L.A. GRAPEVINEAs Seagram Co.'s restructuring of the music business began with its $10.4 billion acquisition of PolyGram, the industry entered a new era with plenty 4/01/1999 7:00 AM Eastern
As Seagram Co.'s restructuring of the music business began with its $10.4 billion acquisition of PolyGram, the industry entered a new era with plenty of speculation about what changes this would bring to the studio business.
In the most dramatic early events, after 37 years of operation A&M Records (but not the studios-see below) closed its doors on Thursday, January 21, letting go of nearly 170 employees who were given the day to pack and leave. As tearful staff gathered in the parking lot, a symbolic black band was draped over the A&M sign-a gesture Universal officials must have found embarrassing because they quickly ordered it removed. A few miles down the road, about 110 Geffen Records employees got the word that they no longer had jobs, with some of them heading across the street to rock 'n' roll hangout The Rainbow for a farewell bash. With 200 laid off in New York at Motown, Mercury and Island, all in all, Black Thursday saw nearly 500 staff cut in the first round of reorganization, which is expected to downsize 15 record labels into four major U.S. music groups and will take until at least July to complete.
Reactions to the events included a combination of sadness and hard-headed realism. At their peaks, A&M and Geffen had represented the apex of independent labels (with artists like Herb Alpert, the Carpenters, Peter Frampton, Supertramp, The Police and Janet Jackson on A&M and Guns N' Roses, Nirvana, Don Henley and Peter Gabriel on Geffen), but both labels had begun losing chart position as well as autonomy after they were swallowed up in the last decade by PolyGram and MCA.
A&M chief Al Cafaro, who was fired, spoke to the belief of many when he told the Los Angeles Times, "The record business is changing fundamentally. Don't think that there are calm seas on the other side of this threshold. If the quake that devoured A&M and Geffen is a 6.0 on the Richter scale, there's a 7.0 coming in this industry. It's a Wall Street world now. Get ready."
Still, the industry has always traveled in cycles. A&M, Geffen, Motown, Mercury and Island all have performed poorly in the last few years, with few hits and balance sheets often in the red, and there are those who acknowledge that the downsizing was probably merited. Seagram's expects to produce $300 million in savings annually by consolidating the companies, and, also as reported in the L.A. Times, analysts suggest that the restructuring will provide Universal with economies of scale that are guaranteed to boost operating margins and position the company for strong earnings growth.
What will all this mean to recording studios? Well, the first, most visible and interesting effect is that the A&M lot, with its five studios, numerous mastering rooms and historical landmark Chaplin Stage is up for sale, while continuing normal day-to-day operations. The staff at A&M Studios is experienced in surviving management transition (it wasn't that long ago that PolyGram purchased A&M), and business continues as usual, although, as the joke goes, there's now plenty of parking on the lot. "Last year was our most successful year ever, and we just had our most successful January, so obviously for us it's very frustrating to be operating in a vacuum," says chief technical engineer Gary Meyerberg.
Studio manager Ron Rutledge lists recent projects: "We've had The Wallflowers, a long stint with No Doubt, Black Sabbath's reunion record, Kiss' new release and mixing for Guns N' Roses' live record. Seal has been in doing remixes with Trevor Horn. Ringo Starr, who did his last record here with Geoff Emerick producing, is coming up again shortly. Another exciting thing that's happening is an addition to our mastering team: Stephen Marcussen has left Precison Mastering after 20 years and will be working with us for some time while he maps out his own facility."
"We've had a lot of great people in recently, we've got a lot of great things coming up, and we've got a lot of great plans for the future," continues Meyerberg. "Although right now we're in a holding pattern, people should realize that the studios haven't really been impacted. At A&M we've lived through a lot of transitions, and we've been able to make the effects be transparent to the client base. Nothing gets degraded-we're as committed as we've ever been to the clients in what we stand for, and in the standards and legacy that we maintain.
"From the days where Herb gave us an open checkbook, to PolyGram where we had a very tight checkbook, to now where we don't know what checkbook we'll have, through it all we've maintained the quality of our staff and the quality of our equipment," Meyerberg says. "We're also profitable, partly because we haven't jumped on any purchasing bandwagons. It's certainly one reason we're still here and we're in the black. I can guarantee that if we'd put in two SSL 9000s two years ago this studio would be closed. Instead, the equipment we have is all hot-rodded, and we've probably got the best tech people in the world. We're well-positioned in the rational world of accounting and columns and numbers as to why we should exist."
Studio Referral Service's Ellis Sorkin probably knows more about what's happening in the overall studio business than anybody. "Until things settle down, it is going to be difficult and people are going to become more and more uptight about collecting their monies," he observes. "It is a bit better now than at the end of last year, when speculation was rampant and people were really nervous. We saw a lot of projects set up to happen that got canceled at the last minute because shifts were still going on at the companies. Now people know more of what's going to happen. I expected business to be slower than it is, but we're breaking new ground here so it's difficult to predict.
