Company Town : 4 Music Companies Wooing Interscope : Recording: Time Warner’s move to distance itself from the controversial label may prove to be politically savvy but financially disastrous.
Two months after Time Warner Inc. severed ties with Interscope Records, the controversial label is being wooed aggressively by four of the media giant’s major rivals.
Moreover, what may have been a smart move politically for Time Warner is now looking like a financial fiasco. Sources close to the bidding say the price to acquire a 25% stake in the Westwood label has risen to about $125 million--roughly what Interscope agreed to pay Time Warner for the half-share it is buying back.
Interscope, which was dumped primarily because it distributes explicit rap and rock music by the provocative Death Row and Nothing/TVT labels, has sold more than $350 million worth of albums in the United States in the past three years and has five albums on this week’s pop chart.
Sources say representatives from EMI, PolyGram, Bertelsmann and MCA have met with Interscope owners Jimmy Iovine and Ted Field during the past two months and expressed a desire to purchase a chunk of the label.
“Who wouldn’t be interested in having a stake in this amazing company?” said Charles Koppelman, chairman of EMI Records Group North America.
“Interscope has a terrific artist roster and is run by two guys who are so far ahead of the curve it’s unbelievable,” he said.
Founded five years ago by Iovine and Field, Interscope is widely regarded as one of the most successful new labels in the record business.
Pushing the boundaries of mainstream pop by transforming underground acts into MTV stars, the company has cornered about 2% of the total U.S. market--rivaling the performance of such catalogue-heavy institutions as Motown Records.
Although Interscope has been painted in the news media as a “gangsta rap” company, because of its association with Death Row stars such as Snoop Doggy Dogg and Dr. Dre, Interscope has consistently penetrated the nation’s pop, alternative and R&B; charts with hits by such acts as Bush, Deep Blue Something, the Toadies, BLACKstreet and Pure Soul.
Time Warner paid $15 million for 25% of Interscope in 1990 and invested another $100 million in the label about seven months ago, raising its equity stake to 50%.
But under political pressure from rap opponents, the media giant--whose cable television interests are subject to government regulation--on Sept. 27 decided to wash its hands of the label.
Time Warner executives said they severed ties because they did not have creative control over the music or lyrics released by the label.
The separation, which provides that Time Warner will continue to manufacture and distribute most Interscope product until April, requires Iovine and Field to repay Time Warner about $115 million before 1999.
That figure should be easy to raise for Interscope. Field is said to be asking $125 million for a 25% share of Interscope. Several executives questioned whether a buyer would ultimately pay that amount, but said they expected an offer to come close because Interscope is considered the only solid label for sale today.
Any company that purchases a stake in Interscope will be required to yield complete creative control over the label’s recordings--no matter how controversial they may be--to Field and Iovine.
Interscope is also said to be asking for significantly reduced manufacturing and distribution rates from whichever firm decides to become its partner, sources said. Interscope is also requesting the right to sell the company in five years to the highest bidder, they said.
It is unlikely that Interscope will strike a new partnership deal before January. Sources also said that Iovine and Field have yet to rule out the possibility of forming their own independent distribution company.
Time Warner’s competitors doubt that rap critics such as Senate Majority Leader Bob Dole (R-Kan.), former drug czar William Bennett and C. DeLores Tucker, chair of the National Political Congress of Black Women, will go after the next corporation that invests in Interscope.
The difference, executives say, is that those corporations--unlike Time Warner--are foreign-owned and less accountable to American stockholders.
In fact, not a peep has been heard in recent months from the anti-rap forces who made Time Warner tremble.
Although Bennett and Tucker vowed to hound any mainstream corporation that traffics in what they consider pornographic music, neither has complained about a stream of potentially offensive rock and rap albums released in the past 10 weeks on labels owned by either Time Warner or its five major competitors.
Bennett, who has recently attacked TV talk shows, said he is far from finished with the explicit lyrics issue.
“The cultural rot we are after shouldn’t be thought of as a single piece of trash,” Bennett said Thursday. “It is an enormous pile of garbage. We took a shovelful and removed it from the mainstream with our campaign against Time Warner, but the battle over our culture is far from over, and we will keep at this one shovel at a time.”