They Never Even Recouped Their Aqua Net Expenses
#20 As grunge dawns, one label bets on hair metalIn 1989, with hair metal reaching its zenith, the A&R department at MCA Records finally decided to get in on the act—by tossing a rumored $1 million at L.A. band Pretty Boy Floyd, who at the time had played only eight shows. The band’s debut, Leather Boyz With Electric Toyz, peaked at No. 130 on the Billboard charts, and the Floyd blew another mil or so of MCA’s money before the label finally dropped them in 1991 … right around the time the suits blew a chance to sign a fledgling Seattle outfit called Nirvana.Unintended consequence Around 1992, the Sunset Strip pizza-delivery scene gets a fresh infusion of talent.
The Vinyl Solution
#19 The industry kills the single—and begins its own slow demiseIn the early ’80s, the music industry began to phase out vinyl singles in favor of cassettes and later, CDs. Then, since it costs the same to manufacture a CD single as a full album, they ditched the format almost altogether. But they forgot that singles were how fans got into the music-buying habit before they had enough money to spend on albums. The end result? Kids who expect music for free. “Greed to force consumers to buy an album [resulted] in the loss of an entire generation of record consumers,” says Billboard charts expert Joel Whitburn. “People who could only afford to buy their favorite hit of the week were told it wasn’t available as a single. Instead, they stopped going to record shops and turned their attention to illegally downloading songs.”Unintended consequence The Eagles still top the album charts.
Come Back, Kid
#18 BMG dumps Clive Davis, begs him to returnIn 2000, when company retirement policy deemed Clive Davis too old to run Arista, the label he’d founded 25 years earlier, he was pushed out the door in favor of Antonio “L.A.” Reid. After loud public complaints from artists including Whitney Houston and Carlos Santana, parent company BMG was shamed into giving Davis a nice going-away present—his own label, J Records, along with a $150 million bankroll. Ironically, while J spawned hits from Alicia Keys, Luther Vandross and Rod Stewart, Arista reportedly chalked up hundreds of millions in losses. In 2002, BMG forked over another $50 million to buy J, then two years later ousted Reid and hired a new CEO of BMG North America: an ambitious young turk named Clive Davis Unintended consequence Rod Stewart’s The Great American Songbook, Volumes I-IV
#17 Thomas Edison disses jazz, industry standardsAmerica’s most famous inventor, and the creator of the phonograph, also had his own record label: National Phonograph Company, later Edison Records. Naturally, it was the biggest one around at first but made two fatal errors. One was that Edison Records worked only on Edison’s players, while other manufacturers’ conformed to the industry standard and worked interchangeably. The other was that Edison let his personal taste govern Edison releases—and he hated jazz: “I always play jazz records backwards,” he sniffed. “They sound better that way.” So after releasing the world’s first jazz recording—Collins and Harlan’s “That Funny Jas Band From Dixieland”—the company spurned the craze in favor of waltzes and foxtrots. Edison Records folded in October 1929.Unintended consequence Edison adds “tin-eared A&R” to his list of inventions.
#16 Warner pays for Wilco record twiceWhen Wilco handed over their album Yankee Hotel Foxtrot to Reprise in June 2001, acting label boss David Kahne—best known for producing Sugar Ray albums—reportedly thought it was “so bad it would kill Wilco’s career.” The band refused to make changes, so Reprise handed them their walking papers—and the masters to the album. A few months later, Wilco signed with Nonesuch, which, like Reprise, was a subsidiary of AOL Time Warner, meaning that after shelling out roughly $300,000 to make YHF in the first place, the corporation was now paying for it again. The record remains Wilco’s best seller to date.Unintended consequence Jeff Tweedy’s poetry collection is published in 2004.
Money For Nothing
#15 MCA’s teen-pop calamityHow sure was MCA that slinky Irish teen Carly Hennessy was going to be a gargantuan pop star? So sure that in 1999 they staked the former Denny’s sausage spokesmodel with a $100,000 advance, $5,000 a month in living expenses and an apartment in Marina Del Rey, California, spending roughly $2.2 million in all on her 2001 debut, Ultimate High. How wrong were they? In its first three months in stores, Ultimate High sold a whopping 378 copies, putting the label’s investment somewhere in the order of $5,820 per copy sold. Last seen, Hennessy had resurfaced—still looking for her big break—on season seven of American Idol. Unintended consequence “Sausage spokesmodel” proves a less embarrassing resumé entry than expected.
Always Read The Fine … Oh, Never Mind
#14 Stax Records unintentionally gives away the storeSoul fans can credit Memphis’s Stax Records for classic hits by Otis Redding, Sam & Dave and Booker T & the M.G.’s—but the real winner was Atlantic. In 1960, Atlantic partner Jerry Wexler liked one of Stax’s first releases enough to pay label president Jim Stewart $1,000 to lease it, and Atlantic soon contracted to market and distribute all Stax releases. Seven years later, with Stax reeling from Redding’s death, Stewart finally took a close look at the Atlantic contract and discovered he’d been bamboozled: Contrary to industry practice, Atlantic became the owner of any Stax release it handled. Stax had signed away its catalogue and future.Unintended consequence Bob Dole flips “Soul Man” into “Dole Man” during his ’96 presidential campaign.
