Corporate downsizing hits the music business; Nashville feels the heat
By Beverly Keel
FEBRUARY 15, 1999: The music business, as we all know, is dominated by corporations, with their focus on the bottom line. It's been that way for some time now.
Suddenly, it seems, the chickens--or, in this case, cash cows--have come home to roost. It remains to be seen precisely how this ballooning corporate trend will affect Music City. But all indications suggest that this is just the beginning. In this week's multi-part cover story, the Scene writers take a look at the effect of downsizing on Music Row and on the music industry.
As Decca closes its doors, Music Row looks to an uncertain futureThings have settled down now, but only a couple of weeks ago, up and down 16th Avenue, voices were joined in a doleful chorus. Thanks to the burgeoning trend of corporate downsizing in the music business, the office of Decca Records was shut down--an abrupt end to a label steeped in country-music tradition. With virtually all of its employees on the street and the majority of its acts without recording contracts, Decca might be the year's first victim of corporate slashing and burning, but some observers say there are more to come.
Wall Street paid a visit to Music Row, and boy did it make an entrance. But the story actually goes back to late 1998, when the Seagrams corporation, owner of Universal Music Group, purchased PolyGram for $10.4 billion. Universal is the parent company of MCA, Decca, Interscope, and a handful of other labels, while PolyGram is the parent company of a number of labels as well, including A&M, London, Island, Mercury, Motown, Polydor, and Verve. The merger of these two entertainment conglomerates created the largest music company in the world.
Word leaked in November of Seagrams' plans to restructure the newly combined organization by slicing $300 million from its annual operating budgets; labels were to be integrated and jobs to be eliminated. After several months of speculation, the bomb finally dropped on Jan. 21, now known as "D-Day": Decca was closed immediately, A&M and Geffen lost half their employees, and Motown was decimated (cut from 75 to 7 employees). About 500 workers lost their jobs and another 500 to 700 more firings should come by mid-year; about 250 acts were dropped.
Compared to Los Angeles and New York, Nashville got off lightly. Although Decca was shut down, only nine full-time Decca employees, six MCA employees, and one Mercury worker lost their jobs, about 2 percent of the total jobs lost. Workers were given nearly four weeks' pay for every year they'd worked, health insurance for six months, and the services of a career specialist.
Decca's top acts--Mark Chesnutt, Gary Allan, and Lee Ann Womack--were shifted to MCA, while all of the others--Rhett Akins, Chris Knight, Dolly Parton, Rebecca Lynn Howard, Danni Leigh, and Shane Stockton--were dropped. Mercury dropped John Anderson, Jenny Simpson, and comedian Rodney Carrington. MCA's roster remains intact.
While other labels under Universal/PolyGram are merging, Mercury and MCA Records will remain autonomous. A plan to have Mercury Nashville's president Luke Lewis report to MCA Nashville chairman Bruce Hinton was nixed in part by no less than Shania Twain, whose impressive record sales have earned her considerable corporate clout. MCA's and PolyGram's publishing companies are expected to merge within the month, which could mean additional layoffs and roster cuts.
All things considered, Nashville really did come out of the consolidation fairly unscathed. Even so, the news was enough to convince many fearful nay-sayers that a little piece of the sky had just fallen smack-dab in the middle of Music Row. So the question remains: Does the closing of Decca--a name once associated with Loretta Lynn and Conway Twitty, two of country's biggest stars--now represent the dismal future of a genre generating flat sales?
As tears dry and unemployed workers start booking job interviews, Decca's closing starts to look more insignificant--depending on whom you talk to. But even those who invoke the imprint's historical importance are missing a point. True, the original Decca was a highly respected label, guided by Paul Cohen and Owen Bradley, with a roster boasting some of country music's greatest acts: Ernest Tubb, Red Foley, Kitty Wells, Patsy Cline, Webb Pierce. But the Decca name was retired in 1973, as the company was sucked up into the MCA corporation. The Decca that closed last month was only reestablished five years ago: Its tie to the original Decca was in name only.
The bottom line is, most people on Music Row can't get too worked up--especially since they all still have jobs. "Do you know the difference between major surgery and minor surgery?" asks Donna Hilley, president/CEO of Sony/ATV/Tree. "It's major surgery if it's on me, and it's minor surgery if it's on you. That's the way these mergers are; it depends on who you ask."
