Capitol Betting Millions on Gersh : Pop music: The much-rumored move of naming Gary Gersh as president is designed to ‘energize’ the record label. The announcement is expected today.

In the most dramatic West Coast music industry shake-up in years, EMI Music has hired Gary Gersh to replace Hale Milgrim as president and chief executive of Capitol Records, EMI sources confirmed Wednesday.

The much-rumored action--which is expected to be announced today--is the latest step in the New York-based corporation’s plan to “energize” the Hollywood label, home of such acts as Paul McCartney, Bonnie Raitt and Hammer.

The move--which may cost EMI more than $7 million in buyout payments--will be closely watched in the music industry because the label is betting heavily on a young executive with a keen “artist-and-repertoire” sense as opposed to someone with a more conventional background in legal, marketing, promotion or management.

“I’m a 37-year-old record maker who’s been given a chance to run a $400-million corporation and I’m very excited about it,” Gersh said. “My goal is to bring Capitol back to the forefront of popular music and to turn it into a creatively driven company where artists, managers, lawyers and agents want to be.”

Gersh, who will take over at Capitol on July 1, developed his reputation as a savvy judge of talent at Geffen Records, where he signed such acts as Nirvana, Robbie Robertson, Rickie Lee Jones, Sonic Youth and the Stone Roses. Previously, he had worked at EMI Records, where he signed David Bowie, the Stray Cats and John Waite.

Milgrim--who could not be reached for comment--was expected to resign at a closed-door corporate meeting at the Capitol Tower on Wednesday night, sources said.

“A record company needs to be run by a proven music person and Gary Gersh has clearly earned his stripes,” said Charles Koppelman, chairman and chief executive officer of EMI Records Group in North America.

“What Hale did was effectively market Capitol’s existing roster of artists, but over the past few years the company has clearly not broken any new artists of a substantial nature. Gary has a track record for discovering talent.”

Less than two weeks ago, Milgrim--who has been president at Capitol since 1989 and signed a contract last summer guaranteeing him an additional five years at the helm--privately told friends and associates he had been assured by EMI’s senior management that his job was not in jeopardy, sources said.

However, rumors of Milgrim’s departure have circulated in the industry since Joe Smith, Koppelman’s predecessor, stepped down in April. Speculation intensified two weeks ago when Gersh officially obtained an early release from his contract with Geffen Records--a pact that ran through Dec. 31.

Prior to Koppelman’s arrival, Milgrim was widely hailed as the marketing whiz who helped Smith transform Capitol from a company in decline--subsisting on the revenues from Beatles and Beach Boys reissues--into a competitive firm with million-selling artists such as Hammer and Raitt.

But under Milgrim’s recent watch, Capitol has turned in a lackluster chart and fiscal performance, insiders said. The label--whose domestic market share has shrunk from 3.8% in 1992 to 3.4% this year--currently has only one album (by Duran Duran) in the Top 100 on Billboard magazine’s pop chart.

Jim Fifield, president and chief executive of EMI Music, said he gave the green light on the controversial move because he believed “new blood” was needed to rejuvenate his corporation’s flagship label.

“New leadership was required at Capitol and with Gersh we now have a strong proven creative manager who I know will work well with Charles Koppelman,” Fifield said in a phone interview Wednesday. “I’ve been a strong supporter of Hale, but results are what drive the business and we just haven’t had the consistency in the new artist area required to meet our goals.”

Industry reaction to Gersh’s installment at Capitol was mostly positive--though some warned about his lack of experience in running a label.

“I think Gary Gersh will be a very tough competitor,” said Danny Goldberg, senior vice president of Atlantic Recording Corp, reflecting the view of several label executives interviewed. “It makes Capitol more of a threat as far as attracting artists to the label.”

Gersh reportedly first discussed returning to the EMI family of labels last December with Koppelman, who was then in charge of EMI’s East Coast labels. But it wasn’t until April 30--after Gersh was assured of release from his Geffen contract--that the talks became serious and began centering on Capitol.

EMI officials refused to discuss how much the shake-up will cost the company, but Milgrim reportedly signed a five-year contract in 1992, which guaranteed him more than $1 million per year plus an estimated $300,000 annual bonus.

If, as expected, Art Jaeger, executive vice president of Capitol, also resigns, EMI may have to pay an additional $2.5 million to buy out the remainder of his contract, sources said. EMI declined comment on Jaeger’s job status or salary.

Sources said EMI will pay Gersh more than $1 million a year plus a guaranteed six-figure annual bonus--several hundred-thousand dollars a year more than he earned at Geffen. His five-year EMI contract also reportedly includes a long-term incentive provision with the potential to earn additional bonuses in 1996 that could yield 100% of his salary if the company achieves specific financial targets.

Milgrim’s exit comes a week after news that finance executive Neil McCarthy will leave the company. More than three dozen jobs have been eliminated at Capitol since Koppelman took over in April.

Sources at Capitol said Wednesday that the departure of Milgrim and possible exit of Jaeger have contributed to an already “anxious” working environment for employees. Fears are that Gersh--who is rumored to have already assembled a small team of non-Capitol executives to help him change the direction of the label--may clean house when he takes over in July.

But Koppelman and Fifield both denied speculation that Gersh was being installed to carry out a wholesale purge of Capitol’s promotion, marketing, creative services, royalty, legal and finance departments.

“The rest of the company, from my point of view, is in terrific shape,” Koppelman said. “The things that have transpired in the first few months since I took over at Capitol are not the things I like to do. In fact, I hate that part of the job. The way I see it, Gary Gersh is the last piece in the puzzle for setting EMI’s North America course in the right direction. Now it’s time to get back to what this business is all about: making music.”