The Last Of The Mega-Deals
#13 One label’s big spending single-handedly ends “alt-rock” boomIn 1996, Warner Bros. signed R.E.M. to a five-album contract for a reported $80 million. It was the most costly record deal in history and elicited one of the lowest returns. Warner needed R.E.M. to sell at least 3 million copies of all five records to come out in the black, but sleepy folk-rock albums like 1998’s Up moved a fifth of that. The execs went further into the hole by allowing R.E.M. to keep the masters of all their Warner releases, forfeiting future revenues generated by the band’s popular ’80s and early-’90s discs. No one knows how much the label lost—but the debacle brought to a close an era in which acts known for their “integrity” could score huge paydays.Unintended consequence Warner executives still hoping “Daysleeper” makes it on to The Hills soundtrack.
#12 Geffen pumps millions into (the nonexistent) Chinese DemocracyTen years ago, Guns N’ Roses still looked like a good investment—they’d gone platinum 32 times. So in 1998, Geffen Records could be forgiven for paying Axl Rose a million bucks to complete GNR’s fifth album, promising a million more if he delivered it soon. (Rose had already spent four years working on the LP, losing every original bandmate in the process.) Beset by perfectionism, lack of focus and plain-old nuttiness, Rose never got that bonus million. But his label kept spending: In 2001, monthly expenses totaled $244,000. Four producers and a gazillion guitar overdubs later, the album is no closer to release. And Geffen’s in the red for $13 million. Unintended consequence A frustrated Rose gets into a well-publicized fistfightwith …
Tommy Hilfiger!Just Be Yourself—Or Else
#11 Geffen sues Neil Young for making “unrepresentative” musicAt the dawn of the ’80s, David Geffen signed Neil Young to his new record label, promising that “commercial” considerations would never get in the way of art. Young took this to heart, wandering so far off the reservation with albums like 1983’s synth-driven Trans that Geffen filed a $3 million breach-of-contract suit: effectively charging the folk-rock icon with not making “Neil Young” records. Young filed a $21 million countersuit before settling out of court, but remained somewhat bemused by Geffen’s judgment: “He didn’t seem to comprehend how … uh, diverse my musical career had become,” Young said.Unintended consequence Young’s Happy House and Tejano albums remain on the shelf.
#10 Columbia Records loses Alicia Keys, drops 50 CentColumbia had a way with young talent in the late ’90s and early ’00s. First, after plunking down a reported $400,000 to sign Alicia Keys, they turned her over to high-priced producers who tried to transform her into Whitney Houston. Frustrated, she bolted—and signed with J Records, where she has sold more than 20 million albums to date. Around the same time, another languishing Columbia prospect, 50 Cent, recorded “How to Rob” in a desperate attempt to get his label to notice him. But when he was shot nine times in 2000, skittish execs dumped him—and then watched as he became an unstoppable one-man money factory at Interscope.Unintended consequence Fedoras and bulletproof vests become essential urban-fashion accessories.
#9 “Digital-rights management” backfires even more badly than usualIn a 2005 effort to combat digital piracy, Sony BMG packaged millions of CDs with copy-protection software that automatically installed a “rootkit” on users’ PCs, which, in addition to preventing consumers from making more than three copies of their legally purchased CD, also made them vulnerable to viruses and hackers. Sony BMG initially downplayed the problem, but after the Department of Homeland Security issued an advisory, the label recalled more than 4 million CDs. Sony was accused of spying on its customers’ listening habits and was forced to pay several million dollars to settle class-action lawsuits that alleged violations of spyware laws and deceptive trade practices.Unintended consequence Radiohead offer up In Rainbows for a bargain pay-what-you-like price.
#8 Warner junks InterscopeWhen anti-rap crusaders wanted to deliver a body blow to hip-hop, they took aim at the Warner Music Group, because its corporate parent, Time Warner, was American-owned and publicly traded. When Ice-T’s “Cop Killer” became too hot to handle, Warner Music dropped him, but the label still enjoyed huge rap hits—particularly through Death Row Records, partially owned by their Interscope label. But when Republican presidential candidate Bob Dole attacked Warner Music in his stump speech, Time Warner panicked, ordering the sale of Interscope to rival Universal. Universal soon became the biggest record company in the world—in large measure due to Interscope hits by Tupac, Dr. Dre and Eminem. Warner Music went on a long slide and was finally sold in 2004.Unintended consequence Time Warner shareholders never have to worry about who killed Tupac.
Something’s Happening, But You Don’t Know What It Is
#7 Music publisher gives away Bob DylanIn the early 1960s Leeds/Duchess was a legendary music-publishing company but far from the hippest: It knew Tin Pan Alley but couldn’t find a Greenwich Village coffeehouse with a compass. Yet when Columbia signed Bob Dylan in 1961, they steered him to Leeds, where he happily signed a publishing deal with a $1,000 advance. The following year, Dylan’s new manager, Albert Grossman, got out of the deal with the disinterested publisher simply by repaying the $1,000. Dylan’s new publisher, the savvier M. Witmark & Sons, received 237 songs—many of them future standards worth tens of millions of dollars—in just the first three years.Unintended consequence The receptionists at Leeds/Duchess never have to field calls asking what “All Along the Watchtower” is really about.
