How Things Really Stack Up at the Capitol Records Tower : A shake-up is going down at Hollywood and Vine, with a new chief coming in and artists and employees waiting to see if they’re heading out

From the street, the Capitol Tower still casts the calm, familiar shadow over the world-famous intersection of Hollywood and Vine that it has since 1956. But inside the 13-story landmark, the mood is ominous.

The decision last month to replace easygoing, veteran Capitol Records label head Hale Milgrim with young, aggressive Gary Gersh was the first blow in a dramatic shake-up at the historic label--a roll of the dice by an East Coast management team that has left many employees fearing for their jobs.

Next up on the chopping block: a score of artists, including such possible candidates as Great White and Richard Thompson, as well as rumored staff cuts.

“It’s not a pretty place to be right now,” one Capitol employee says. “Everybody is either too busy watching their back or brown-nosing the new regime to actually get out there and sell any records.”

Gersh may be the man in charge, but all eyes are on Charles Koppelman, the controversial figure who was brought in earlier this year to head the North American sector of British conglomerate Thorn-EMI’s music group. Among the labels Thorn-EMI owns are Virgin Records, Liberty Records, Blue Note and Capitol, home of such acts as Paul McCartney, Bonnie Raitt and Hammer.

His mission: to make EMI the No. 1 record corporation in the world by 1998. That’s a tall order for a firm that currently ranks last among the six record conglomerates in domestic sales.

The only thing more prevalent around town these days than rumors about Koppelman’s next move is the debate over why he was given such a mandate from EMI in the first place.

A shrewd East Coast music veteran with a three-decade track record of pop hits and the successful launch three years ago of his own SBK Records, Koppelman comes to the job with a reputation for flamboyance and self-promotion and is widely perceived as a street-smart big-spender unafraid to butt heads with the corporate structure.

“Charles is an old-school risk-taker who isn’t scared to make a decision from the gut,” says Giant Records owner Irving Azoff. “It’s a big statement for EMI to turn to Charles, especially during a period when there’s so much talk about this bean-counting mentality that now governs the music business.”

Still, many insiders question whether Koppelman has the corporate acumen necessary to run a billion-dollar record enterprise.

His resume is riddled with a string of short-fused success stories: Vanilla Ice, Tracy Chapman, Wilson Phillips, and most recently, his own SBK Records label, which some say has yet to turn a profit. Koppelman’s latest elevation, critics jest, gives new meaning to the phrase “failing upward.”

Koppelman, a lifelong New Yorker, is expected to shift control of Capitol from the West Coast to EMI’s Manhattan headquarters, making the label more accountable to EMI’s upper brass. His flair for the quick fix can be seen in his choice of Gersh, who discovered Nirvana at Geffen Records. Gersh has an immediate mandate to sign new acts to resuscitate and energize the floundering label (see accompanying story).

“There’s no doubt that Charles has the golden touch,” says one influential industry insider. “Everything he gets his fingers on ends up paying off extremely well for him personally. The question is whether Charles is capable of making any money for EMI.”

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Charles Koppelman is sitting on the couch in his $1,500-a-night Hotel Bel-Air room sucking on a Cuban cigar. Not shy about flaunting his success, Koppelman blew into town in a private jet and arrived on the Westside in a chauffeur-driven Bentley.

Those who know him say he’s loyal to friends and devoted to his three children and wife. But most of all, he’s passionate about music.

“I’m not one of these new bean counters,” Koppelman says. “Me and the music go way back.”

The dapper, 53-year-old New Yorker, who lives on an opulent Long Island estate, says he’s somewhat baffled over the brouhaha surrounding his new status on the West Coast. Acknowledging the challenges that lie ahead, EMI’s new North American honcho appears relaxed and confident.

And why shouldn’t he be? After all, Koppelman’s been on a winning streak for more than 30 years.

“Charles has an ego the size of Mt. Fuji,” says Carnie Wilson, a member of SBK’s multimillion-selling Wilson Phillips trio. “But why not? He’s an absolutely brilliant music man.”

After breaking into the business in 1960 with the Ivy Three, who had the Top 10 novelty hit “Yogi,” Koppelman worked a stint for publisher Don Kirshner and then formed his own publishing and record-production firm where he signed songwriters such as Tim Hardin and the Lovin’ Spoonful’s John Sebastian.

He joined forces in 1975 with lawyer Martin Bandier to form a publishing and production company bankrolled by Bandier’s wealthy father-in-law, real estate kingpin Sam LeFrak. Their firm helped produce huge pop hits for Barbra Streisand, Dolly Parton, and Diana Ross.

