Part 2 (1/2)

BIG M MUSIC WAS blowing up. Wall Street wanted in. Bertelsmann, a 151-year-old German book publis.h.i.+ng company founded by a do-it-yourself printer named Carl, swooped in to buy RCA Records from General Electric for $300 million in 1986. Chief financial officers from all over the world were starting to look at record companies-or, even better, blowing up. Wall Street wanted in. Bertelsmann, a 151-year-old German book publis.h.i.+ng company founded by a do-it-yourself printer named Carl, swooped in to buy RCA Records from General Electric for $300 million in 1986. Chief financial officers from all over the world were starting to look at record companies-or, even better, CD CD companies-as an easy and fun way to pump up their bottom lines. ”The all-vinyl business had its ups and downs. This one, it just seemed to grow without any end in sight,” recalls Bob Merlis, a former publicist and corporate spokesman for Warner Music. ”That's when the multinationals got all excited about the music business. And that's when the business changed from this homegrown kind of thing to 'we have to do better this next quarter from the last quarter or our parent companies will be upset.'” companies-as an easy and fun way to pump up their bottom lines. ”The all-vinyl business had its ups and downs. This one, it just seemed to grow without any end in sight,” recalls Bob Merlis, a former publicist and corporate spokesman for Warner Music. ”That's when the multinationals got all excited about the music business. And that's when the business changed from this homegrown kind of thing to 'we have to do better this next quarter from the last quarter or our parent companies will be upset.'”

RCA and its all-American logo-Nipper the dog looking quizzically into a phonograph-going to the Germans was one thing. Could CBS Records, the all-American home of the Boss and the King of Pop and whatever Barbra Streisand was, really go to the j.a.panese? That's what the trades were saying, and the rumors turned out to be true.

Walter Yetnikoff was the catalyst.

In 1988, the CBS Records chairman had two problems. First, his legendary consumption of drugs and alcohol prompted one of his biggest rivals, MCA's Irving Azoff, to declare in an industry speech that CBS had a drug addict at the helm. But Yetnikoff was perhaps even more addicted to power, and a straight-shooting New Jersey billionaire named Laurence Tisch was standing in his way. Two years earlier, Tisch, owner of the Loews Corporation, had taken over a controlling interest in the label's parent, CBS Inc. At first, Yetnikoff encouraged Tisch-even tried to charm him-because he couldn't stand his previous boss at CBS Inc., Thomas Wyman, the president. But as exCBS Inc. general counsel George Vradenburg recalls: ”When Larry got in, Larry really did not talk to Yetnikoff, and Yetnikoff felt a bit betrayed. [Yetnikoff] ended up disliking Larry perhaps more intensively than he disliked Tom Wyman.” Yetnikoff called Tisch ”the Evil Dwarf.”

Tisch never quite understood the record business. As head of CBS Inc., he thought he could plunge into the record label, sidle up to the top executives and managers, and work his influence subtly, from within. But Yetnikoff got in his way, preventing Tisch from getting close to anybody. ”[Tisch] thought the business relied too much on personalities and loyalties, and he wasn't confident that he understood the business,” Vradenburg says. ”To some extent, he had that little concern at the back of his head that the business wasn't clean. The people in it were not people that wore three-piece suits. They had not come out of any business that Larry had been a.s.sociated with. There was this sense that this business had problems with drugs, independent [radio] promotion and bribery and kickbacks. There wasn't anything specific.... But there was always that worry.”

Yetnikoff was shocked to discover Tisch wanted to sell CBS Records to Nelson Peltz, another billionaire, whose fortune was not in music or entertainment but in the food business. Yetnikoff stomped into Tisch's office, employing some of his best expletives. Tisch calmly suggested that Yetnikoff could buy CBS Records for the same price he offered Peltz-$1.25 billion. In cash. The gears in Yetnikoff's law schooltrained brain started whirring. He knew he couldn't do anything without Sony, which had owned CBSSony Records since executives from the two companies established a joint venture in the late 1960s. That company was booming, thanks in part to the CD's popularity in j.a.pan. So Yetnikoff contacted Mickey Schulhof, then the highest-ranking American official at Sony. Of course, Yetnikoff didn't like him either. He called him ”Meekee.”