Nothing Exceeds Like Excess
#6 Casablanca rides strong sales straight to the poorhouseNo record label represents the coked-up inanity of the late ’70s like disco-driven behemoth Casablanca. In 1978, the label simultaneously shipped a million copies of four solo albums by each member of their biggest rock act, Kiss, so they could justifiably claim the records “shipped platinum.” The albums sold well—but not that well. Record stores returned hundreds of thousandsof unsold copies, inspiring comedian Robert Klein to joke that Casablanca’s releases “shipped gold and returned platinum.” The label continued to lose millions a year throughout the late ’70s, until part-owner PolyGram Records bought out founder Neil Bogart for $15 million in 1980. Unintended consequence Hey, man—400,000 extra surfaces to snort drugs from!
#5 The RIAA sues a struggling single mom for digital piracyn In the court of public opinion, it’s hard to find a more sympathetic defendant than a single mother of two, earning $36,000 a year. So what in the name of common decency was the Recording Industry Association of America thinking when it went after 30-year-old Jammie Thomas from Brainerd, Minnesota? The RIAA accused Thomas of using the P2P service Kazaa to illegally share mp3 files of 24 songs, including Journey’s “Don’t Stop Believin’,” the Goo Goo Dolls’ “Iris” and Destiny’s Child’s “Bills, Bills, Bills.” Thomas pleaded not guilty, blaming the shared files on mistaken identity, but last October a jury disagreed and fined her $222,000. That breaks down to a whopping $9,250 per song—more than six times her annual salary. At press time, Thomas was planning an appeal.Unintended consequence The nation’s toddlers and fluffy kittens rush to erase their hard drives.
Pay (Somebody Else) To Play
#4 Indie promoters take the major labels to the cleanersAfter the payola scandals of the ’50s, the government barred record labels from paying radio stations to play records. The solution: set up middlemen to do the dirty work! “Independent promoters” represented the labels’ interests to radio programmers, creating a massive cash flow of corruption. Even a mid-size hit could cost $700,000 in promo expenses—cash, vacations, drugs and other illicit rewards for mustachioed DJs—and labels ended up paying to get airplay for huge artists the stations would have spun anyway. A lot of coked-up DJs got nice tans, while the labels spent unnecessary millions and covered their balance sheets in bloody red.Unintended consequence Colombian GDP spikes each time Mariah Carey releases a single.
Detroit At a Discount
#3 Motown sells for a pittanceIn 1988 Berry Gordy Jr., reportedly losing millions of dollars on the label he had founded decades earlier, sold Motown and its incomparable back catalogue to MCA and investment company Boston Ventures for $60 million. How bad was that price? The next year, Herb Alpert and Jerry Moss sold their A&M Records to PolyGram for roughly $500 million. In 1990, David Geffen got about $700 million for Geffen Records and in ’92, Richard Branson unloaded Virgin Records to EMI for $960 million. And five years after buying Motown, Boston Ventures cashed out, selling the label to PolyGram for $325 million—a return of more than 500 percent.Unintended consequence The Motown Atlantic airline, and Berry’s career as a trans-global balloonist, have yet to materialize.
Tomorrow Never Knows
#2 Decca Records A&R exec tells Fab Four, “No, thanks”Dick Rowe was not the only record-label executive who passed on the Beatles in the early ’60s, but he was the only one who brushed off their manager, Brian Epstein, with the astute prediction that: “Groups with guitars are on their way out.” Epstein begged Rowe to reconsider, so Rowe hopped a train to Liverpool to check out the band live. When he arrived at the Cavern, he found a mob of kids trying to force their way into the club in the pouring rain. Annoyed, he smoked a cigarette, went home and signed Brian Poole and the Tremeloes instead. Unintended consequence The Monkees
THE BIGGEST RECORD-COMPANY SCREWUP OF ALL TIME
#1 Major labels squash NapsterShawn Fanning’s file-sharing service attracted tens of millions of users, but instead of trying to find a way to capitalize on it, the Recording Industry Association of America rejected Napster’s billion-dollar settlement offer and sued it out of existence in 2001. Napster’s users didn’t just disappear. They scattered to hundreds of alternative systems—and new technology has stayed three steps ahead of the music business ever since. The labels’ campaign to stop their music from being acquired for free across the Internet has been like trying to cork a hurricane—upward of a billion files are swapped every month on peer-to-peer networks. Since Napster closed, “there’s been no decline in the rate of online piracy,” says Eric Garland of media analysts BigChampagne, who logged users of son-of-Napster peer-to-peer networks more than doubling between 2002 and 2007. And that figure doubles again if you count BitTorrent.Unintended consequence Your grandmother deciding to trade up from that dial-up connection