In 1986, Koppelman and Bandier linked up with New York financier Steven Swid, who helped underwrite and negotiate the trio’s $125-million purchase of CBS Songs, a 250,000-song catalogue featuring standards such as “Singin’ in the Rain” and “Over the Rainbow.” They named the company SBK Entertainment World.

But Koppelman’s biggest break came in 1989, when he and his SBK partners met EMI music chief Jim Fifield and sold him their song catalogue for $297 million--more than double what they paid for it. As part of the deal, Fifield also offered Koppelman and Bandier $15 million to launch a joint venture record label plus lucrative salaries and bonus incentives to operate it.

Up and running within months, Koppelman’s SBK Records struck pay dirt with pop hits by Technotronic, Wilson Phillips, Vanilla Ice and the “Teenage Mutant Ninja Turtles” soundtrack--generating more than $100 million during its first full year of operation.

He quickly sold off the remaining 50% of SBK to EMI for a reported $35-million down payment and was immediately appointed to oversee the merger of SBK with EMI Records USA and Chrysalis Records. In April, he seized control of EMI’s entire North American division following the exit of Los Angeles record luminary Joe Smith and is scheduled to receive a $100-million check on the SBK balance in six months.

Quite an impresssive resume, right?

‘He’s one of the last fly-by-the-seat-of-your-pants hustlers still operating in our business,” a competing label chief says. “A real success.”

But questions still linger.

Although Koppelman’s label generated $100 million during its first full year of operation, the company posted a $7-million loss in 1991--leading many in the industry to wonder whether SBK’s success was real or just smoke and mirrors. Where, they ask, did all that money go?

“Charles is shrewd and he’s charming, but he has yet to demonstrate any ability in running a fiscally prudent organization,” says one record exective, reflecting the view of many interviewed. “When it comes to discovering and promoting pop hits, he’s a proven winner. When it comes to running a record company, that’s another matter.”

Koppelman disagrees:

“My biggest fault is that I make it all look too easy.”

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With so many hits to his credit, why do so many people in the music industry question Koppelman’s ability as a record executive?

Critics say Koppelman has demonstrated no ability at SBK to develop acts with long-term career potential.

Vanilla Ice, who sold more than 10 million albums his first time out, quickly vanished after an ill-fated live follow-up album and SBK-affiliated motion picture bombed.

Wilson Phillips, whose debut album sold more than 6 million, disappeared last year after its followup, “Light and Shadow,” sold only 900,000 copies in the U.S.

Some critics blame the kind of the acts Koppelman signs and the disposable flavor of their music, but others attribute SBK’s difficulties to what they call Koppelman’s penchant for hype.

At the heart of the issue: How could a tiny company like SBK Records generate $100 million in one year and still lose $7 million? Could it be the lavish amounts Koppelman spent on promotion, marketing and staff bonuses?

“Charlie is in a class by himself when it comes to this kind of stuff,” says one rival executive. “During the heyday of Vanilla Ice and Wilson Phillips, SBK was paying three and four times what the going rate was for promotion. My promotion people were always coming to me complaining it was impossible to compete with their spending habits.”

Koppelman says he’s tired of hearing competitors accuse him of buying hits.

“These people don’t have a clue, do they?” Koppelman says. “If a hit could really be bought, my life would be so much easier. Trust me, SBK Records spent far less on Wilson Phillips than Sony spent on Mariah Carey. My company does not buy hits. We just know how to market and promote our artists better than the competition.”

Despite the red ink for SBK in America, the EMI conglomerate made millions of dollars manufacturing and distributing SBK pop hits around the world--which helped offset the money lost domestically.

Soon after the British conglomerate bought SBK and merged it with Chrysalis Records and EMI USA, Koppelman hit big again with Grammy-winning Arrested Development and Jon Secada.

The rap group’s 2.5-million-selling breakthrough and Secada’s 1.5-million-selling album helped offset disappointing showings last year by Sinead O’Connor, Slaughter, Jesus Jones, Wilson Phillips and highly touted newcomer Russ Irwin. Financial breakdowns on Koppelman’s EMI operation aren’t public, but he says his U.S. operation is in good shape. EMI sources say the firm lost several million dollars in 1992.

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Doubts in the industry about Koppelman’s performance at EMI are not shared by his boss.

Fifield, who honed his management skills at General Mills before taking over EMI in 1988, says he stands firmly behind Koppelman, whom he credits with helping the company’s worldwide music sales leap 34% last year--to more than $2 billion.

“Charles has done an excellent job and his appointment is a very important piece of my vision for the company,” says Fifield. “When Charles does something, he does it in a style that’s right in your face. He’d rather take a chance and fail than play it safe and sorry--which is my style too.”

Many in the industry, however, also express reservations about Fifield and the empire he is building at EMI.