Unlike Yetnikoff, Schulhof was not a record man. He had degrees in physics from Cornell, Brandeis, and Grinnell, but went into business at age thirty. His resume gave him the background for a manufacturing job at CBS Records, and he oversaw things like recording studios and inventory control-”the noncreative side,” he says. Clive Davis, the CBS executive who'd hired him, realized Schulhof was up for something more technical and introduced him to Harvey Schein, then the US president for Sony.

Schein hired Schulhof as an a.s.sistant in 1974, and within three months, Sony's charismatic chairman, Akio Morita, was asking to meet this new American employee he'd been hearing so much about. Morita, too, was a physicist. The two men bonded. Per Morita's instructions, Schulhof successfully built a Sony speaker factory in Delano, Pennsylvania. He also bonded with Morita's number two, Norio Ohga, who, like Schulhof, was an amateur pilot. The executives became Sony's power troika for the next two decades, zooming around the world for business and personal trips on the company's various Falcon jets. ”Whatever you discussed with [Schulhof], he could answer you like a specialist, a professional,” Ohga says. ”When you try to discuss music with most people, or airplanes with most people, the conversation doesn't go very far. With Mickey, if we spoke of airplanes he was on the level of an airline pilot, and since he was a real learner, if I asked him to look into something he'd come back in a flash with the most detailed report you can imagine. No matter what the subject, he'd be there and master it.”

Yetnikoff, who was not so cultured but just as smart, was naturally threatened by this kind of personality, as well as by Schulhof's proximity to j.a.panese power players he, too, considered friends. Nonetheless, in spring 1986 he called Schulhof, suggesting Sony buy CBS Records outright. To his surprise, Schulhof responded positively. ”I called Morita at home and he said, 'Of course. Now is the golden time. We know software is important,'” Schulhof recalls. Yetnikoff and Schulhof knew Sony was desperate to expand into the US music business. In part, this was because of the CD, whose profits were jumping at that time to previously unimaginable heights. But it was also because Sony was preparing to release hardware like Digital Audio Tape, or DAT, and the MiniDisc, and its executives believed these formats could be almost as lucrative as the CD. When Sony had gotten burned before, with the ill-fated Betamax format, it was in part because the electronics giant had no movie software to supplement its hardware. Sony executives didn't want to make that mistake again.

For the next year, Sony and CBS haggled. Schulhof met with a lawyer and a financial adviser at 7:30 one morning at the Mayfair Regis. The three then showed up at Yetnikoff's house on Fifty-sixth Street. Yetnikoff, who was given to all-night drinking, dragged himself out of bed at 8:30 a.m., put on a bathrobe, instructed his wife to prepare especially potent coffee, and proceeded to extract an agreement that would bring him a fee of something like $20 million. They were all set to pull the trigger. Then William Paley, the legendary chairman of CBS Inc., who was known for his whims, decided the sale wasn't such a good idea. He strongly discouraged CBS's board, including Tisch, from going through with it. They were ready to vote ”no.”

Fate intervened. On October 19, 1987-Black Monday-the stock market crashed. Billionaire Tisch freaked out, fearing his financial future wasn't so secure after all. Paley or no Paley, he called Schulhof the next day and wanted to know if Sony's offer-$2 billion-still stood. Schulhof called Morita. ”He said, 'If the company was worth $2 billion yesterday, it's still worth $2 billion today. My opinion hasn't changed,'” Schulhof recalls. ”We bought CBS Records.” In 1988, Yetnikoff finally succeeded in his quest, as he put it, to have somebody ”install me as Super Czar and make me superrich.”

What Yetnikoff didn't know was that an old friend, hyper-ambitious Thomas D. Mottola Jr., was quietly consolidating his power at CBS, positioning himself to take over the moment Yetnikoff slipped. Given Yetnikoff's drug-and-alcohol problems and his increasing lack of public discretion, Mottola and his allies felt certain that time was coming-soon. It would be a monumental power grab, one that would shape the way Sony's music companies, Epic and Columbia, would operate for more than a dozen years.

