Chapter 22
Overture to a competitor ... The seductive smile of the conglomerateur ... The eminently bearable elegance of the executive dining room
Clive Davis, Nina Holzman, and Jac; 1967
JAC: What was I searching for at Elektra? I was at a point where I was looking for changes of substance and nuance at the label, and in my relationship to this new music business world in which we were now living.
At Atlantic, Ahmet and Nesuhi Ertegun and Jerry Wexler were a formidable threesome that worked smoothly together. I had always been a one-man band. But what if I took in somebody at my level? And if I did, who might that be? What about Clive Davis?
Clive was up from the streets, had earned his way into Harvard law school, then had done scut work for Columbia at an outside law firm. That was when we met and became friendly. He moved in-house, became Columbia's general counsel, and rose to be head of CBS Records.
Clive very smoothly took the reins of that large company machine from Goddard Lieberson, a record business deity known as God, revered for his lordly charm and his unerring taste—in one of his memorable coups, God decided that he would not only record the original cast album of a new Broadway musical but would also pick up the entire stage production investment of four hundred thousand dollars. The show was "My Fair Lady."
As for Clive, I never saw an attorney take so naturally to the music business. He had an insatiable curiosity, wanting to learn everything, quick to ask questions. The consummate student. At Monterey Pop he carried a portable radio tuned to Top 40, even taking it into the bathroom. His appetite for music was unquenchable.
By 1969 Clive was in full sail at Columbia. He looked good because he was good, and he had something that none of us at Elektra had: the experience of running a major label with all the resources of one of the best-staffed, most aggressive companies, with superb marketing, distribution and their own pressing facilities. If Clive could be persuaded to come to Elektra, he would bring a proven ability to do the job. He knew the terrain. I expected that he would carry some of his best people with him, and I could see him making Elektra work even better.
Clive's style wasn't quite mine. Corporately, his style was, "I am the company." My manner was more, "We are the company." Musically, if I could summarize the difference between us in one sentence, it would be: I exercised taste first, then judgment; Clive exercised judgment first, then taste. No matter, it worked. He had a formidable pop song sense.
Clive was unhappy and surprisingly open about his compensation package at Columbia, so I approached him about coming to Elektra. We had dinner and discussed it in detail. I offered him a thirty percent stake over time and the opportunity to work in tandem, to merge our strengths. He thought about it but eventually declined. I think he was reluctant and perhaps wary of taking on a boutique label without the deep infrastructure of a CBS. Later he went on to do exactly that at Arista, but in 1969 he wasn't ready.
JAC: If I couldn't have Clive, I didn't want anyone else. Yet, the way the record business was developing, Elektra was going to have to change with it.
For years I had observed the parallels between motion pictures and records. Every major change that occurred in the record business was foretold through the evolution of the movie business: vertical and horizontal integration, consolidation of distribution, consolidation of exhibition (in the record business, read "retail"), offsite production, independent companies, and the rise of a new generation of packagers and gatekeepers, the producers, agents and lawyers.
A record selling in the hundreds of thousands was once a very big deal; now some were selling millions. Those numbers attracted the money-driven wanting in on the action.
Film was the old royalty; music was becoming the new royalty. The songs of the counter-culture had endowed music with a deeper resonance. Movie stars began hanging out with rock stars. And lawyers representing rock artists began to move on a level equivalent to the film entertainment lawyers—they became very powerful.
At Elektra we had been having a great run up to the end of the Sixties, showing higher profits in relations to our revenues than any other record company. If we were selling ten million dollars worth of records, we were making two and a half million dollars, or twenty-five percent. That was serious money. We were doing very well, and so were our artists.
Regardless of how well we had done our job, the artists—and equally or more their managers and lawyers—were primarily interested in maximizing their profitability, and who could blame them.
The rub came when lawyers attempted to insinuate themselves, busting up existing arrangements if they thought they could hijack an artist and bring that artist to a situation that promised better money. Lawyers approached Elektra artists, offering to get them out of their contracts with us, spinning tales of million-dollar advances from a major label, less their cut, of course. It was unethical, time consuming, and personally painful. It was a venality I had never seen before.
DAVID BRAUN: I don't think Jac relished that. Jac was not the kind of guy who would pay you five million for an artist. First of all, I don't think he'd want to pay that kind of money. Because it was his own money. It's different when you're paying with CBS's money. Secondly, I think Jac's ego wouldn't go for it: "Why spend five million? I'd rather develop two hundred acts for the five million, and knowing my track record, half of them will work out." I think that was part of it too.