The 51-year-old executive raised many an eyebrow over the past four years as he threw tons of money at SBK, Chrysalis, I.R.S., Sparrow and Virgin Records in an effort to build his organization. Virgin alone cost the conglomerate almost $1 billion--about $250 million more than rival companies were willing to spend.

The firm’s glowing $2.3-billion year-end results are somewhat misleading, analysts say, because under UK law, the corporation is not required to amortize “good will” against profits, as music firms must do that operate in other countries. In other words, EMI Music may be worth less than it appears.

Sources also allege that Fifield and Koppelman have further inflated the value of the company by burying SBK’s losses in “a black hole” of creative bookkeeping--charges both men vehemently deny.

Insiders suggest that the overhaul at Capitol and other EMI labels by Koppelman and Fifield is being carried out simply to upgrade the firm’s image in an effort to attract potential buyers. When Fifield’s boss Colin Southgate met last December with Hollywood power broker Michael Ovitz, the rumor mill ran wild with speculation that Paramount and Disney were considering a purchase. Fifield denies the firm is for sale.

“I’ve never been at a meeting with an investment banker or adviser to talk about a possible acquisition,” Fifield says. “It’s all been just dinner conversations.”

What about talk around town that Fifield and Koppelman are simply pumping up EMI’s numbers to cash in on lucractive incentive bonuses?

“Absolutely not true,” Koppelman says, shrugging off the suggestion with a wave of his cigar. “But it’s no accident that people at other companies are talking about us. They’re jealous.”

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The industry is watching closely as Charles Koppelman expands his domain. Some say he’s determined to assume control at Virgin. Others suggest he’s got his eye on Fifield’s job.

But the big question on most everybody’s mind is what Koppelman--who will directly oversee operations at Capitol until Gersh reports for work on July 1--plans to do next at Capitol.

Until now, Capitol has escaped the kind of major restructuring changes other EMI labels have recently suffered. At Virgin, Fifield slashed the label’s 200-act roster by half and its work force from 1,100 to 700. When EMI, Chrysalis and SBK merged, more than 140 jobs as well as dozens of artists were given walking papers.

So far, about 40 positions have been eliminated at Capitol since Koppelman took over. But sources estimate that at least one-quarter of the 80-act roster will be dropped and that staff cuts in marketing, creative services, royalty, legal and finance departments loom on the horizon. Koppelman says rumors of staff cuts are untrue.

There are big questions also about what direction the label’s promotion department will take now that it answers to Koppelman’s longtime friend and personal consultant, Alfred DiSipio, a figure in the recording industry payola scandal of the ‘80s.

Controversial independent promoter Joe Isgro also recently paid a visit to the Tower and has billed the company for at least one R&B; record he promoted to obtain radio airplay for Capitol, sources say.

DiSipio and Isgro dropped out of the independent promotion business shortly after a 1986 NBC-TV news report alleged that they were linked to East Coast crime figures. DiSipio--along with a dozen other independent promoters--was investigated but never charged with a crime.

Isgro was indicted in Los Angeles in November, 1989, for payola and 56 other felony counts, including racketeering. The case, dismissed in September, 1990, was reinstated three months ago.

Executives at several other major labels said they would hire neither DiSipio nor Isgro. They questioned their reputations and what most described as an “antiquated” approach to obtaining radio airplay.

Koppelman says he brought DiSipio to Capitol specifically to strengthen the label’s in-house promotion strategies and reduce the amount of money spent on outside contractors. He and several other EMI officials credit innovations suggested by DiSipio--who has been on the EMI payroll since 1991--for slashing costs and revitalizing promotion operations at EMI’s East Coast labels.

“Fred DiSipio is the Joe DiMaggio of independent promotion--the ultimate expert in his field,” Koppelman says. “We’re lucky he came out of retirement to help us. Joe Isgro, on the other hand, is just another guy passing through the revolving door, no different from hundreds of other businessmen each week who request a meeting one time with me. I gave the guy 10 minutes. He does not work for Capitol or EMI.”

Koppelman dismisses all questioning about his judgment and scoffs at the talk about smoke and mirrors. He’d rather focus on the future, he says, and the creative infusion he expects Gersh to bring to the EMI empire.

The way he sees it, the job ahead is to turn the historic Hollywood label into a home for the nation’s best new artists and export their hits around the world.

“No matter what anybody says, all that matters to me is the music,” Koppelman says. “What people forget is our business all starts with the music. If you have the belief in your gut about a song and artist, you have to have the nerve to stand behind the thing, to stay the course.”

“A record company cannot be financially secure unless it is creatively driven. You must have great music. If you don’t, your lawyers won’t have anything to lawyer, your accountants won’t have anything to account and everybody will just end up sitting around the office with nothing to do.”