Joining the Party : Multinational Giants See Great Potential in Latin Music, and They’re Investing to Expand Its Market

Like dancers moving to the contagious rhythm of a conga line, record executives are latching on to the lucrative Latin music industry and investing heavily in the hope the party will last all night long.

Successful pop crossover artists such as Gloria Estefan and the late pop diva Selena have raised awareness of the Latin music market, which now accounts for about $250 million, or 2.1%, of annual domestic album sales, according to SoundScan. Now the multinational music giants are zeroing in on their Latin labels and divisions, where they see major growth potential.

“Latin music is catching on to the point where we are no longer perceived in the industry as little Latin labels,” said Jose Behar, president of EMI Latin. “If you’re looking for a big business, this is a train you should definitely be on.”

Record executives attribute the surge in Latin music sales to more than the recent crossover success stories. They note the purchasing power in the pockets of the country’s 27 million Latinos and the fact that Latinos are expected to become the nation’s largest minority group within 10 years. Aggressive marketing and distribution at retail outlets such as Tower Records is another factor.

Although Latin music sales have tripled over the last five years, the industry still hasn’t achieved the potential some had hoped. With sales increasing only about 10% last year, Billboard magazine’s Latin music expert John Lannert says, he fears the market has begun to plateau.

But industry leaders are convinced they can build Latin music into a bigger, more credible business.

Leading in the market is EMI Latin, whose offices are in the famous Capitol Records tower in Hollywood. Under Behar, EMI Latin has been at the forefront of shifting Latin music’s main audience from an older, blue-collar, Spanish-speaking population to a younger, bilingual market. Behar hit the jackpot when he signed Selena in 1989; EMI Latin’s earnings increased by 800% in three years. Since 1992, the label has had 17 No. 1 hits on Billboard’s Hot Latin Tracks Chart, from artists such as Jon Secada, Alvaro Torres, the Barrio Boyzz, Ricardo Montaner and Pandora.

EMI Latin has been developing younger, bicultural artists in an effort to attract second- and third-generation Latinos who have assimilated into American culture but who still feel strong ties to their roots. Behar says that assimilation has redefined the Latin music industry.

“There are now two sides to this business,” Behar said: “one side that is purely Latin and sings only in Spanish and another side which is bicultural and bilingual. To succeed, you have to know what clicks in the Latino world and what clicks in the Anglo world.”

One of Behar’s key decisions was to use slicker, more professional marketing and advertising.

“We don’t want a lady with fruit on her head in our ads; we want to fit in,” he said. “Instead of saying those [Anglos] just don’t understand, we have to look at what the big guys are doing and capitalize on it.”

Although record executives such as Behar are counting on the Latino crossover phenomenon to become a trend, some are skeptical.

Billboard’s Lannert sees the opportunity for something new to come in and shake up the market, but he believes it must be sung in English.

“Crossover is when music crosses over, when the sound and arrangement is Latin and appeals to the masses, like Secada and Gloria did. Selena sang pop music; she was not a Latin music crossover,” Lannert said. “Latin artists like Selena are crossing over, but the music is not.”

Evidence of the record industry’s interest in the Latin music market can be seen in the recent string of distribution deals signed by major labels.

* October 1995: MCA signed a distribution deal with RMM Records, headed by Latin music impresario Ralph Mercado. The RMM roster includes veterans such as Celia Cruz (dubbed “The Queen of Latin Music”), Tito Puente and Oscar D’Leon.

“I don’t think major record corporations are in this game because they’re looking for the next Selena,” said Zach Horowitz, president of the MCA Music Entertainment Group. “There is a significant body of music that sells well without crossover.”

* December 1995: PolyGram joined forces with producer Jellybean Benitez and launched HOLA Records. The New York-based label will release bilingual records that will be marketed by PolyGram Latino to the Latino market and by Island Records to the white market.

* January 1996: Sony Discos started a Latin label, Sir George Entertainment, headed by Sergio George.

The industry presents a challenge for newer players because of the market’s fragmentation. The three main subgenres include Latin pop; tropical/salsa, which is a strong sell mainly with Puerto Ricans and Dominicans on the East Coast; and regional Mexican/Tejano, which is more popular with Mexican Americans living in the West. As a result, regional trends tend to dominate marketing in the growing industry.

George, hailed as the brains behind the soulful salsa music of RMM’s contemporary newcomers India and Marc Anthony, emerges as the first player to focus on the urban Latino market with a new sound.

George says the trend for the future of Latin music is a fusion with other genres. The debut album from George’s label is called “Dark Latin Groove,” by a trio of New Yorkers of the same name. He describes the record as a bilingual mix that combines Latin music with rap and hip-hop elements. Asked about the industry’s outlook, George said it’s in transition. “Record corporations are being forced to do things they would never have done before because there is more money involved and more competition,” he said. “Things are getting better in the Latin music industry, but at the corporate level we still have a way to go.”

“We were a pond and now we are a lake,” Behar said of the Latin music business. “But before we become an ocean, we have to become better swimmers.”