You see it in Michael Eisner at Disney, who's very much like Jac. Eisner does not pay the best salaries in town, but he gets the best product. He picks young people who are good, makes them into great executives, never overpays anybody. Jac was very much like that. Jac and Eisner really resemble each other a great deal.
Now, you wouldn't go to Jac with every artist. If you had a tonnage rock act, you'd go to Columbia and get big money and more royalties. If you didn't need a relationship with the company, you didn't go to Jac. And towards the late Sixties and early Seventies, the feeling developed among artists that all record companies were the same, it didn't make any difference with whom you went, they only wanted the money.
JAC: Each of the aggressive labels handled contracts and business affairs in a way that reflected their management style. Columbia was rigid. Mo Ostin and Warner Bros. rightly considered themselves an artist-oriented company, and whatever the artist wanted, within reason, the artist got. Elektra was somewhere in between, leaning toward Warners. From a legal standpoint, we did not want to have to go to an artist for every clearance, the withholding of which might later be used as leverage to stall the release of an album. This could be a negotiating ploy for something having nothing to do with the matter at hand. Yet we were always considerate of our artists, because I didn't want niggling discussions that didn't address my main concerns: the music and their career.
DAVID BRAUN: Jac's strength was the personal touch he offered the artist, selecting material and helping develop a career and being a kind of father.
JAC: Recording contracts were becoming terribly burdensome in their complexity. We might send a short amendment letter on some issue and the reply would be longer than the document submitted.
I liked simple, direct deals, but our simple, neat document was being obsoleted by the complexities of the brave new music world. And the more complex the negotiation, the more the artist was charged by the lawyer—and guess who was going to pay for it eventually?
And it slowed the process. Once, there had been a relatively clear road you traveled. Now you had to jump high hurdles daily.
Sue Roberts, our head of business affairs, kept special files, arranged by lawyer, containing detailed notes of the clauses they would or would not accept in their contracts. We knew not to present a draft that contained the "offending" language. This was just one symptom of a larger change. The MUSIC business—which was where I had started out and where I was happiest—was becoming the music BUSINESS.
JAC: Elektra was not one of the majors. We were a small, feisty company that had gotten bigger, and along the way we ran up against a problem that got bigger as we did: distribution. I had identified distribution as a critical gating issue as early as 1963. By the end of the Sixties it had become a matter of survival, a choke point. With independent distribution we had three customers—the distributor, the record retailer, and the individual record buyer; and we didn't control our connection to two of these.
STAN CORNYN: Independent distributors, to make a buck, would represent a hundred different labels. This is tough on those labels, and whether they got paid depended on all sorts of things—
JAC:—Like how hot you were at the moment.
STAN CORNYN: There was no guarantee that you got cash flow from independent distributors.
IRWIN RUSSELL: Someone was always going out of business or merging or not paying their bills.
Well suited to going public
JAC: We had to take charge of our distribution, but I couldn't afford to do it on my own.
Here were my options. I could take Elektra public, sell stock and raise capital to fund a distribution network and invite other labels to join me. Or I could make a strategic alliance which would guarantee control over distribution.
To float a trial balloon ahead of any potential stock offering, we hired a financial publicity firm. They immediately set up a major story in the Wall Street Journal. John O'Connor followed Elektra and me for two weeks and wrote a long, detailed, and enthusiastic piece: "Making Money and Music at Elektra." It yielded what we wanted—calls from several firms interested to be underwriters.
Initially attractive as the idea of a public offering was, the more I reflected on it the more problems I saw.
Federal law requires a high level of disclosure in a document called the 10-K. The 10-K dissects your company so thoroughly that your private information and trade secrets become public property, available to everyone—how much cash you have, your revenues and profitability, key salaries, a tabulation of your biggest-selling artists. As a person who valued his relations with talent, I didn't want to deal with disclosure that would have been grist for the lawyers.
Then there were legal liability issues. Every time the principal of a public company utters anything in an open forum, you are on the record, and if your words don't coincide with the result there is an entire bar of lawyers drooling and ready to file a class action suit.
The distribution problem was not going to be solved by going public, so I came to the conclusion that an alliance, with distribution as the driving raison d'être, was the way to go.
I wanted to avoid any liaison with a major company that would have a predisposition to do things the way they had for the past twenty years. That ruled out RCA, Decca, Capitol and perhaps CBS. On the other hand there was Warner, which didn't have that baggage or inertia. There I could participate in creating the standards and practices that would guide our future.
