A New Mix for the Recording Industry

Two years ago, Pharrell Williams and Chad Hugo turned up the heat under Britney Spears by writing and producing her sexed-up single, “I’m a Slave 4 U.”

Lately, a lot of people in the record business have been singing that tune about Williams and Hugo.

Known professionally as the Neptunes, the two 30-year-olds were honored this month with a Producer of the Year award at the Grammys. What’s dazzling the industry, however, is their reputation for scoring rich deals with competing labels when companies have had little cash to spare amid slumping sales.

Now they are playing the field again. Williams and Hugo recently began shopping for a new partner for their Star Trak Entertainment label, two years after launching it as a joint venture with Bertelsmann Music Group’s Arista Records. Sources say the pair want a deal that will guarantee them at least $5 million plus a payment to help secure a release from their agreement with Arista.

At the same time, Williams and Hugo have been touring Europe under their recording contract for rival EMI Group’s Virgin Records, playing in their rap-rock band N.E.R.D. to promote their second album, “Fly or Die.” According to industry sources, EMI paid them advances of about $1.5 million to record and deliver the album, set for release next month.

All the while, the Neptunes -- whose recent production work generated more than $200 million in album sales -- operate as free agents when crafting beats for others. They pump out songs for any label that can pay the going rate, which approaches $300,000 for a single track, more than the cost of producing many albums. In addition, they usually get a royalty based on the suggested retail price of the CD.

That juggling act follows a model set by producers like Sean “P. Diddy” Combs and Timbaland, who also used their production work as a springboard to their own record contracts and joint ventures with the major conglomerates.

But it is also causing friction, as companies recognize that hotly pursued players like the Neptunes won’t give any label the kind of exclusive control that was once taken for granted.

“There are times in music when the power is focused in producers’ hands, and this is one of those times,” said Virgin Records chief Matt Serletic, himself a Grammy-winning producer who created hits for Matchbox Twenty and Santana.

Some Bertelsmann insiders bristled as Williams and Hugo produced smash after smash for rivals while their own record venture released just three albums in two years through Arista, selling about two million copies combined. Sources close to the Neptunes say they are looking for a new partner for Star Trak because they believe Arista didn’t do enough to promote their recordings and they didn’t generate any profits.

The Neptunes’ attorney, Steve Shapiro, declined to discuss the Arista partnership but said any split would be amicable and added that his clients “are going to enjoy an ongoing relationship” with Bertelsmann, which declined to comment.

So far, neither N.E.R.D. nor Star Trak has produced a runaway blockbuster on the scale of, say, Justin Timberlake’s “Justified” album, which sold 3 million copies and for which the Neptunes produced several tracks. But that hasn’t mattered: The Neptunes have become superstars by making their own brand name more important than a commitment to any one label.

Hugo says the pair is careful to balance record labels’ competing priorities, rather than playing them against each other.

“It does get hectic bouncing between three studios doing three different projects,” he said by phone from his hometown, Virginia Beach, Va., where he was finishing tracks for N.E.R.D. (which stands for No One Ever Really Dies) and for a Star Trak rap act, Clipse. “I’ve kind of learned how to change the channels -- it’s just like changing the channels on a remote.”

Hugo and Williams first paired up while attending middle school in Virginia Beach. Williams played drums in his school marching band; Hugo played saxophone.

The friends formed a band called the Neptunes, and caught their first break when renowned New York R&B; producer Teddy Riley relocated to Virginia and hosted a talent show at Williams’ high school. Riley signed the act to his own label and let the duo produce songs for his group, Blackstreet. But he never released the Neptunes’ album, so the pair struck out on their own.

After crafting remixes for a number of fledgling acts, Williams and Hugo eventually landed a deal with EMI’s now-defunct EMI Records division. The label folded in 1997 before releasing their album, and they once again fell back on production work.

They rebounded by scoring their first smash, producing Mystikal’s “Shake Ya Ass” on Jive Records in 2000. Since then, they have built a resume that includes Justin Timberlake’s “Rock Your Body,” Nelly’s “Hot in Herre,” and Jay-Z’s “Excuse Me Miss.”

As recording artists, Williams and Hugo earned their shot in 2000, when Virgin signed their N.E.R.D. act, which includes longtime friend Shae Haley.

Williams -- who still wears his Princess Anne High School letterman’s jacket and speaks of wanting to start a family -- has raised the duo’s profile, lending his falsetto to recordings by clients Snoop Dogg and Busta Rhymes and appearing in their music videos.

Virgin Records, in renegotiating N.E.R.D.’s contract, went so far as to provide Williams a written guarantee allowing such cameo appearances, notwithstanding the industry’s usual demand to dictate terms for such outside work. Label executives hope the Neptunes’ ubiquity will help drive sales of “Fly or Die.”

The more reserved Hugo, a skateboard fan and father of two, said their rising profile mattered to brand-savvy contemporary listeners, who often demand to know who was in the control booth before shelling out for a new recording.

“With Quentin Tarantino or Steven Speilberg, you know it when you see it,” he said. “I think people should recognize where the music is coming from.”