Sony Music Chief Resigns, Ending an Era

Thomas D. Mottola, one of the most recognizable executives in the music business, abruptly resigned Thursday as head of Sony Music Entertainment, instantly becoming a symbol of the recording industry’s inability to reverse plunging profits and surging piracy.

Mottola’s success at building the careers of such pop divas as Celine Dion, Jennifer Lopez and Mariah Carey -- whom Mottola later married and since has divorced -- has failed to translate in recent years to Sony Music’s bottom line: It posted operating losses of $142 million for much of last year and ranked third among the five major music corporations.

The industry’s longest-reigning “creative” record chief, and one of its highest paid, characterized the move as of his own making. He said he decided over the course of a year to launch his own label, and will have considerable financial help from Sony. “I’m the kind of guy who likes to be in charge of my own destiny. I’m an entrepreneurial spirit,” Mottola added. “This is what I decided to do.”

Mottola also said he couldn’t stand to watch the corporate cuts expected by Sony in the year ahead. Industry sources, however, said Mottola would have had little choice.

Displeased with the music division’s recent performance and Mottola’s highflying lifestyle, Sony’s Japanese brass informed him that the company was unwilling to renew the extraordinarily lucrative financial provisions in his contract when it ran out in August 2004, those sources said.

To many in the entertainment world, it signaled the end of an era in which music executives chiefly concerned themselves with grooming and promoting talent rather than simply boosting the bottom line. Such a sensibility may no longer have a place, they said, in an industry that saw album sales decline 11% in the last year as more and more fans pirate music off the Internet or “burn” CDs instead of purchasing them.

Mottola’s replacement is expected to be an as-yet-unnamed financial executive, who will restructure the music group and fire at least 1,000 employees in the months ahead in an effort to please Japanese bosses determined to improve profit, sources said.

Among the names being floated as potential candidates are former AOL executive Robert Pittman and former Universal executive Brian Mulligan. Sources close to both men denied the rumors.

“This move symbolizes the end of the old way of doing business in a declining record industry,” said Michael B. Nathanson, an analyst with Sanford C. Bernstein & Co. “Tommy is the kind of talent person that the music business was built upon. For Sony to replace him with a numbers guy is a total about-face. It’s a radical statement.”

He is known as a creative manager as skilled at running marketing meetings as he is at making tweaks in a recording studio’s control booth.

Competitors credit Mottola, a former guitarist and artist manager, with transforming the once-stodgy music corporation into a global competitor with a hands-on approach that remained no matter how high he rose within Sony’s corporate structure.

Mottola joined Sony as head of CBS Records Group in 1988 and took over as chief of Sony Music in 1995. He improved Sony’s credibility by handpicking one of the industry’s most aggressive and stable management teams. He also pioneered the concept of marketing U.S. acts in global territories, a move that often tripled sales numbers and transformed entertainers such as Carey, Dion and Michael Jackson into international superstars.

During the Sony boom years that he helped engineer, Mottola negotiated one of the richest management contracts in music history. Sources say the 52-year-old executive was guaranteed a $12-million annual salary and, with bonuses, could earn as much as $20 million a year. That’s more than 10 times the amount made by the company’s highest-ranking official, Sony Corp. Chairman Nobuyuki Idei.

That did not sit well with Japanese executives watching Sony profit drop for several years. During the late summer, the Japanese brass told Mottola that they intended to exert more control over the future of the company.

Sources say Mottola dodged a messy contract dispute by resigning early.

Under an agreement struck late last week, Sony will pay Mottola a severance package in excess of $20 million to leave his post and to launch an entertainment label, to which Sony could commit about $20 million a year until 2008, sources say.

Mottola, long known for his flashy image and brash approach, often lived his life out on the pages of the New York tabloids. This year, his wife’s sisters were kidnapped. One of his biggest stars, Michael Jackson, jumped on the artist rights bandwagon, accusing Sony of questionable accounting practices and blasting Mottola as the devil.

During the late 1980s, critics had a field day when Mottola became romantically involved with Carey, saying he was promoting her only because they were linked. Carey turned out to be one of the bestselling stars in the business.

But Mottola mostly has been highly regarded as an executive who delivered profits with hits by such acts as Carey, Dion, Jackson, Bruce Springsteen, Pearl Jam, Lauryn Hill, Offspring, Shakira and New Kids on the Block.

It is unclear what Sony plans to do about the heads of its Columbia and Epic labels. Columbia chief Don Ienner and Epic’s Polly Anthony each have less than a year on their contracts. So far only Sony Senior Vice President Michele Anthony, Mottola’s right-hand person, has renewed her deal.

The corporate drama unfolding at Sony is drawing comparisons to a similar upheaval in the mid-’90s that decimated Time Warner’s music division, which has never recovered. Former Warner chief Robert Morgado ultimately was fired after forcing nearly a dozen creative executives out the door.

“There are very few executives who can run a company and still go into the studio and make a record. Tommy can,” said Doug Morris, chairman of Vivendi’s Universal Music Group, the largest music company in the world. “Depending on who they replace him with, it will send a signal to the industry about the future of Sony.”

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Bio: Thomas D. Mottola

Position: Chairman and chief executive, Sony Music Entertainment. He resigned Thursday.

Age: 52

Hometown: New York

Sony milestones:

Became president of Sony’s CBS Records unit in 1988 and continued as the U.S. division’s president when it renamed itself Sony Music in 1990. Became president and chief operating officer of parent Sony Music Entertainment in 1993. Became chairman and CEO in 1998. Under Mottola, Sony signed superstar acts Mariah Carey, Celine Dion, Michael Bolton, New Kids on the Block, the Dixie Chicks, Jennifer Lopez, Destiny’s Child and Shakira. Expanded SME into more than 60 countries.

Sources: Sony, Times research