Apple’s $3.2 billion acquisition of Beats Electronics—the biggest, most dramatic music-business story since UMG’s acquisition of EMI—puts Jimmy Iovine in the billionaire’s club alongside David Geffen and Clive Calder. That’s quite a feat for this feisty longshoreman’s son from Brooklyn, who worked his way up from cleaning recording studios to his present status as a music-tech titan.

Iovine is no Johnny come lately in his embrace of technology. While his fellow music executives were in deep denial about the digital revolution, and subsequently licking their wounds after failing to come to grips with a rapidly changing market place, Iovine saw the possibilities of a music industry in flux. Insiders say he played a key role in bringing together the major labels and Apple when the music industry was at its lowest ebb; he subsequently became tight with Steve Jobs; and he launched Beats by Dre with Andre “Dr. Dre” Young in 2008 as a way of battling inferior sound quality brought on by the ubiquity of MP3s and cheap earbuds. With surprising speed, these two forward thinkers established a major new brand, revolutionized the audio-hardware business and initiated a pop-cultural phenomenon that fused music, sports and fashion.
Beats’ major stake holders are in line to make a killing of colossal proportions as a result of the Apple deal. The Carlyle Group will net a $1 billion profit on the $500m it spent for just under 50%of the company seven months ago, and UMG will make as much as $500m from its14% stake, while Iovine and Dre pocket $800m apiece. Len Blavatnik’s Access Industries, which has poured $160m into Beats Music, will likely profit substantially less based on value of the streaming service compared to that of the hardware business.

But this deal also has significant unintended consequences, in that it gives right sholders dramatically increased leverage in dealing with technology companies that license their music. In short, it’s a game changer.

By 1989, 15 years into his career as an A-list producer and engineer, Iovine had become recognized as a savvy player throughout the business. Irving Azoff, who’d just resigned from the top post at MCA, had conversations with Iovine about becoming part of the start-up label that would eventually be named Giant, while Marshall Field department store heir and movie-biz entrepreneur Ted Field was recruiting Iovine for his fledgling label Interscope. Azoff chose Charlie Minor for a key role at Giant, and Iovine decided to go with Field, joining Tom Whalley, who was already in place. Field and Iovine then pursued Daniel Glass, but he decided to stay with Charlie Koppelman and Marty Bandier at SBK, subsequently becoming President/CEO of EMI Record Group.

In one of their first key moves, Field and Iovine cut a distribution deal for Interscope with Atlantic’s Doug Morris, who’d become friendly with Iovine during the making of Stevie Nicks Bella Donna in 1981. During the ensuing decade, Iovine had produced big albums for numerous top rock acts, including Tom Petty, Bruce Springsteen, U2, Dire Straits, Pretenders and Rod Stewart. Iovine’s Midas touch continued in his new role of executive at Interscope, which had hits right out of the gate with Gerardo, the label’s very first release (brought in by attorney Peter Lopez) and Marky Mark, both effectively worked by promotion head Marc Benesch, who’d come over from Columbia. The label then launched the careers of enduring acts like Nine Inch Nails, No Doubt, Bush and Marilyn Manson. But it was a deal with Dr. Dre and Suge Knight’s Death Row Records that brought Interscope its defining early hits from Dre himself (with 1992 hip-hop milestone The Chronic), Snoop Dogg and Tupac Shakur, mainstreaming West Coast rap and initiating a sea change in the business as a whole.
In1995, that same Death Row deal changed the course of Interscope when the label became embroiled in a controversy over rap lyrics, pushed to the boiling point by the attacks of C. Delores Tucker and William Bennett. This PR crisis coincided with the insanity at Warner Music Group, as WMG Chairman Bob Morgado pushed out legendary Warner Bros. Records head Mo Ostin and made Morris President of WMG, but was fired himself after a failed attempt to bring in U.K. exec Rob Dickins (the uncle of Jonathan Dickins, Adele’s manager) as Ostin’s successor over the objections of WMG’s senior executive team, which then appointed Danny Goldberg to run WBR. Morgado was replaced by Michael Fuchs, who fired Morris, a shocking move that augured the beginning of the end of the glory years for WMG while setting up a chain of events that would lead another major music group to dominance in the modern era.

Fuchs, bowing to the pressure from Tucker and Bennett, and having no clue about the value or potential of Interscope, unloaded the label at a bargain price to MCA Music Entertainment Group, which was headed by Morris, who’d replaced Al Teller, bringing Morris and Iovine back into business together. A year after that extremely eventful 1995, MCA was renamed Universal Music Group, and, following UMG’s 1998 acquisition of Poly Gram, Morris once again bet on Iovine, putting A&M, Geffen and MCA under the Interscope umbrella, thus creating the Interscope Geffen A&M label group. IGA notched hit after hit under Iovine’s inspired leadership, exemplified by his handing Dre the demo of then-unknown white rapper Eminem, solidifying the company’s ownership of the genre.

When UMG bought out the rest of Interscope in 2001, Field left the company and Iovine officially became The Man. Morris upped the ante by making a new, eight-figure-a-year deal with Iovine—expiring at the end of 2014—that made him the highest-paid executive in the business, while allowing him to do outside projects, leading to the formation of Beats and UMG’s investment in the start-up.
After Morris left UMG in March 2011, new Universal ruler Lucian Grainge, fully aware of the treasure in his midst, further enabled Iovine’e visionary and entrepreneurial impulses, installing John Janick as IGA President/COO, thus freeing Iovine from day-to-day responsibilities while grooming his eventual successor. Iovine acknowledged as much during UMG’s recent Leadership Conference, stating that “No one cleared the trees for me like Lucian.” Those moves made possible the Apple-Beats deal and its afore mentioned unintended consequences, as Grainge leads a new offensive for rights holders, while Iovine begins the next chapter of his spectacular career.

Names in the rumor mill: Tim Cook, Eddy Cue, Robert Kondrk, David Cohen, Beau Hill and Steve Berman.

TAGS: nograybox
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