Together Again : DreamWorks Lures an Industry Titan to Run Its Pop Music Division

The dream team just got dreamier.

Mo Ostin, the most coveted executive in the record business, will sign a long-term, multimillion-dollar contract today to run SKG, the pop music division of DreamWorks, the entertainment combine launched last year by Steven Spielberg, Jeffrey Katzenberg and David Geffen.

The combination of Geffen and Ostin, widely regarded as the two sharpest record chiefs in the industry, is a formidable pairing, competitors and analysts said Wednesday. Geffen is expected to announce this morning the formation of a new management triumvirate at DreamWorks SKG that will also include Ostin’s long-time partner Lenny Waronker and Ostin’s son, Michael.

Ostin and Waronker have been the focus of a fierce bidding war since the Warner Bros. Records veterans quit their jobs last year after a bitter corporate power struggle in Time Warner’s music sector. In the past five months, the widely admired duo has rejected offers from more than a dozen entertainment corporations including Disney, Viacom, Fox, PolyGram and Time Warner, which pleaded for them to return.

“The idea of starting over from scratch, of doing something fresh, of redefining my life at this stage of my career is very appealing to me,” said Ostin in an interview this week at his hill-top Pacific Palisades home. “DreamWorks is an independent operation run by three very entrepreneurial guys who understand the creative process, an artist-friendly business with a focus on quality, not just profit. What you have here is a situation that resembles what attracted all of us to get involved in the music business in the first place.”

Ostin, 68, who ran Warner Bros. Records for more than three lucrative decades, is highly regarded in entertainment circles for his savvy business instincts and commitment to artistic development. He transformed Warner Bros. from a tiny soundtrack label into the most stable and successful operation in the record industry.

Waronker, 53, is an esteemed record producer and former Warner Bros. Records president who helped Ostin forge Warner’s strong reputation in the creative community. Ostin’s 40-year-old son Michael, who resigned his post as Warner Bros. Records senior vice president just five days ago, is an 18-year veteran of the firm’s artist and repertoire department.

On their watch, the Burbank-based label became the envy of the record business, developing the careers of a wide range of revolutionary acts including Frank Sinatra, Jimi Hendrix, Neil Young, the Sex Pistols, Prince, Madonna and Green Day.

Thursday’s announcement will end months of speculation as to where Ostin and his team would resurface. Reaction to the news was positive from Hollywood to Wall Street.

“Bringing in Mo Ostin and Lenny Waronker gives DreamWorks an immediate presence and instant credibility in the music market,” said Jeffrey Logsdon, entertainment analyst and managing director at Seidler Cos. “David Geffen is already one of the most admired guys in the music field, but once again this shows that he and his partners at DreamWorks are committed to building the most creative and financially savvy executive team in the entertainment industry.”

Under the arrangement, Ostin, Waronker and Ostin’s son will become partners in the DreamWorks SKG music venture as well as shareholders in the entire entertainment combine. A DreamWorks source said they would own a “significant” share of the overall company, but neither side would discuss details of the pact. The record division, which will be temporarily housed at Geffen Records headquarters on Sunset Boulevard in West Hollywood, will be comprised of two separate labels: one for soundtracks called DreamWorks and another for pop and rock recordings called SKG.

Both will be marketed through MCA-owned Geffen Records and distributed internationally by MCA Music Entertainment’s UNI division. The first record to be released on SKG will be British pop star George Michael’s upcoming single, “Jesus to a Child,” which is scheduled to hit the stores by December. Sources said that DreamWorks is already trying to sign other stars including Janet Jackson and R.E.M.

Waronker said the group joined DreamWorks because they are weary of corporate politics and want to work more closely with a smaller staff and artist roster to which they can devote their undivided attention. He said SKG’s roster will not be confined to any one musical genre.

“For us, it all just comes down to talent,” Waronker said. “We have no baggage here. This is like a fresh canvas and we intend to paint it as we go along.”

Michael Ostin agreed. “The cool thing about DreamWorks is that there are no rules,” he said. “There’s no corporate climate here. It’s about fun and creative freedom.”

Geffen and Ostin have a long history together. They met more than two decades ago before Geffen launched Asylum Records, a lucrative boutique label that featured such artists as Linda Ronstadt and the Eagles. Geffen later sold the label to Warner.

