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Paradise Lost: Arista Becomes a Hell-Hole And Clive Gets the Last Laugh
This is not news...News is allegedly objective. This is anything but. This is about interpreting
the news into information that you can use. The key to predicting the future
is in interpreting the past. In real terms, this means understanding how the
big players interpret their mistakes and their recent acquisitions.
Readers: Every major periodical is working on a similar story to this, but
remember where you heard the "inside" facts first. This past week a source
at BMG informed me that the German Giant is preparing walking papers for
Arista's new president, Antonio "LA" Reid. It seems a year later the
management at BMG is questioning their wisdom of de-throning legendary
old-school record man Clive Davis and replacing him with La Face Records',
"LA" Reid. For those who haven't been following this: when Clive scoffed at
his early retirement, BMG's then CEO Strauss Zelnick began eyeing Reid as his
protégé in order to gain control of Arista.
Reid had the street cred but not the book savvy to run the $3,000,000,000
company so Zelnick, hoping to groom Reid into someone whom he could make more
presentable to the collegiate board of BMG, made Reid his "pet project" and
sent him to a 10 week summer seminar at Harvard Business School. He got the
Germans to back this plan and the rest has become record industry history:
BMG forces Clive out only to give him his own label deal at a start up cost
of about a hundred million and puts Reid in the driver's seat. Now, a year
later Clive is back in the game with a vengeance while Arista has turned into
a veritable ocean of pink slips and mismanagement.
A healthy pissing match between Davis and Reid would have been interesting
for all to watch. But when Reid's mentor, Zelnick, was fired it left no
layer of insulation between "LA" and the rampant budget cuts that have been
sweeping through BMG's labels for over a year. Mr. Reid had to make his own
executive decisions, and with only his instincts and Harvard Summer Camp
training to assist him, the multi-platinum song writer has become
increasingly paranoid, cleaning house of the remains of the Davis regime,
even if it means paying off six-figure compensation packages.
Now cash that could be used for artist development is going to pay off fired
executives so they can keep up with their Lexus payments. These are not just
mailroom clerks, but A&R people with proven track records like, Richard
Sweret who brought Ace of Base and Sara Malachlan to the label. The lack of
sanity is beginning to take on costly and comical proportions. Several times
in the last six months the secretarial pool and the mail room staff have
received free catered lunch served by waiters because no one bothered to
cancel catering orders for the executive meetings that had been canceled days
earlier.
Ironically, "LA"'s motto for this year's brutally expensive corporate retreat
in Puerto Rico was, "ONE FAMILY, ONE VISION." That vision seems to be
manifesting itself in the firing of all loyal employees and replacing them
with twice the amount of temps. Most of them younger, less experienced, and
apparently less qualified folk who will work for less money. To the casual
observer the result in the staff cuts seems to be that there are more
inexperienced employees working for lower salaries, but no significant
reduction of headcount, which was the main point of BMG's budget cuts to
begin with.
Once again artist development will take the hit and the "welcome to the
family" greeting for a new Arista exec comes with the mental image of "LA"
poised over the entrance of the executive wash room with a sickle, like the
angel of death.
But don't think Clive is out-of-the woods. While Davis' new label, J Records
is sopping up buzz with signings like Soil out of Chicago and Alicia Keyes,
they are also feeling the pressure to economize in addition to showing the
world that Clive is not too old to Rock and Roll. Despite the fact that acts
like Usher and Outkast demonstrate that Reid has the golden ear, the industry
seems to be backing the "old Man" at J Records with cautious optimism.
Meanwhile, remaining employees at Arista say that the place feels like the
Titanic.
And things are about to get way worse for Mr. Reid. Last month, quite
suddenly, Senior Director of Marketing, Shanti Das, quit without notice or
comment. Unlike the other causalities of war, she'd been with Reid at La
Face Records for years in Atlanta. "LA" brought her in to run his division at
Arista. She is the first of the Reid crew to jump ship of her own accord.
How long can this continue? In business pages last week BMG announced NO
PROFITS for the music division this year. There is talk that they may sell it
off.
WHAT IT ALL MEANS
I like "LA". I love his work, and he's got amazing ears. But it's clear
that he's being played for a patsy. My only question is, does he see it?
BMG has been trying to downsize Arista for years, hoping to take BMG public.
That's why they wanted to get rid of Clive in the first place: his $4,000,000
a year salary looks real whacked when you're trying to attract investors.
But old imprints don't just die. They must be strategically crippled until
their only remaining value is their catalog. In BMG's case they needed a fall
guy for Arista. Someone to blame for its "failure." Reid is the prefect
choice. He was the win/win scenario when they let Zelnick put him in power
and fired Zelnick shortly afterward. If Reid fails, they would blame Zelnick
for his experiment. If he succeeded they would take the credit and Reid
would be in their hip pocket. It's Julius Creaser in modern times.
So, if you have a new deal on J Records, Arista (or really any BMG label) you
need to watch your back. If the German Giant can't get lean enough to sucker
in some serious cash you may find your contract sold off to some three-deep
label with lame distribution. They have the power to do that. (Look at the
clause in your contract called "Release Obligations.")
The sad part is that "LA" may really have the skills to pay d'bills as an
executive, and I'm sure in his mind a year ago when he got the opportunity of
a lifetime, he felt that he could have been a junior Clive Davis. But the
deck was stacked against him and now it looks to this observer that "LA" Reid
is BMG's sacrificial lamb.
Hey, you know the old saying, just because people really are out to get ya,
doesn't mean that you're not paranoid.
SOME CASUALTIES OF REID'S WILD SWINGING AXE
Richard Sweret SVP A&R. Booted in October 2000.
Marc Zimet - VP Video Promotion, Jim Elliot - VP Top 40 Promotion, Derek
Lafayette - Director Urban Artist Development, Dana Hill - Sr Director Urban
Marketing. All booted in November 2000.
Ken Krongard - Director A&R, Michelle Ozbourn - Manager West cost A&R.
Booted in January.
Pete Ganbarg - Sr VP A&R, Ken Levy - SVP Creative Services. Booted in
February.
And in June: Rob Schneck - Director New Media (after recent promotion), Lou
Simon - Sr Director A&R (hired in Feb), Lynn Salliveras - Promotion, Director
- (hired in November.)
RIP to all.
Linkography
Arista - www.arista.com
BMG - www.bmg.com
La Face - www.laface.com
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