Iovine a Key Player in Seagram’s New Arrangement for Its Labels

As Seagram restructures its music business following its $10.4-billion acquisition last month of PolyGram, the company is counting on Jimmy Iovine to play a key role in the success of the reorganized group, which folds the Geffen and A&M; labels into Interscope Records to form IGA.

One task on the horizon is to figure out how to preserve the individual identities of Geffen, home to such acts as Beck and Hole, and A&M;, home to Sheryl Crow and Barry White, while operating with a smaller staff and a tighter budget--a plan to which Iovine is committed but that critics say is impossible.

Iovine, a former record producer, co-founded Interscope Records with Ted Field eight years ago and built it into one of the most successful record companies in the business. The Westwood label spawned a string of hit rock, rap, R&B; and gospel stars including No Doubt, BLACKStreet and the Wallflowers, as well as a stable of respected executives such as Tom Whalley and John McClain.

Iovine has been criticized for spending too much money on signing and promoting acts and for profiting from the sale of profanity-laced rap and rock music. Critics also contend that although Interscope has frequently dominated the nation’s pop chart, the company has rarely posted a profit.

Iovine, who broke into the business 27 years ago by mixing and producing records for such artists as John Lennon and Bruce Springsteen, agreed to speak about the restructuring and his curious transformation from freewheeling entrepreneur to cost-conscious hired hand.

Question: About 300 Geffen and A&M; employees got the ax Thursday during the first phase of Seagram’s massive global restructuring of its music assets. How do you feel about what’s going on?

Answer: It’s terrible when anybody has to lose their job. I feel bad. I think everybody at Universal [Music Group] is feeling down because of the layoffs. But even if Seagram hadn’t purchased PolyGram, I believe something like this would have had to happen soon anyway. PolyGram had nine labels in America. Let me put it like this:

Time Warner has only three. Sony has two. You just can’t have nine. It gets to the point where that’s not serving anybody. It hurts the artists and it hurts the company and it makes it impossible to focus valuable resources on important projects.

*

Q: There is a rumor that you plan to drop every artist that doesn’t hit a certain sales figure.

A: That’s bull. We kept a number of acts that haven’t sold anything and plan to drop several others that sold more than 500,000 units. We listened to as much music as we could and met with as many people working on the records as we could. What it comes down to in the end is a judgment call. You bet on the music and people that you think you can work best with.

*

Q: There’s not going to be much left of A&M; and Geffen after the staff and artist roster cuts this week. How do you plan to preserve the identities of the two labels as Universal folds them into Interscope?

A: We are committed to keeping A&M; and Geffen exciting and vital. Anyone who know me knows how much I revere the legacy of those companies and the guys who built them. To me, A&M; and Island were the ‘70s. Geffen was the ‘80s. We built Interscope as a hybrid of A&M; and Geffen and Island and Atlantic and the philosophies that drove them. Herb Alpert and Jerry Moss. David Geffen. Chris Blackwell. Ahmet Ertegun. These are guys I’ve always looked to for inspiration and direction. It’s like a dream for me to end up running Geffen and A&M.;

*

Q: How will IGA be structured?

A: Ted [Field], Tom [Whalley] and I will run the company. We will have separate [talent scouts] at Interscope, A&M; and Geffen--all of whom will report to us. Interscope and Geffen will share a rock promotion staff. There will be separate urban promotion staffs for Interscope and A&M.; What we want to create here is a big company that can move quickly on its feet and yet have the size and muscle to market and promote Interscope, Geffen and A&M; artists in a big international way.

*

Q: PolyGram was criticized for killing the creative cultures at A&M; and Island after purchasing the labels in the 1980s. What makes you think that the Interscope culture will survive now that you are fully owned by a giant corporation like Seagram?

A: I’ll give you two good reasons: I work for [Universal Music Group Chairman] Doug Morris and [Seagram chief] Edgar Bronfman Jr. These aren’t the kind of guys who think, ‘OK, we got Jimmy now. Let’s give him a lobotomy.’ What I like about this company is that we have people at the very top who truly respect the creative process and embrace the entrepreneurial spirit. Of course, they expect us to deliver our numbers, but they also get the unique culture we created here and want to preserve it.