In 1980, Ostin helped Geffen launch Geffen Records by cutting a deal that called for Warner to provide financing, marketing and distribution. Geffen’s new company scored hits by such artists as John Lennon and Guns N’ Roses and was quickly hailed the most successful independent label in the United States.

According to sources in the record industry, the two executives had a falling out around 1990, around the time Geffen sold his label to MCA, a move that eventually earned him an estimated $1 billion in cash and stock after Matsushita bought MCA. Geffen and Ostin apparently later worked out their differences.

“After competing with each other for all these years, it’ll be fun to be on the same side,” Geffen said in a prepared statement.

Last summer, Geffen was one of Ostin’s most vocal supporters during the period when Time Warner’s corporate management was trying to pressure him to quit. Geffen even went so far as to publicly chastise Time Warner Chairman Gerald Levin for allowing his corporate underlings to drive Ostin and Waronker out the door. Four other top Warner executives have since left the company.

Ostin and Waronker are the latest in a series of deposed Warner executives to wind up under the MCA umbrella. Other recent arrivals to land MCA-related label deals include former Elektra Entertainment Chairman Robert Krasnow and former Warner Music-U.S. heads Doug Morris and Mel Lewinter. Sources are predicting that Danny Goldberg may also resurface with his own MCA-financed label soon.

“Like Krasnow says, MCA seems like the place to be right now,” Ostin said. “I’m thrilled to be back in business. I can’t tell you how excited I am about the future.”

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Ostin Joins Geffen

DreamWorks SKG’s new record company reunites two of the most successful record company executives--Mo Ostin and David Geffen. Their careers span the history of rock ‘n’ roll music.

* 1964: Ostin is named vice president of Warner Bros. Records and signs the Kinks, which moves the label aggressively into the world of contemporary rock. David Geffen lands a job in the mail room at William Morris Agency in New York.

* 1966: Ostin hires record producer Lenny Waronker. Grateful Dead signed. Geffen begins his career as a manager representing singer Laura Nyro and later Jackson Browne and Joni Mitchell.

* 1967-69: Warner roster additions include Jimi Hendrix, Randy Newman and Neil Young.

* 1970: Ostin becomes president of Warner Bros. Records. Fleetwood Mac is signed. With financing from Warner, Geffen opens Asylum Records, featuring such artists as Linda Rondstadt and the Eagles.

* 1971: Warner expands into distribution and internationally as Rod Stewart joins the fold.

* 1972-74: Geffen sells Asylum to Warner Communications for $7 million. Ostin is named chairman and CEO of Warner Bros. Emmylou Harris signed.

* 1975-79: Geffen quits the entertainment business after doctors say he has cancer. Ostin’s Warner Bros. Records surpasses Columbia to become No. 1 in album sales. Warner makes deals with Sire and other labels, which lead to albums by Madonna, Talking Heads and Prince.

* 1980-85: Geffen learns that the cancer diagnosis is wrong. Ostin authorizes financing for Geffen Records, which joins the Warner lineup in 1980. It leads to albums by John Lennon and Guns N’ Roses. Waronker becomes president of Warner Bros. Records. Eric Clapton, Dire Straits, and John Fogerty sign on at Warner.

* 1986-88: Ostin signs R.E.M. and strikes a deal with Tommy Boy Records (Naughty by Nature) and alternative-rock citadel Slash (Los Lobos).

* 1989-90: Ostin signs deals with Rick Rubin’s American Recordings and Irving Azoff’s Giant. Geffen sells his company to MCA for stock worth $545 million. Eight months later, Matsushita purchases MCA and Geffen gets cash and stock worth more than $1 billion.

* 1992-93: Ostin signs deals with Red Hot Chili Peppers, Green Day and Madonna’s Maverick Records label.

* 1994: Geffen, Jeffrey Katzenberg and Steven Spielberg open DreamWorks SKG. Ostin steps down as chairman and CEO at the end of the year.

* Oct. 4, 1995: Ostin, Waronker and Michael Ostin join DreamWorks as partners and shareholders to run Geffen’s new music division.

--CHUCK PHILIPS