"I do expect it to get interesting, with an eruption of a lot of new labels, which will be good for studios," Sorkin continues. "Business might get better on my end also, in that there will be more of a need for what I do-matching projects' budgets to facilities-with less people able to get things together on the labels' end. Business should improve for our company and other related businesses like production coordinators and contractors; I expect there will be a lot more outsourcing going on. Managers of producers and engineers as well as artists will also probably be taking on bigger roles to replace some of what was previously done at labels."
With so much staff gone and addresses changing almost daily, it's a given that there will be more confusion in A&R administration, which can only lead to one thing: slower receivables. Few understand better than industry vet Rose Mann Cherney, president of Record Plant, that cash flow is the lifeblood of a studio. "When the merger actually went through, we had PolyGram and Interscope acts in all three studios, so you can bet we feel very close to the issue," she comments. "As far as day-to-day operations, the only effect I expect to see is on payment. It's probably going to take longer to get paid, and if one company is late now, they'll all be late! I'm glad to hear that Lynn Weiner will be at Interscope-that should help! We have our system down here at Record Plant, though, we follow up on each stage of the payment process to make sure we get paid in a timely manner.
"As far as effects on overall business," she adds, "we're very optimistic. It's a sad thing when people lose their jobs, but who knows? With employees cut, maybe there will be more money available for bands and recording and more money for artist development."
Shivaun O'Brien, manager of Sound City, agrees that billing headaches have increased. "The whole payment process is more difficult. Universal had one system, PolyGram had another and there's a lot of confusion. Just trying to get purchase orders takes more time. Finding the right person to issue them isn't a given anymore, and then that person has to take bills for approval to someone who may not even be at the company anymore. The future can look very scary.
"Still, I believe in the end the overall effect will be positive. There are going to be a lot of very savvy, experienced executives on the street looking for talent and starting their own companies-that could end up being a very good thing. The best scenario would be a healthy resurgence of indie labels and more places for new and better music to get a foothold. At a place like Sound City, where our hearts are in cutting-edge rock, we would love to see that happening."
Skip Saylor has run his eponymously named studios for 18 years and, with his trademark wry sense of humor, voices a different opinion. "With all those people on the street, there are going to be more and more people out there trying to make records with credit cards, private money and bad checks in order to get something going."
Joking aside, Saylor also sees mixed issues on the horizon. "I've been busy as all get-out since January 4, but I would say the business is very volatile. I get ten phone calls for every session instead of the usual five, and I wouldn't give you five cents for predictability. As far as payment goes, a P.O. number isn't what it used to be, even from real companies. You get your P.O. at the last minute, and people tend to be so slow in paying that even the A&R administrators are apologetic. Every record is different, every P.O. number is its own particular experiment in terror, with the only thing that's consistent being that none of them are easy. As far as billing goes, I'm going to play it the same way I've been playing it for 18 years-cash, or, if I trust you, a check, or a P.O. number from a major label. Sony, Warner, Capitol-Capitol is great, by the way. Some days I wish all my projects were with them. Maggie Sikkens and Jonna Terrasi are wonderful. So are Evelyn Burgueno and Dee Dee Gordon at Sony, and Lynn Weiner, who was at A&M.
"As far as what it all means in the overall scheme of things, when the people who actually know how to make music are not at all in control, it lowers the bar," Saylor continues. "Record companies were started by people who knew how to make records. Capitol and Johnny Mercer, Reprise and Frank Sinatra, Herb Alpert and A&M. Now, the whole quarterly profit thing has changed the dynamics of the entire process. It's no longer the cheeseburger; now it's the wrapper. Actually, though, I don't have a problem with the idea of consolidation. I think the smaller the music industry gets, the broader the brushstrokes will be, meaning that the creation of the music will become the work of small independents. I'm not certain record companies even want to develop music-maybe that's not what they're for anymore. So, my joke about making records with credit cards...in the long run, that might not hurt us; it might be very healthy.
"Right now everybody's sitting around like vultures waiting to see what artists get dropped in the corporate paring down." Saylor says. "We'll get more work when everybody decides who they're going to sign and they have to start getting product from those artists. So as far as business goes, I think we're going to have some real busy times."
The pragmatic Buddy Brundo, owner of the 1998 TEC Award-nominated Conway Recording Studios, also holds a positive viewpoint of the consolidation. "I think it's wonderful," he comments. "You know why? You get rid of the deadwood. Whenever you have huge consolidations like this it's better for the independents, because the bigger the companies are, the slower they become-there's more bureaucracy and everything takes longer to get done. So right now is a good time for the young person, the person who has ears.
"It's sad that a lot of our friends are gone from labels, but from what I've seen they're going out and starting up their own companies and looking for new talent. I think it's the perfect time for the independents to come screaming in with new product. I think it's great. It's going to be an exciting time."