AT EIGHT YEARS OLD, Tommy Mottola of New Roch.e.l.le, New York, was a talented trumpet player. It won him a private school scholars.h.i.+p, but then he got bored and switched to the guitar. He had a rebel spirit, ditching school and running away from the military academy to which his parents had sent him when he decided he wasn't a fan of attending his private school. Mottola's mom and dad finally gave in, letting him come home if he behaved. He didn't exactly keep his side of the deal, playing in a rock band, racing cars, and partying so hard that an old friend later called him ”the baddest boy in New Roch.e.l.le.” Instead of focusing on school, he focused on girls. He dated Lisa Clark, daughter of powerful ABC Records founder Sam Clark, in the highfalutin' neighboring town of Harrison, then married her in 1971. Through a connection with his father-in-law, Mottola snagged small parts in four film flops, then tried to make it as a singer under the name ”T. D. Valentine.” He was terrible, but the experience gave him connections in the music business, and he was working as a song plugger for music publisher Chappell when he got his first break.

It was in the form of a hunky but weirdly dressed duo-one short guy with dark hair, one six-foot-plus guy with long, wavy, blond hair and platform shoes-called Hall and Oates. They could sing sing. Using his newfound industry connections, Mottola promised Daryl Hall and John Oates a record deal if they dumped their current manager and hired him instead. Like many young stars in the history of the record industry, they quickly went into debt ($230,000 in their case) to the first label that signed them. Then they switched to RCA Records, borrowed some more money, and...well, anybody who listened to the radio in the 1980s knows the rest. They catapulted Mottola into the record business. He named his management company Don Tommy Enterprises, which some in the business speculated was due to Mottola's fascination with the Mob. (Mottola was said to have been introduced to infamous boss Vincent ”the Chin” Gigante.) Either way, he wore gold chains and purple leather jackets and looked cool.

Mottola soon changed the name of his company to Champion Entertainment, and through Hall and Oates's lawyer, Allen Grubman, he befriended CBS chairman Walter Yetnikoff. Some in the company came to call him ”Walter's personal valet.”

Yetnikoff liked Mottola so much that he promoted him to take over CBS's US labels, replacing veteran Al Teller. ”Al was a Harvard MBA, very uptight, businesslike-every 'T' crossed and 'I' dotted and all that sort of thing. Not the most loved guy, but he loved music,” recalls Bob Sherwood, a longtime CBS executive who ran Columbia Records for a year and a half during the transition to Sony. ”Tommy was a manager. Celine Dion owes a lot more to him than [to] her voice coach. He saw this rough-hewn woman from Canada and turned her into a superstar. Tommy and I worked well together, but he had been a very abrasive manager-which the successful ones ultimately are.”

One night in 1988, while attending a party for CBS blues singer Brenda K. Starr, Mottola received a demo tape from a mysterious benefactor. He stuck it in his limo's ca.s.sette deck and immediately knew he was hearing a star. Eighteen-year-old Mariah Carey and her multi-octave* voice had already received an offer from Warner's Mo Ostin for $300,000. voice had already received an offer from Warner's Mo Ostin for $300,000.

But Mottola received authorization from Yetnikoff to up the offer by $50,000, and he signed Carey. He also pushed her then-boyfriend, a producer, out of the picture, although neither Mottola nor Carey has ever said how. Mottola was married at the time, but he nonetheless canoodled with Carey around New York nightclubs. Soon he was divorced.

Yetnikoff continued to support his friend. He had given Mottola a $3 million bonus after just a few months in Teller's old job, and in 1990 arranged to have Mottola paid $15 million over five years, not counting bonuses. ”One of the more interesting facts about Tommy is that he's extremely smart,” Yetnikoff told a reporter. ”He's hidden that from the world until recently.” What Yetnikoff didn't know was that by the end of 1990, Mottola was fraternizing with his boss's long-term enemies. Yetnikoff was right-Mottola was extremely smart. He proved a master of power politics at Sony Music Entertainment. He saw cracks in the powerful chairman's foundation. For example, just two years after the Sony takeover, Yetnikoff was in rehab. He was in the process of divorcing his long-suffering wife, Cynthia. Warner had displaced Yetnikoff's previously dominant company in market share, building up new acts like R.E.M. and Anita Baker, whereas Sony's biggest labels, Columbia and Epic, relied on older stars like Jackson and Springsteen. And it wasn't like anybody had any sympathy. He'd built up incredible ill will over two decades of childish behavior, making enemies everywhere he went. Sometime back, Yetnikoff had supposedly p.i.s.sed off fellow record mogul David Geffen by asking one of his a.s.sistants whether the openly gay Geffen would teach Yetnikoff's girlfriend the finer points of oral s.e.x. Geffen started talking to his old friends, Bruce Springsteen's manager, Jon Landau, and Michael Jackson himself, pus.h.i.+ng them farther away from Yetnikoff. Landau issued a statement: ”Neither Bruce nor I have had a significant conversation with [Yetnikoff] in nearly two years.”

