Madonna to Sell Stake in Label to Warner Music

She’s made up her mind: She’s not keeping her label.

Madonna has agreed to sell her interest in Maverick Recording Co., which she co-founded in a joint venture with Warner Music Group, the companies said Monday. The deal is part of the settlement of a lawsuit she filed accusing Warner Music of cheating her and her partners out of millions of dollars.

One of Madonna’s partners in Maverick, Ronnie Dashev, also will sell, and she and Madonna together will receive about $10 million, according to people familiar with the settlement agreement. The singer’s other partner, Guy Oseary, agreed to sell part of his stake and extend his employment contract with the label, these people said.

Warner Music will own more than 75% of Maverick, up from 40%.

When the transaction is completed, possibly within weeks, Warner Music is expected to shut Maverick’s Beverly Hills office, lay off some staff and shift the remainder to its flagship Warner Bros. Records label in Burbank, sources said.

Maverick, whose roster includes such acts as Michelle Branch and Alanis Morissette, will continue as a separate label, the company said. Maverick is still important: In fact, Morissette’s “So-Called Chaos” is the only album in the Warner Music family that ranks in the top 30 on the nation’s pop chart.

After filing the breach-of-contract suit in March, Madonna said Warner Music’s conduct amounted to “treason.” The suit accused Warner Music of repeatedly “sacrificing the interests of the partnership and its partners for [its] own selfish financial interests.” It also said the company had unfairly forced the label to lay off its radio promotion staff and used improper accounting practices to artificially reduce the joint venture’s earnings.

But with the discovery phase of the lawsuit starting, pressure was mounting on both sides to settle the case, sources said. Edgar Bronfman Jr., whose investment team recently acquired Warner Music from Time Warner Inc. for $2.6 billion and took the company private, wasn’t keen on the idea of sparring with the pop icon while trying to revitalize the recording giant.

The fight erupted in March, after the collapse of talks between Maverick and Warner Music about how to end the venture. Expecting the suit, Warner Music tried to preempt Madonna by asking a Delaware court to rule that the music conglomerate had not breached its contract with the label. Warner Music said in that complaint that Maverick’s expected suit amounted to a negotiating ploy aimed at giving Madonna and her partners more leverage in the talks.

Maverick, launched in 1992 as a 50-50 joint venture with Warner Music, had once ranked as possibly the most successful artist-run label. But it was viewed initially as little more than a vanity label -- a bargaining chip used by Warner during contract talks to sweeten its offer to Madonna, who is signed to the Warner Bros. Records label.

Warner put up about $10 million to launch the label, which was at first run by Madonna and her then-manager, Freddy DeMann. One of DeMann’s hires was Oseary, then a teenager with virtually no experience in the music business, who had befriended DeMann’s daughter.

Oseary delivered the company’s biggest early hits, bringing in Seattle rock act Candlebox, whose debut album sold 4 million copies. Oseary then came across a recording of Morissette, an unknown Canadian singer whose demo had been rejected by almost every major recording company. Her debut for Maverick -- “Jagged Little Pill” -- went on to sell more than 28 million copies worldwide, making it one of the bestselling debuts in history.

The label had generated more than $50 million in profit by the time it approached the end of its initial Warner pact in 1999, according to Warner Music’s complaint. But a rift opened among the partners, with DeMann reportedly favoring selling out to Warner while Maverick was riding high and Madonna and Oseary preferring to continue.

In a restructuring of the pact in 1999, Warner agreed to lend Maverick’s partners $20 million to buy out DeMann.

Since then, Maverick has been short on hits and, according to Warner Music’s complaint, has racked up more than $60 million in losses.

Many such ventures by record companies and artists -- including Michael Jackson’s MJJ label and the Beastie Boys’ Grand Royal label -- have failed to produce the hoped-for hits.

“The industry is very wary of [joint ventures] because not too many of them have worked out,” said attorney Don Passman, who has represented such artists as Janet Jackson and Mariah Carey.

“The companies were taking 100% of the risk of building an asset, and then, if successful, they’d have to buy them back for a lot of money.”