As early as 1966, I had talked to the then-president of Warner Bros. Records, Mike Maitland, but I didn't feel any personal chemistry, and Mike only wanted to buy Elektra, which didn't suit me. Still, there were attractive aspects to an arrangement with Warner. I knew and appreciated Mo Ostin, who was running the Reprise label under the Warner umbrella. I had met Mo socially, and we delighted in each other's company and ideas. Over the years I would send Mo notes about odd items in the catalog and he'd always write back. We became trusted friends.
Then in 1969 Warner bought Atlantic. For many years, Atlantic had been running parallel with Elektra on its own musical track. Both labels had started from nothing, along with hundreds of other small companies two decades prior. Atlantic and Elektra were the two—really the only two from that time—that had survived the early Fifties and gone from strength to strength in the Sixties. The Ertegun brothers, Ahmet and Nesuhi, and Jerry Wexler, had learned to live together. Those guys were so different from each other that I wondered how one building, one company, could contain them. But they had done it, and done it well, none better. I respected that enormously, because I knew what a difficult and opinionated one-man band I was.
Atlantic's music was blues, R & B, Muscle Shoals, the Memphis Sound, jazz, and a different approach to pop than mine, all the way to Sonny and Cher. Warner and Reprise were conventional pop, the Everly Brothers, Trini Lopez, Sammy Davis, Dean Martin, Frank Sinatra, and also, courtesy of Mo and Lenny Waronker, the Kinks, Small Faces, and Jimi Hendrix. Arlo Guthrie and Joni Mitchell were as folky as Mo got.
Add Elektra to that mix, and it could be potent—we would bring a range of musical product they lacked, from Nonesuch to the Doors. And the combined size of the alliance would make a viable distribution network.
To create and feed a distribution organization would require an annual sales volume of close to a hundred million dollars. Warner Records and Atlantic combined were doing about seventy. Elektra was doing fifteen—close enough. Elektra would represent critical mass and a differentiated but coherent catalog.
MO OSTIN: Jac and I talked again about the situation.
JAC: Mo had recently replaced Mike Maitland at Warner.
MO OSTIN: We felt exactly the same way about distribution—that for a whole host of reasons, primarily that we would have much more clout in the marketplace and sell more records, we should have our own distribution.
When Jac said he was interested in merging, I felt strongly about it. Atlantic went along. I brought it to Steve Ross and said, "I want to buy this company."
JAC: Steve was the chairman of the Kinney Corporation, which had recently acquired Warner-7 Arts. Ted Ashley had run the Ashley Famous Agency which had previously been bought by Steve, and Ted had convinced him to acquire Warner-7 Arts and their record companies. I had known Ted for years, in fact Theo Bikel and I had introduced him to one of his wives. I had never met Steve.
One day I was in Mo's office, enjoying one of our regular schmoozes. Ahmet dropped by. He said, "Steve Ross is in Ted Ashley's office." Mo grabbed me by one arm and Ahmet got me by the other, and over we went.
Steve Ross, master pitchman
Steve was silver-haired, suave, and very sure of himself. He had masterfully cobbled together Kinney—a curious mix of funeral parlors, office cleaning companies, parking lots, rental cars, real estate and magazine distribution—into a small public company. With the addition of the Ashley Famous Agency he had moved into entertainment and was now sitting atop Warner Bros. and their subsidiary record companies.
Steve pressed his master salesman button and talked about his vision for Kinney (soon to be renamed Warner Communications Inc.) as a full-spectrum entertainment company with serious interests in movies, music, publishing, and whatever might come out of the new technologies. My ears perked.
I talked at length about domestic and international distribution. Steve asked if I would consider an acquisition, with a continuing participation, if Warner and Atlantic would commit to the distribution model we had discussed. I candidly told Steve that being with Mo and Ahmet, Nesuhi and Jerry would give Elektra added muscle and I couldn't think of better people with whom to cast my lot. I required only two additional understandings. Elektra would function with absolute autonomy; and if there were anti-trust problems with the Justice Department, Steve would have to deal with it. Under those conditions, I would seriously consider a sale or merger.
AHMET ERTEGUN: It was the wish, not only of the corporation, and of Jac, but also on our part—Mo Ostin and Joe Smith for the Warner's side, and the three of us from the Atlantic side, myself, Nesuhi, and Jerry—for Jac to come into the group. We respected him, we admired him, we were friends. We wanted it to happen.