I do believe that Island and A&M; would be very different companies today had PolyGram found a way to keep Chris Blackwell and Jerry Moss happy and on board. Either they made a mistake by buying the wrong company or they made a mistake by driving out the guys who made the companies a success. I think that might have been the biggest mistake the industry made during the CD boom expansion. The corporations thought they could replace all the entrepreneurs with a bunch of managers that they could control. You know what I’m talking about. Guys whose first, second and third talent is to deliver numbers on a timely basis. It didn’t work.

*

Q: Are corporations unrealistic to expect music labels to perform under a quarterly reporting system?

A: There is no doubt that the reporting of quarterly numbers is something that is counterproductive to the creative process. That’s a fact. People on Wall Street have got to come a little bit closer to the record business to fully understand it so that they don’t hurt the companies that they are interested in investing in. Edgar [Bronfman] and Doug [Morris] understand the consequences of what happens when you try to jam an album out just to make the numbers. It damages the music. It damages careers. And while all that hocus-pocus might look good on paper in the short run, it will damage the company’s future prospects in the long run too. You don’t ever hear about anyone at Coca-Cola calling up their managers and screaming, “Hurry up! Ship out more Coca-Cola! I don’t care if you have enough time to put the right amount of sugar in it. We’ve got to make our numbers!”

*

Q: You’ve been criticized for spending too much money signing and promoting acts at Interscope. Some of your competitors wonder whether a guy who hasn’t had to watch the bottom line for the last eight years can run a profitable corporate enterprise.

A: It’s true that Interscope was never driven by label-level profits. But our corporate partners always made money by manufacturing and distributing our records. At Interscope, we were in a building mode since the day we opened. We were in the business of putting together a great artist roster and team of executives and building value for the people who owned Interscope. And I think we did a very good job of that. But now we’re in the business of building value for Seagram. And that’s what we’re going to do. Watch us. We’re going to be a lean, profitable company with a giant international reach--thanks to the merger. The merger also gives us the resources to experiment with different ways to reach consumers beyond radio, whether it be TV or the Internet. I know that parts of this restructuring are brutal, but I think Seagram has an opportunity here to create a new business model that could have an enormous impact on the future of the industry.

*

Q: What’s the biggest problem ahead for Seagram and the industry as a whole?

A: If we don’t improve the economics of the record business, we are going to end up like the movie business, where it’s getting very difficult to make any profit at all. . . . We need to be more aggressive in reaching out to potential music consumers. We are competing with Bill Gates and the Internet and the electronics industry for the minds and hearts of potential record buyers. Not just that, I think the record industry needs to become a more fascinating place so that we can inspire talented kids to become musicians and excite smart young executives to join the business and shake things up.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Fading Labels

A&M; Records

Founded: 1962

Roster: Carole King, Joe Cocker, Peter Frampton, the Carpenters and Styx delivered big hits for the company in the 1970s; the Police, Bryan Adams and Janet Jackson in the 1980s; Sheryl Crow and Soundgarden in the 1990s.

History: Kicking in $100 each to start a record company, trumpeter-composer Herb Alpert and business partner Jerry Moss use their inititals to name their enterprise “A&M.;” Their first single, Alpert’s “The Lonely Bull,” sells more than 700,000 copies. The label moves into Charlie Chaplin’s old studios in 1966. Dutch-owned Polygram buys the label for a reported $500 million in 1989 and, within four years, both Alpert and Moss had given up day-to-day roles in the label.

Geffen Records

Founded: 1980.

Roster: John Lennon, Elton John and Donna Summer brought the flegling company instant credibility, but Lennon’s death sent the label reeling. The company rebounded by the late 1980s with hits from Aerosmith, Don Henley and Guns N’ Roses. More recent stars have included Nirvana, Hole, Counting Crows and Beck.

History: Music mogul David Geffen had left the music industry after the 1972 sale of his Asylum Records but returned in 1980 to found his own label, financed by Warner Bros. Records. Geffen Records was bought by MCA in 1990 for a reported $545 million, and five years later its founder left to devote his energies to a new entertainment venture, Dreamworks SKG.