Y2K IN REVIEW
MP3-swapping application Napster began as a Net cult groundswell, then snowballed into a bona fide international media sensation—garnering millions of users and RIAA-sponsored litigation in the process. CEO Hank Barry and co-founder Shawn Fanning were tarred as pirates by the biz as well as high-profile acts like Metallica and Dr. Dre, even as they were championed by the mainstream press and such politicos as Orrin Hatch. Then Bertelsmann stepped in with an offer to help the service go “legit,” shocking the industry and throwing down the gauntlet for the other digital-minded media companies. No one's picked it up yet.
AOLTW: This Was The Year That Wasn't
In the year of the merger, the granddaddy of 'em all—AOL and Time Warner—was just given a big green light, capping a year of negotiations between company officials and antitrust agents both foreign and domestic, which saw the pact dramatically seesaw between getting an OK and getting nixed. After some high-level wheeling and dealing to assuage the complaints of AOL and TW's rivals, the five-member Federal Trade Commission finally gave the nod to the $183 billion merger last week, much to the relief of AOL chief Steve Case and his TW counterpart, Gerald Levin. AOLTW's open-access deals with EarthLink and Juno may have finally convinced the regs. Next up: The FCC.
EMI: A Tale of Two Suitors
British music giant EMI became the serious object of desire of two music groups during the course of Y2K. Early this year, EMI seemed destined to become part of the proposed AOL-Time Warner family, as the combined media colossus was eager to boost its content for an online play. In top-secret meetings around the world, EMI's Eric Nicoli and Ken Berry and TW's Richard Parsons and Roger Ames attempted to hammer out a deal that would gain regulatory approval from authorities on both sides of the Atlantic. After a year of give and take, WEMI was left at the altar when participants realized that even selling off a major label and part of its lucrative publishing business would not satisfy antitrust concerns. As the deal began faltering, German media monstrosity Bertelsmann came a-courting. At this early stage, an EMI-BMG deal is a long way from being possible, let alone probable.
Vivendi-Seagram: A Merger That Actually Happened
Viva Vivendi Universal! Vivendi's Jean-Marie-Messier and Seagram's Edgar Bronfman Jr. were whistlin' a happy tune as shareholders and regulators formally approved the three-way merger of Seagram, Vivendi and Canal Plus. As part of the deal, Vivendi paid $30.2 billion for Seagram. The new company has lucrative media holdings in film, music and television, including 14 million European pay-TV subscribers, Universal Studios and Universal Music Group. Perhaps this deal flew because the FTC did not have to approve it, and the European Commission did not have to deal with any Americans.
BMG Reinvents Itself
In the most surprising reshuffling of the year at a major music group, Bertelsmann bigshot Thomas Middelhoff realigned his BMG operations, naming Rudi Gassner as the company's Chairman/CEO. Gassner's appointment was preceded by the resignations of Bertelsmann's two highest-ranking music executives, CEO Strauss Zelnick and Chairman Michael Dornemann. The duo's departures were due in part to the parent company's new reporting structure, whereby Internet music activity would no longer fall under the music group's control. In addition, it was widely reported that Middelhoff had problems with the Dornemann/Zelnick team's handling of conflicts with label heads Clive Davis and Clive Calder. Zelnick's non-approval of the Napster deal also reportedly came into play.
Davis-Reid: Arista Goes L.A., While Davis rolls a J.
With all the hoopla surrounding Clive Davis' exit from Arista, the company he founded nearly three decades ago, and the rise of Antonio “L.A.” Reid to its throne, one might have expected some turmoil. Instead, it was smooth sailing once the troubled waters calmed. Reid has brought in some heavy players and held onto most of the top acts on the Arista roster, while Davis signed a 50-50 joint venture with BMG and launched J Records, taking some of his key personnel with him. Davis comes to the starting gate with O-Town, LFO, Next, Deborah Cox, Jimmy Cozier, Alicia Keys, Q-Tip and Shannon Curfman.
