, or why bother? The economy is going to force all of us to be a lot more disciplined about the albums we release and focused about how we promote them.

“Instead of swinging for the fences and striking out a lot, we’re going to try to keep the bases loaded and drive in a lot of runs. You’re not trying to hit a home run every time.”