Hands Off

Mar 25 2009

In case, you haven’t heard, the grand new era of Guy Hands at EMI officially ended this week– not simply with the British financier bowing out of EMI, which he’d already done some time ago, but by Hands actually resigning the CEO position at Terra Firma Capital Partners, the firm he created. It doesn’t take a great deal of investigative reporting to get to the real story behind the press release It’s pretty clear that (a) no one gives up control of their own firm happily (b) despite the numerous problems for any financial firm these days, the EMI acquisition was clearly the straw that broke the backers’ back, and knocked Mr. Hands off his feet. And all this after only 2 years…

It’s hard to believe that it was only two years ago that Hands engineered the $2.5 billion dollar purchase of EMI, promising a new era of re-invention, cost-cutting, prudent, financially-savvy management, and a mission to bring a more mature, sensible approach to this business we call show. Of course, paying 2.5 billion for something worth probably half that amount was not a great start. Hands later acknowledged that Terra Firma was shocked upon acquiring EMI to learn how little of the company’s income came from current artists, as opposed to the old catalog. It seems that a financial capital firm’s due diligence does not include asking a couple of random music execs at the Soho House about the company’s prospects. After all, virtually any music weasel could have easily explained that aside from Coldplay, Radiohead and
Robbie Williams (he’s quite big in the UK)

, EMI hadn’t been able to buy a hit record since the Beatles. It was not a well-kept secret.

Nevertheless, Hands took over the teetering ship, made a number of oft-quoted and lofty announcements, took a rather quixotic approach to hiring (putting a UK A&R man in charge of the US, and a former Procter and Gamble exec in charge of him) and promptly began to feel the water rising up around his nose. Artists started lambasting him, Radiohead went off to release its album through the Internet for nothing, Robbie Williams bid adieu, and recorded music sales dropped like a brick. Earlier this year, Terra Firma disclosed a $1.78 billion dollar write-down on its investments, thanks largely to Guys’ foray into the world of rock ‘n’ roll. And now, we begin the wind-down, as second-level execs assume their positions, bow their heads, and prepare to submerge. The whole thing lasted just about as long as the equally ill-fated Sony-BMG merger. Come to think of it, that AOL-Time Warner thing didn’t do much better either.

There’s a pattern here. Show business, whether it’s the movie business or the record business, has a long and hallowed history of fleecing the money guys. Inevitably, a wealthy financier blows into town, trailing money, and expounding on his determination to “re-make” the industry, or perhaps more precisely, to hang out with rock stars, their model girlfriends, and aspiring young actresses, while re-making the industry. Of course, this impulse is understandable (not necessarily the hanging out with rockstars and actresses part, although that’s understandable too) since the world of show business is one of the most illogical, inexplicable, nonsensical, and utterly insane business environments in existence. Inevitably, people from the financial world (or even anyone who can do high-school math) take one look at a business like music and conclude that all of the current executives are idiots, and that anyone with actual business acumen could easily better their dismal performance. To be fair, a lot of musicians and songwriters look at most music executives and think pretty much the same thing.

Remember that recent movie Grizzly Man, about the guy who lived with grizzlies in the wilderness? He thought they were his friends. In fact, he was so confident of his kinship with the grizzlies that he started filming his own experiences with them. And then one day, that ate him for lunch. It’s not all that different from a night at Spago in Hollywood.

The problem with real “business” people in the music business is that they’re inevitably sure that the secret to success lies in somehow eliminating risk, cutting costs, improving marketing, reigning in the artists, and making the whole thing more like other more predictable industries. It’s a nice thought. But all of history points to the fact that show business is reliant not on efficiency or prudence or common sense, but rather the completely unpredictable science of finding hits, based on open ears, a little luck, a lot of gut instinct, and plenty of chutzpah.

Most major players in the music industry are very limited in their executive skills. Most have almost no ability to contain costs, plan for the future, or create an efficient operation. However, the ones that survive generally do know how to accomplish one all-important thing: they know how to recognize a hit song or a hit artist. Most MBA-toting, professional CEO’s can’t do it. So far, none of the “too cool for school”, zeitgeist-reading advertising gurus or new media guys have figured out how to do it. Many artists can’t do it, which is why so many artists’ label ventures fail completely. One thing you have to say about the music biz sharks– when they hear a splash, they recognize the sound of opportunity calling. And they know how to take advantage of it.