UMG: The Godzilla of the Record Biz
Just two years after its $10.4 billion purchase of PolyGram, Universal Music Group has shown how a successful merger should be done. By combining its operations, UMG has been able to gobble up hug chunks of domestic marketshare, nabbing a commanding lead in such genres as PoMo, R&B and rap. Architect Doug Morris secured the talents of a team of top executives like Jimmy Iovine, Jim Caparro, Lyor Cohen, Monte Lipman, Kedar Massenburg and Jay Boberg to help guide the labels and their respective rosters. In so doing, the four major UMG divisions are clicking on all cylinders, scoring an unprecedented 30% of the market. Such UMG artists as Eminem, Dr. Dre, Limp Bizkit, Sting, Nelly, 3 Doors Down, Sisqo, DMX , Jay-Z and blink-182 were among the year's top sellers.
Jive: Some Like It Hot
Could Jive Records get any hotter? The unquestionable leader in the pop music charge, Jive scored again with the latest effort from the Backstreet Boys, which sold over 1.6 million in its first week of release, Britney Spears and, of course, NYSNC, who set the first-week sales record with 2.4 million sold back in March. Add to that threesome R. Kelly, Aaron Carter and Mystikal, and it's easy to see why Clive Calder and company may want 2000 to continue indefinitely.
MP3.com: Michael Rowed The Boat Ashore
Netco MP3.com's streaming locker service, My.MP3.com, sparked litigation from the majors over its unlicensed database—even though chief Michael Robertson insisted the service would preserve CD sales in cyberspace. After months of legal battling, the majors arrived at settlement terms and licensing protocols, as did publishing org HFA. But the last holdout, UMG, earned a $53.4 million payout that dwarfed the awards granted to the other big-label groups, all of whom had most-favored-nation clauses; calling it a “judgment” rather than a settlement didn't seem to calm them down. The service relaunched in December and inked an “instant-listening” pact with Tower Records. Still, the dot-com faces an array of publishing and indie-label licensing issues—and has some expenses to justify.
Dot Comedown: High-Flying Techs Crash & Burn
A year ago, the tech industry was all about high-flyin' stock prices and 19-year-old dorks getting rich from IPOs. Now those same dorks are being laid off as dot-coms collapse. In April, the tech stock market crashed, and stock prices continue to decline as investors started looking for companies with a an ability to turn a profit. For those not checking Fuckedcompany.com on a regular basis, Urban Box Office, Scour, DiscJockey.com, SpinRecords.com, MXGOnline.com, Riffage.com, AtomicPop, Pop.com and DEN.net all kicked the bucket. EMI sold its stake in Musicmaker.com. Marc Geiger's ARTISTdirect has traded below a dollar since early October, risking being de-listed by the Nasdaq. EMusic is also under a buck. Both Liquid Audio and MP3.com are down more than 90% from their 52-week highs. The bloodletting is far from over.
Retail: The Price (War) Is Right
By spring of 2000, the FTC's Robert Pitofsky had finally gotten his wish. Minimum Advertised Price policies were a thing of the past, and every label group and retailer of note was the target of class-action suits for selling records above wholesale. Price wars were inevitable, and Best Buy fired the first shot with a $9.99 Limp Bizkit price. But Best Buy's real bombshell fell just six weeks later, when company head Richard Schulze announced the acquisition of Musicland, thus forming the nation's largest music retail entity. Wow.
2001 PREVIEW:
Grammys: The big question is whether NARAS will honor Eminem. But with so many big albums coming out late in the year, should the Sept. 30 cutoff date be addressed?
Best Buy-Musicland: It's the biggest retail merger ever; so how will it affect the business overall? Will prices drop? Will other mergers follow?
Clear Channel: How will this voracious monolith, led by Randy Michaels, change the radio landscape?
The Bunny: Meanwhile, in Burbank, they're waiting for Tom Whalley and wondering what Roger Ames has in store.