Mottola formed an alliance with Geffen and Allen Grubman. The influential industry lawyer had recently tried to strong-arm Yetnikoff into signing a ma.s.sive new contract for Michael Jackson, a client he'd recently taken over, but Yetnikoff blew up and banned Grubman, once his friend and confidant, from the building. (Jackson remained with Sony Music.) On advice from Geffen and Grubman, Mottola started schmoozing the Sony executives-most effectively, by befriending Akio Morita's aspiring pop-star G.o.ddaughter, Seiko Matsuda. Leaks appeared in the Wall Street Journal Wall Street Journal saying Yetnikoff was on his way out. Soon, Frank Dileo, a former Epic Records vice president of promotions, Yetnikoff's close friend, and Michael Jackson's manager, found himself the final link between Yetnikoff and his top artists. ”Once they blow me out, Walter's vulnerable,” Dileo remembers thinking. Shortly after that, Jackson abruptly fired Dileo. Yetnikoff suddenly had no artist connections. saying Yetnikoff was on his way out. Soon, Frank Dileo, a former Epic Records vice president of promotions, Yetnikoff's close friend, and Michael Jackson's manager, found himself the final link between Yetnikoff and his top artists. ”Once they blow me out, Walter's vulnerable,” Dileo remembers thinking. Shortly after that, Jackson abruptly fired Dileo. Yetnikoff suddenly had no artist connections.

Yetnikoff fell. Hard. Ohga, who had stayed at Yetnikoff's house and swam at his pool numerous times during his visits to New York, interrupted a vacation to meet with his Sony Music chief at his office. He patiently explained to Yetnikoff that he was tired of his public outbursts and lack of finesse with Sony's biggest stars. He put Yetnikoff on sabbatical, then pressured him to cut off his three-year contract. (Yetnikoff managed to retain $25 million in the settlement.) ”I'm sorry, Walter,” Ohga said, ”but this hurts me more than it hurts you.” Ohga did not shake his old friend's hand. After the Sony chief left with his attorney, a security guard showed up and asked Yetnikoff to leave through the side door. While Yetnikoff cleared out, Ohga was in the next room, symbolically handing over the reins to Mottola. (To Mottola's frustration, he wouldn't officially take over Sony Music until 1991, about a year after Yetnikoff left the company; at first, Ohga himself became chair of the music group and allowed Mickey Schulhof to run the daily operations as Mottola's boss.) After the purge, a reporter asked Yetnikoff what he would do. ”Count my money,” he replied. ”And, believe me, that's going to take some time.”

While Yetnikoff was counting, Mottola was spending. ”He was riding that job for all it was worth,” says an industry source from that time. Finally in charge of Sony Music, ex-manager Mottola gave Aerosmith, recently dropped by Geffen, a $25 million deal. He spent $800,000 to produce Carey's debut alb.u.m, $500,000 to redo her first video, and another $1 million on general promotion. The New York Times New York Times called him ”Sony Music's Mr. Big Spender” in a front-page headline. In June 1993, he married Carey in a ma.s.sively overblown Manhattan wedding, in which the bride wore a 27-foot train and Springsteen, Tony Bennett, Ozzy Osbourne, and Robert De Niro were among the stars in attendance. The couple moved into a $10 million estate with a 20,000-square-foot house in Harrison, New York, surrounded by golf courses and country clubs. It was equipped with the works: shooting range, electronic security doors, 64-channel recording studio, indoor swimming pool, and Ralph Lauren as a neighbor. called him ”Sony Music's Mr. Big Spender” in a front-page headline. In June 1993, he married Carey in a ma.s.sively overblown Manhattan wedding, in which the bride wore a 27-foot train and Springsteen, Tony Bennett, Ozzy Osbourne, and Robert De Niro were among the stars in attendance. The couple moved into a $10 million estate with a 20,000-square-foot house in Harrison, New York, surrounded by golf courses and country clubs. It was equipped with the works: shooting range, electronic security doors, 64-channel recording studio, indoor swimming pool, and Ralph Lauren as a neighbor.