There is no greater skill than the ability to recognize a hit song. It will cover up a multitude of sins. It will sustain you despite market meltdowns and marketing mishaps. A real, genuine hit song can’t be stopped– even by all the stupidity of the record and radio industry– it has a life of its own. The ability to create, or at least to understand the principles that go into creating a hit song, is what my new book,
The Billboard Guide To Writing And Producing Songs That Sell

is all about. If you understand what makes a hit record, you’re better positioned for success than 90 percent of the people with more money, more business connections, more artistry, or more book knowledge of how to run a company. It may not be fair or just, but it’s just how show biz works.

So now that the latest savior of the music business has tossed in the towel, where do we turn? If not Hands, then who? Certainly, there’s no denying that the music business needs fixing. Here’s my idea:

Rather than turning to an outsider, whose claim to fame is turning around a gas station chain, why not look to the survivors of the industry, those who have been on the inside, and have managed to find success over and over again? On this score, my vote goes to
Barry Weiss

the President and CEO of the Zomba/RCA label group within the Sony Music hierarchy. Barry will probably never be the head of a multi-billion dollar financial capital company. I can’t see him buying gas-station chains or running Procter and Gamble. He’s not even likely to become a high-profile personality revered by the record-buying public, like Clive Davis or Simon Cowell.

But having grown up in the record business, Barry understands what actually matters. He knows the fundamentals of getting records out into the market place. He knows how to make his numbers, both on the cost side, the calendar side, and the sales side. Most of all, he knows that a company survives in this business by making hits, pure and simple. He’s not always eloquent, or politic, and he doesn’t specialize in finesse. Nevertheless, Jive Records continues to turn out hits, year after profitable year. Call me crazy, but that might be a guy we could learn from. I say, with Hands down, this year let’s Weiss-up, and look at the people that have proven they can get it right.

    Outsiders in any business never make insiders feel good. Insiders have been the one in the trenches, “Who does this GUY think he is!?!”. I think one of the major problems in the record business is the unwillingness to take ACTUAL chances, not “chances” based on the fact that Duffy and Amy Winehouse are really moving graphs so lets move a girl who seems of the same vein to the top 5 of american idol, but actual chances. You know the old saying about doing what everyone else isn’t is the path to greatness (or thereabouts). I feel just like any business, it’s not about the product but rather small “risk-avoiding” test groups, follow-ups, re-dos etc… I am sure these are prudent moves in the fact it keep the cash flowing and everyone feeling good about themselves (and keeping their jobs in the down economy!), but in the end I think they are falling short to realize what matters most. I think back not that far (from the 90′s) to even a band like Pearl Jam or Dave Matthews Band… Not only are these both amazing bands, but look at their “indy-major” approaches to the business and how well they fare in the concert business. I mean DMB is as capitalistic as it gets (releasing live shows constantly, pay fan club etc…) and IT WORKS! I still get that clean business feeling from them. When was the last time Kanye West (or even Nickelback) has had a 3-day concert sold out in the SAME VENUE (I speak of the gorge in george, it’s gorgeous, everyone should go once)… the answer is never! DMB/PJ type of acts are doing things right and are recession-proof. These are extreme cases as it is not as if marketing and the way they are handling business alone (isn’t hurting them) that is making their success, they are ridiculously talented. But I think there is something to learn there.

    - Brandon Keeley
    Check out my new song “Good for you”
    http://www.brandonkeeley.net/brandon_keeley_good_for_you.mp3

    I’m fascinated by the art/science of writing and producing a hit. According to Malcolm Gladwell’s “Outliers”, one needs to put in 10,000 hours, and mastery–of virtually anything–will inevitably follow. As I continue to log my hours, I often wonder about shortcuts or whether I have the hit producer gene. Congrats on the book. Can’t wait to check it out!

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