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Two two longtime colleagues are pitted against each other in a complicated dynamic on both the business and interpersonal levels.

I.B. BAD ON THE YEAR IN MUSIC
PART ONE: ROMULUS & REMUS

The Battle Lines Have Formed and the Opening Salvos Have Been Fired in What Is Shaping Up as a Battle Royal Between the Big Two
This was no ordinary year, as both Warner Music and EMI changed hands, radically transforming the major label landscape, in the biggest seismic shift since MCA bought PolyGram in 1998. These acquisitions ended the decade-long struggle of both EMI and WMG to step up to another level by trying to merge into a formidable competitor to Sony Music and UMG. Consequently, what was the Big Four 12 months ago is now the Big Two, with UMG accounting for roughly 40% of the U.S. market, and even more in other territories. Assuming it gets regulatory approval for the acquisition of EMI's recorded music assets, Universal will vault well ahead of Sony Music; the two companies are currently neck and neck in overall marketshare on the year. That leaves Warner Music—which desperately needed EMI to be competitive with Universal and Sony—a distant third. A similar seismic shift has shaken the publishing sector with Sony/ATV’s purchase of EMI Music Publishing in partnership with a coalition of investors. All in all, 2011 has been a year of big changes, starting at the very top...
 
The two superpowers of the modern music business are being run by a pair of executives whose careers are inextricably linked, as UMG ruler Lucian Grainge goes head to head with his mentor, Sony Music chieftain Doug Morris. A great many things transpired between Morris’ anointing of Grainge as his successor as Universal chieftain in 2009 and his decision to take the top job at Sony a year later—a move that insiders believed surprised Grainge, who had expected Morris to retire, pitting the two longtime colleagues against each other in a complicated dynamic on both the business and interpersonal levels.

Some say their relationship became contentious when Morris was prevented from leaving Universal for six months after accepting his new job, forcing him to rent an office across the street from 550 Madison, where he grew increasingly annoyed that the company he’d built into an empire would treat him that way.

In his first full year as Universal Chairman/CEO, Grainge has decisively made his mark on the company, moving the company’s headquarters from New York to L.A. while luring Barry Weiss from Sony Music to oversee UMG’s East Coast operation. He’s also put his philosophy into action by significantly beefing up A&R throughout the music group, including putting David Foster in charge of Verve, promoting Evan Lamberg to the top spot at UMPG, bringing in Gee Roberson to give Jimmy Iovine’s Interscope an East Coast presence, and replacing departed IDJ chief L.A. Reid with a squad of A&R executives that now includes department head Karen Kwak, the newly arrived Chris Anokute, Breyon Prescott, Bruno Mars manager Brandon Creed and Ethiopia Habtemariam, while upping Steve Bartels to head of the label group. Additionally, in a series of high-level deals, Grainge picked up the established American Idol and promising newcomer The Voice, as well as inking hit songwriter Diane Warren.

Grainge’s M.O. involves taking both musical and executive talent off the table before his rivals can counter. In this regard, consider his decisive response to a 2002 speech by then-EMI U.K. head Tony Wadsworth in which he criticized UMG’s U.K. company for not being a serious player in the rock music business. Legend has it that Grainge, who was then running UMG U.K., took Wadsworth’s contention as a direct challenge and set out to systematically dismantle EMI, hiring away a number of the competition’s execs and making every deal that was put on the table (in this sense, his 2010 signing of the Rolling Stones, who had been on Virgin, can be seen as a sort of coup de grace). This extremely aggressive strategy saw Universal marketshare increase at the expense of all the other majors, but especially EMI. Everyone wanted to work at Universal, and the deals for artists continued to pour into those same U.K. coffers.

Is Grainge attempting to repeat this pattern in the U.S.? Some say that he can’t, because the size of the deals here is so much greater. Others say that he is quietly on a mission to become the first U.K. captain of a major to make the Atlantic crossing not only work but to dominate the U.S. business. It’s been said that the downfall of most Brits trying to run U.S. companies results from their inability to grasp the American black music business and their difficulty in hiring the right executives—challenges that Grainge must successfully deal with in order to break the pattern.

Of the major deals now on the horizon for Grainge, Scott Borchetta’s Big Machine and Slim and Baby’s Cash Money appear to be the biggest, with each rumored to be running at a payout north of $150m. Also coming up for renewal next year is the Disney distribution deal, as the capable, digitally aware Ken Bunt succeeds retiring industry legend Bob Cavallo. Additionally, with a return to Warner Bros. apparently a no-go, and with Sony and EMI out of the picture, Rick Rubin’s American Recordings now appears to be headed to UMG as well. Insiders are saying Iovine is not a buyer. Is there a possible return in the works to Def Jam, which Rubin co-founded with Russell Simmons? Or could Monte Lipman’s Universal Republic be interested? Rubin’s successful run with Tom Whalley at WB has spurred speculation about the two reuniting in one form or another; Whalley is presently under the Universal Republic umbrella. 

Also thought to be on Grainge’s list of collectibles are possible label deals for Capitol Nashville’s Mike Dungan and Justin Bieber manager Scooter Braun; Grainge is also rumored to be snapping up Atlantic EVP A&R Mike Caren and former Sony Music boss Don Ienner, the latter in a likely consultancy role.

UMG’s label heads have had eventful years, with Iovine running IGA, revitalizing American Idol and making a financial killing with the wildly successful Beats Audio; Lipman playing his Cash Money and Big Machine trump cards at Universal Republic to finish the year #2 in marketshare with 7.4%; and Bartels sitting on The Throne at IDJ—the latter two comprising Barry Weiss’ rebuilt UMG East.

Grainge had a six-month head start on his longtime colleague turned fierce competitor, but Morris wasted no time imposing his own philosophy—which begins with putting talented executives into key slots and granting them full autonomy to make decisions. Morris has always believed that U.S. repertoire drives sales worldwide, and he’s betting that his team—Columbia’s Rob Stringer and Steve Barnett, RCA’s Peter Edge and Tom Corson, Epic’s L.A. Reid, Syco’s Simon Cowell and Kemosabe’s Dr. Luke—can do just that. Many believe Morris’ exclusive deal for the services of Dr. Luke, a street-smart, aggressive record maker, will prove to be about more than just big pop hooks. The early signs for Morris’ playmakers are promising indeed, as the Stringer/Barnett tandem has Columbia running away with label marketshare for the year, while Reid and Edge/Corson (whose label is #4 in current marketshare) expand their executive brain trusts to do battle in 2012.

Within days after arriving at Sony Music in July, Morris was decisively cleaning house and putting his own handpicked executives in place, replacing SME U.K. and Ireland head Ged Doherty with former EMI A&R chief and Island U.K. head Nick Gatfield, and tapping Edgar Berger, who was running Sony Music Germany Switzerland Austria, to succeed Richard Sanders as the head of SME’s under-performing international division.

The level of competition between the legendary record man and his onetime protégé turned formidable foe should become even fiercer when Morris’ no-poach stipulation is lifted in January. In related news, look for former Universal Motown topper Sylvia Rhone to rejoin Morris in a label joint venture soon after the first of the year… Looking down the line, could the wheel eventually go full circle, with Morris ending up with Warner Music, which he left in 1995? In any event, the Morris-Grainge narrative is sure to provide the music sector with plenty of plot lines in 2012.
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