Well before the wedding, Sony Music Entertainment employees fired up their publicity, marketing, and promotion machines to focus almost exclusively on Carey. ”The eight-hundred-pound gorilla in the room was the fact that they were having a relations.h.i.+p and everybody in the world knew it,” Bob Sherwood recalls. ”There's not anybody with a brain who wasn't going to put maximum effort into her.” During a contract negotiation in the early 1990s, Michael Jackson called an old friend, Mickey Schulhof, to complain that his sales slump was due to Mottola putting disproportionate resources into Carey's career. Yet, as Sherwood points out, the Carey-Mottola-Sony triumvirate paid off. Her Sony CDs would sell 55 million copies in the United States alone, putting her in the Top 20 of all time.

By 1992, though, given the hits from Carey, Dion, and Michael Bolton, Sony had a pop-only reputation. Springsteen had split with the E Street Band. Disturbing revelations about dalliances with young boys were starting to dog Michael Jackson. Sony Music, once a giant in the form of CBS Records, looked weak compared to compet.i.tors like Warner and even EMI. It wasn't that Sony Music was doing poorly, in general. The company's operating profits, according to the New York Times, New York Times, jumped by 60 percent between 1987 and 1991. But its top rival, Warner, jumped by 60 percent between 1987 and 1991. But its top rival, Warner, doubled doubled its profits during the same period. This was unacceptable in a hyper-compet.i.tive business. Mottola would soon change all that. At one point Michele Anthony, the hard-nosed attorney for rock acts such as Guns N' Roses and Alice in Chains, told Mottola over dinner: ”I wouldn't sign a rock act with Sony if my life depended on it. You guys are arrogant and out of touch, and your company has been living off the fat of its superstar roster for so long you don't have a clue how to develop a new act.” Mottola hired Anthony, who started bringing hit rock acts to the label. Before long, Sony's high advances to top artists prompted huge bidding wars, helping to set the lavish new deals for Michael Jackson and Aerosmith as the industry standard. its profits during the same period. This was unacceptable in a hyper-compet.i.tive business. Mottola would soon change all that. At one point Michele Anthony, the hard-nosed attorney for rock acts such as Guns N' Roses and Alice in Chains, told Mottola over dinner: ”I wouldn't sign a rock act with Sony if my life depended on it. You guys are arrogant and out of touch, and your company has been living off the fat of its superstar roster for so long you don't have a clue how to develop a new act.” Mottola hired Anthony, who started bringing hit rock acts to the label. Before long, Sony's high advances to top artists prompted huge bidding wars, helping to set the lavish new deals for Michael Jackson and Aerosmith as the industry standard.

”n.o.body likes to overspend when you're on the corporate side,” Schulhof says. ”But I knew what Tommy was spending. I never had a problem with it, and I don't think what he spent was disproportionate with what others were spending at the time in the industry.”

Mottola's personal expenses, including travel, ballooned to $10 million a year. Three of his five a.s.sistants made $180,000 a year. Employees received $550 Gucci bags for the holidays. Mottola's brain trust, including Anthony and rising Columbia chief Don Ienner, rode to the top of the Sony Building in New York in a special freight elevator, and drivers shuttled them around the city in new Mercedeses. They became Mottola's famiglia famiglia, as New York New York magazine later put it in a profile. Jeff Ayeroff, a longtime Warner Music executive in LA who joined New Yorkbased Sony Music in 1994, as cofounder of the Work label, says: ”It was sort of like the West Coast was liberal and the East Coast was take-no-prisoners. These guys were very aggressive and very smart and did whatever it took.” When Work signed a young actress, Jennifer Lopez, Mottola instructed his people to open their wallets. ”He let us spend more money on marketing than anybody else would have,” Ayeroff recalls. J. Lo's 1999 debut magazine later put it in a profile. Jeff Ayeroff, a longtime Warner Music executive in LA who joined New Yorkbased Sony Music in 1994, as cofounder of the Work label, says: ”It was sort of like the West Coast was liberal and the East Coast was take-no-prisoners. These guys were very aggressive and very smart and did whatever it took.” When Work signed a young actress, Jennifer Lopez, Mottola instructed his people to open their wallets. ”He let us spend more money on marketing than anybody else would have,” Ayeroff recalls. J. Lo's 1999 debut On the 6 On the 6 went triple platinum. went triple platinum.

