Company Town : What Pay Becomes a Legend Most?

While media titan Time Warner Inc. talks merger with General Electric’s NBC unit in New York, in another part of town music industry legend Clive Davis is trying to keep himself merged with Arista Records.

Sources say Davis is asking for a hefty pay raise from Arista’s parent company, Bertelsmann Music Group, in return for extending his contract. Both sides are predicting a successful resolution, even though conservative BMG was reportedly shocked by Davis’ initial demands.

One report has the Arista founder seeking $100 million over five years as compensation for cultivating such monster acts as Whitney Houston, Kenny G, Alan Jackson and Ace of Base. Sources close to Davis call the $100-million figure outrageous, but admit he’s after very generous terms.

Davis brings considerable leverage to the bargaining table. Arista, which was acquired by BMG in 1979, is valued at more than $600 million and is considered the crown jewel in an otherwise lackluster family of U.S.-based record labels owned by the German media conglomerate. The label posted record-setting sales of $250 million to $300 million for the fiscal year ended June 30, according to published estimates, and a 12% to 15% increase in profit.

On top of that, Davis is credited with securing Tim DuBois to beef up Arista’s Nashville division and with bringing into the BMG fold two hot companies: La Face Records, run by producers LA Reid and Babyface, and Clive Calder’s Jive Records.

“There’s no grousing,” said one BMG executive. “He’s done a wonderful job.”

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At 60, those accomplishments seem to put Davis in a significantly stronger career position than many of his famous contemporaries. Fellow legend Mo Ostin is stepping down from Warner Bros. Records at the end of the year, and Elektra’s Robert Krasnow and Capitol’s Joe Smith have already left their posts.

Attorneys Allen Grubman and Joel Katz, who represent Davis, declined to comment on the negotiations, though Grubman was quick to wax eloquent on behalf of his client. “Clive is the definitive executive-artistic genius in the modern record business,” Grubman said. “And he’s getting better as time goes by. He should change his name to Clive Lafitte Rothschild.”

Renewing Davis’ contract could be just one in a series of moves to shore up BMG in the U.S. The company, which ranks third in domestic market share year-to-date with 13.46%, is still on the hunt for a North American operations chief.

Among the leading prospects for the job, which BMG hopes to fill by the end of month, are IRS Records President Jay Boberg and Strauss Zelnick, CEO at game developer Crystal Dynamics.

BMG Chairman Michael Dornemann declined to comment on the search. But sources say Davis is not interested in the job because he prefers the hands-on role at Arista. Others said to have rejected the post are Krasnow, MTV Chairman Tom Freston and Columbia Records chief Don Ienner.

Dornemann is also on the hunt for a new chairman of RCA, the venerable label it acquired from General Electric for $330 million in 1986. Joe Galante, its third president in eight years, is returning to RCA’s Nashville office after failing to make a success of the label.

Alan Kovach, who manages Meat Loaf and John Mellencamp, has been mentioned as a possible candidate, but rumors this week focused on Ron Fair, senior vice president of artists and repertoire and staff producer at RCA, who was credited with the successful soundtrack for “Reality Bites.” Capitol Records executive Lou Mann is said to have turned down an offer for the No. 2 post at RCA.

In another area, BMG is rumored to be close to announcing a foreign distribution agreement with Rick Rubin’s American Recordings. Rubin, whose acts include Johnny Cash and the Black Crowes, began talks with BMG after a bitter dispute broke out with London-based Phonogram.

In two lawsuits, American has charged that Phonogram breached its contractual obligations to pay royalties, file tax returns and establish offices for American. An attorney for American also argued in British court that Phonogram, a division of media giant PolyGram, is a “shell company.”

“There is $6 million missing from the Phonogram/Def American joint venture account,” said Mike Bone, head of retail marketing and international at American Recordings. “I can think of no reason why we would want to have any business relationship with people who have such questionable business ethics.”

Phonogram--which also distributes the music of Elton John, Metallica, Def Leppard and Dire Straits--dropped a legal injunction last week to stop American from defecting. It characterized the allegations on Thursday as “ludicrous.”

Representatives for Dire Straits and other rock acts distributed by Phonogram said they are pleased with the company and baffled by American Recording’s allegations.

“We’ve been working with this firm for many years and have never once encountered a money problem,” Dire Straits manager Ed Bicknell said in an interview from London. “Phonogram has always been fair, accurate and meticulous in their dealings with us.”

Hailing a job: The other news in music circles is that former Capitol Records President Hale Milgrim may soon be re-employed. Sources say Elektra and Columbia are both in discussions with Milgrim over high-level jobs.