Says RCA Label Group chairman Joe Galante: "Unfortunately, people got laid off, but Decca's market share wasn't sufficient to cause us to go, 'Oh my God!' It's a shame, but...I don't think there will be a long-term impact. From an overall share standpoint, [Universal/PolyGram] is going to be a market leader. What does that mean to us? Just that the year-end [sales] charts are different. But on a day-to-day basis, it won't make that much difference."
In other words, the move isn't so much a reflection of country's declining sales. Rather, it's more a symbol of what happens in the corporate world on a regular basis: Companies get bought, people get laid off. "I was watching 60 Minutes II the other night, and the whole commentary was about consolidation and what Sara Lee has to do with lingerie," says Evelyn Shriver, president of Asylum Records Nashville. "It's a comment on what's going on with our social history. You have the consolidation of PolyGram and MCA. That's significant because it hits us where we live."
As Shriver points out, Decca's closing caused a reaction on Music Row, but up to that point, people were surprised the label was even still in business. Decca might have arguably been the most successful of 27 new Music Row labels in the last five years--thanks to Mark Chesnutt and Lee Ann Womack--but rumors of its demise began circulating about two years ago. Even as other upstart companies (A&M Nashville, Almo Sounds, Imprint, Rising Tide, Magnatone) started falling by the wayside, Decca managed to survive--until now, that is.
While the closing has few short-term consequences, some Music Row denizens, such as Tim Wipperman, executive vice president/general manager of Warner/Chappell, say it serves as a harbinger of further industry consolidation. Expect more downsizing in Nashville as bottom lines demand attention. In other words: Garth Brooks, meet Brooks Brothers.
"You're looking at a business that is now Wall Street-driven rather than it being people who had a true love for music," Wipperman observes. "It's no different now to Wall Street than selling widgets. Long term, it will have a profound impact on Music Row."
Moreover, since this downsizing happens to be occurring at the same time as a downturn in country sales and an overabundance of record labels, the speed of the changes may increase dramatically. Wipperman predicts songwriters' advances will drop 30 to 40 percent this year, while 20 percent of songwriters will lose their deals. As labels reduce rosters and budgets, support companies such as publicity, video, and radio promotion firms may end up struggling for survival.
MCA has already begun its cost cutting: It ended its lease on the highly visible billboard at the West End-Broadway split, and it won't have a presence at this year's South by Southwest music festival in Austin, Texas. Other labels are focusing on smaller rosters, some less than half the size they were during the early-'90s boom.
"It's a tougher market in Nashville now than it has been in the last several years," Galante says. "We are all copycats to a certain extent, so I'm sure there are others sitting around saying, 'I wonder what we can consolidate?' "
Since EMI, the parent company of Capitol Records, is also up for sale, some predict that its Nashville label could face a similar fate, though Capitol Nashville president Pat Quigley is quick to dispel any such idea. "Capitol Nashville is the most profitable label anywhere in the world for EMI, so anybody who buys EMI would pump more money into this town."
Quigley says most Nashville labels have already trimmed much of their budget fat. For instance, Capitol--home to Garth Brooks, the nation's top-selling act of all time--has only 38 employees. Some L.A. labels, he points out sardonically, are laying off as many people as might actually buy a country release.
Other observers, however, believe Nashville has been living on borrowed time for the last two years. In short, the good times may really be over for good--or at least for awhile. "We've only seen the tip of the iceberg for Nashville," says Keith Hill, a New York-based radio consultant. "There are far too many people working in an industry that produces music that ultimately is unprofitable.
"You take a walk through most of these labels, and you'll see graphic artists and five A&R people," Hill continues. "The buildings are ostentatious, the salaries are inflated, they are living the high life, and it's all built on a house of cards. The town employs twice as many people as are necessary to do the jobs. In any other business in America--the airline business, shoes, clothing--half of these people would have already been shot. It's the unnatural dimension of the sexiness of the industry, the trappings of the business that have kept so many people employed in a structure because we simply believe that's the way it's always been done.
"1999 is a great year; it's about stock value. Welcome to America. Nashville has been an island that hasn't been in the United States. Now free enterprise and American values have come home to roost."
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