n.o.body worried about money at Sony. ”I didn't look at the financials. I wasn't entrepreneurial, and I wasn't running the company,” recalls Michael Goldstone, a talent whiz who linked an unknown San Diego singer, Eddie Vedder, with an established Seattle rock band and signed them to Epic as Pearl Jam. ”I was this A&R gunslinger going out and finding bands.” Pearl Jam and another of Goldstone's discoveries, Rage Against the Machine, became superstars. So did Ricky Martin, J. Lo (who was rumored to have gone out with Mottola after he broke up with Carey), Destiny's Child, the Dixie Chicks, and Shakira. It didn't matter how much the label spent as long as the hits kept coming.

ALTHOUGH A VETERAN Sony executive described Mottola's company to Sony executive described Mottola's company to New York New York as ”a real oligarchy,” Bob Sherwood says the chairman and his people aspired to rebuild the label in Warner's laid-back image. ”They wanted to move Columbia from being a New Yorkbased, relatively uptight, suit-and-tie kind of label to a more Warner look,” he says. ”Tommy brought lots of Warner executives. They liked a more free-flowing style.” To be sure, Warner's chairman, the goateed and erudite Mo Ostin, had built a record label where freewheeling executives could thrive. None other than Frank Sinatra had hired Ostin in 1963 to run his new label, Reprise, and Ostin had spent the better part of three decades signing artists on instinct, including Jimi Hendrix, Joni Mitch.e.l.l, the Kinks, Frank Zappa, and Neil Young, and letting them do their thing over time. ”Mo loved talent magnets like Geffen, [Elektra chief Bob] Krasnow, and [longtime Warner Music executive Lenny] Waronker,” writes retired Warner executive Stan Cornyn in as ”a real oligarchy,” Bob Sherwood says the chairman and his people aspired to rebuild the label in Warner's laid-back image. ”They wanted to move Columbia from being a New Yorkbased, relatively uptight, suit-and-tie kind of label to a more Warner look,” he says. ”Tommy brought lots of Warner executives. They liked a more free-flowing style.” To be sure, Warner's chairman, the goateed and erudite Mo Ostin, had built a record label where freewheeling executives could thrive. None other than Frank Sinatra had hired Ostin in 1963 to run his new label, Reprise, and Ostin had spent the better part of three decades signing artists on instinct, including Jimi Hendrix, Joni Mitch.e.l.l, the Kinks, Frank Zappa, and Neil Young, and letting them do their thing over time. ”Mo loved talent magnets like Geffen, [Elektra chief Bob] Krasnow, and [longtime Warner Music executive Lenny] Waronker,” writes retired Warner executive Stan Cornyn in Exploding Exploding. ”He collected them like his wife, Evelyn, collected fine scarves.”

To ill.u.s.trate the point, one day in 1983, one of Krasnow's hotshot A&R executives, Michael Alago, walked into his office talking up a new, eardrum-shattering heavy-metal band that had almost zero chance of ever getting on the radio. Krasnow really had no idea what Alago was talking about, but he authorized him to sign Metallica anyhow. ”He trusted my instincts. Sometimes he said, 'You're crazy, we're not doing it,'” Alago says. ”But he knew that I knew we were on to something.” Metallica's Elektra alb.u.ms, beginning with Kill 'Em All, Kill 'Em All, would combine forces with Guns N' Roses to begin pus.h.i.+ng hair metal off the charts. (Later, a succession of grunge bands would finish the job.) Although they started as long-haired teenagers hawking tapes, Metallica would sell 58 million alb.u.ms by late 2008, just 2.5 million less than Michael Jackson, in the United States. would combine forces with Guns N' Roses to begin pus.h.i.+ng hair metal off the charts. (Later, a succession of grunge bands would finish the job.) Although they started as long-haired teenagers hawking tapes, Metallica would sell 58 million alb.u.ms by late 2008, just 2.5 million less than Michael Jackson, in the United States.

But Warner Music, by the early 1990s, was moving in a more corporate direction, just like every other major label during the CD boom. In this new world, patient, instinctive, aging talent aficionados like Ostin and Krasnow were rapidly becoming obsolete.