JAC: Steve beamed his most glowing smile and said, "We'll get right back to you." And for six months I didn't hear a word. Not a word.
JAC: There were other people sniffing around Elektra, but Warner/Atlantic were the only suitors that interested me.
Whatever was to happen in the future, I wanted the company to appear solid. This meant creating value through our catalog, backed by audited financial statements. We had been having our books certified for a number of years, which most independent record companies didn't bother with, considering it an unnecessary expense. I wanted us to look clean and look good financially, and we did.
The company also needed to look its best physically and that meant another move, out and up. Though we now occupied one and a half floors at 1865 Broadway we were badly cramped. The new Gulf & Western building, to be constructed at 15 Columbus Circle, directly across the street and with unrestricted views, seemed perfect. What I didn't realize at the time was that Charles Bluhdorn, head honcho at Gulf & Western, felt competitive and antagonistic toward Steve Ross. Not that that would have made a difference.
MARTY RICHMOND: Jac had this odd quirk. Whenever Elektra moved he went to Europe and came back when the move was done, because he hated that turmoil.
JAC: I would take a roll of photos with a wide-angle lens, showing where each piece of furniture should be placed, each picture hung, and then leave town.
MARTY RICHMOND: He would have everything put in place in his new space so he could come back, sit down at his desk and not have to unpack a box, just keep going.
JAC: We signed a lease for a move-in date of June 1970. The new offices were going to be a mammoth and costly project, demanding meticulous planning and skilled execution. I turned to my brother, Keith.
KEITH HOLZMAN: I negotiated the lease. We watched the building go up literally from the point they excavated. I found the designer, Charles Winecoff, and worked with him, laying out the spaces, determining adjacencies, who needed what particular feature, and so on. And the decor. We spent a quarter of a million to design and furnish over ten thousand square feet of open space.
15 Columbus Circle, entrance to office
The elevator doors had Elektra logos covering the entire door. Every time the elevator stopped on our floor, the occupants knew we were there. In the reception area we had slide projectors with a little controller, projecting scenes of Elektra artists and events. For our lighting we made reflectors from record stampers that we got from our pressing plant, sixty to eighty of them, running along the entire hallway in the front part of the building.
We had a good working archive, and a big mailroom—which was never big enough; mailrooms never are. The art department was big. In the center was a large pool table, and on top of that a ping-pong table covered with black material where we would lay out large jobs, album covers and all the ancillary materials.
We used specially milled wood elements throughout the office. Jac's office was rosewood on the inside, walnut on the outside, and the doors were multidimensional, carved wood, all Elektra logos.
The interior of the conference room was also wood-paneled. At the focus of the room, inlaid in the wood, was the Elektra logo, the stylized E that Bill Harvey had designed a few years earlier. Push a button in the projection room, and the pieces would separate and reveal a movie screen, which we used for slide and film projection during sales meetings.
The elegant conference/lunch room. The big 'E' hides a projection screen.
The conference table was famous. One day I was sitting at the counter of a luncheonette under Rockefeller Center, playing around with ideas of hexagons and octagons, because I knew they would be part of the geometric scheme of the space. I was drawing and tearing up pieces of paper. The man sitting next to me was very intrigued. We struck up a conversation, and it turned out to be Robert Russell Bennett, the great orchestrator of the Rodgers and Hammerstein musicals and the famous World War II television documentary, "Victory at Sea." I realized that by taking three parallelograms you could form a hexagon, and by rearranging them you could get a long buffet table with odd, interesting angles at each end, and then be able to reform them into a hexagonal shape, with legs that, when they came together, would assume the same shape as the upper part of the table.
JAC: Details mattered. Keith's masterly table was a sweet, beautifully symmetrical design that said something about who we were. We did important business and had some great times at that table. We hired a cook for staff lunches, and to entertain prospective artists and their managers. At one lunch they could learn so much about the company and its people, feel the pulse. I had discovered early on that if you are pursuing people and deals, frequency of interaction is a key to success—and don't let them just see you, let them see the depth of the organization. Non-music guests would drop by, like Michael Korda, who shared his knowledge of the world of books and the problems of print publishing. We could feed the entire executive staff in-house, keeping them within the building and providing a healthy lunch that would energize them for the second half of the day. It was a perfect way to hold staff meetings and keep outside drinking down. Fridays were special because of interest in the dessert. If sales that week had been particularly good, there would be slices of fresh mango, no matter what the price or season.
