A new rhythm takes hold.

An abundance of black talent is sparking lucrative deals and shifting the industry power structure. But will it last?

Antonio "L.A." reid races around the hit Factory, New York's hippest recording studio, like a man on a mission. One of black music's hottest young producers/entrepreneurs, Reid needs to tie up a few nagging administrative duties for his powerhouse label, LaFace Records, before returning to the mastering studio to complete the sound check of Creep, the new single by the controversial, female hip-hop trio, TLC.

Surrounded by cellular phones and a small entourage, Reid slips into a Hit Factory VIP lounge to powwow with his publicist and his general manager and, as usual, deal with reporters trying to hone in on what's hot on the L.A./Babyface horizon. Clad in a sky-blue jacket covering a "produceresque" black ensemble, Reid is dressed for a night on the town with the "phat" producer of the moment, 24-year-old Sean "Puffy" Combs, president of Bad Boy Entertainment. But before he can end the interview session, Reid has to answer a barrage of questions about the business, not the "hot sounds" of his company. Not used to the public role of co-president of his $37 million, Atlanta-based LaFace label, he slowly gets in the groove of the reporters' questions.

Yes, he and his legendary songwriting partner Kenny "Babyface" Edmonds have parted ways. No, LaFace isn't going down the tubes. Yes, he plans to launch more sub-labels, like the current Untouchables Entertainment. And no, right now, he's not interested in sliding LaFace onto the information superhighway.

By B-school textbook standards, the five-year-old LaFace is still in its formative years. But in an industry that has only recently relinquished power to black forces, such maestros as L.A. Reid are combat veterans. "We are doing exactly what the major labels do, just on a smaller scale," says Reid. "The difference is we understand black artists. We understand how to market them better than anybody. I don't know that every white executive knows that, so how can they effectively market our records to our people?"

Like Reid and Edmonds, members of the music industry's "new wave" spend their days and nights scouting new talent, launching multimillion dollar ventures and mentoring the next generation - in short, going about the business of the black music power elite. Leveraging the legacy and clout of music business legends Berry Gordy (Motown), LeBaron Taylor (CBS Records) and Al Bell (Stax), this new generation of African-American producer/entrepreneurs and executives want more than hot labels with big-name artists. They want control. They want to build empires. They want to keep their share of the profits. And more than all of these things, they want to be power brokers in an industry in which much of the talent is black, but most of the top decision makers are not.

In addition to "L.A." and "Face," the new school of black "music-preneurs" includes:

* Russell Simmons, CEO of $31 million Rush Communications (No. 49 on the BE INDUSTRIAL/SERVICE 100). Earlier this year, after ending a relationship of several years with Sony, Simmons signed a distribution deal with PolyGram. (PolyGram also acquired the legendary Motown Records last year in a deal valued at $325 million.)

* Simmons' close friend Andre Harrell, who launched Uptown Entertainment with a $50 million deal with MCA Records in 1992.

* Jimmy "Jam" Harris and Terry Lewis, whose Perspective Records has a multimillion dollar deal with A&M Records, estimate their 1994 gross sales to be $ 10 million.

BEYOND JOBS, TO EQUITY

If it isn't obvious by now: Black music is hotter than ever - from CD sales to the increasingly popular "black music" soundtracks. According to the Recording Industry Association of America in Washington, D.C., the numbers don't lie. Of the $ 10 billion the industry raked in last year, rock music contributed 32.6% to the bottom line. Country lassoed in 17.5%.

Now here's the real deal: Urban contemporary, R&B, soul, dance, disco, funk, fusion, and reggae pulled down 9.9% of the market; rap music, which last year broke out of the urban contemporary category, bogarted 7.8% of the market; and jazz and gospel commanded 3.3% and 3.1 %, respectively. That means black traditional and contemporary music generates a total of 24%, or $2.4 billion of the total sales of the industry.

Yet, despite black music's sizable contribution to the industry's economic health, African-Americans remain largely excluded from the profit centers - production and marketing, packaging and distribution - the business. "There is a common thread in the record business that says we can do this without you," says Reid. "So we need to start our own ventures."

His peers agree. "This is a very strong time for us right now," says Bill Stephney, CEO of StepSun Music Entertainment in New York. "[Launching labels] signals a different level of development for African-Americans in the industry. Our creativity is worth more than just a job; it's worth us demanding more equity."

Stephney, who was one of the masterminds behind the development of the provocative rap group Public Enemy during his tenure at Simmons' Def jam Records, opened StepSun in 1992 with about $1 million from Time Warner's sub-label Tommy Boy. "Power concedes nothing," counsels Stephney, who was wooed by Tommy Boy, Def Jam's major competitor. "Power respects power. They want the money. And to retain their power they have to invest in us. But we don't have to remain 50-50 partners forever. And soon we can buy up white companies."

But the real key to understanding who's got the juice is getting a handle on the aftermath of the dramatic shake-up of the music business over the last decade. With record companies coming and going (even the idea of records is now antiquated), mergers and acquisitions have changed the very landscape of the business.

Right now, the music industry is dominated by the Big Six record and distribution companies: Warner Elektra Atlantic, PolyGram Group Distribution, Cema Distribution, UNI Distribution Corp., BMG Distribution and Sony Music Entertainment Inc.

Of these multinational conglomerates, several of which are foreign-owned, most have a black music division and a stable of hot producer/entrepreneurs whose independent labels are building up a roster of formidable new artists. At the helm of these divisions is either a president or senior vice president who is black. Their ranks include some of the most powerful black executives in the business: Sylvia Rhone, chairman and CEO of Warner Music Group's Elektra/East West; Clarence Avant, chairman, and Jheryl Busby, CEO of Motown Records; Ed Eckstine, president of Mercury Records; Cassandra Mills, president of Giant Records; and Tony Anderson, senior vice president of Black Music at Columbia Records. Their mission? Find acts, create stars and make money.

For Sylvia Rhone, being among the first black presidents at a major record company is like being "under a microscope." Rhone, who has no "black music" tacked onto her title, is on at least equal footing with the white male heads of Warner Music's two other major label groups, Interscope Records and Rhino Records.

Although she's gone the farthest, she's far from the first of the industry's innovative black executives. LeBaron Taylor started the trend way back in the early '70s. Taylor convinced CBS Records to start a black music division, and then brought on Kenny Gamble and Leon Huffs Philadelphia International musicmaking machine to grind out the hits. Avant, himself a former black-music entrepreneur (he owned Sussex Records during the '70s), is also a longtime industry power broker.

Still, 20 years later, the number of top black executives at major music companies can fit around a large table in a Harlem jazz club. But this time around, more blacks are concerned with branching out beyond, not just rising within, the music industry's corporate structure. "Blacks are seeking more control over the balance between art and commerce," says Lisa Cortes, president of Loose Cannon, a one-year-old, black-owned label under PolyGram.

Before negotiating with PolyGram's CEO Alain Levy to launch Loose Cannon, Cortes spent nearly five, often frustrating years as vice president at PolyGram/Mercury. "Marketing had no idea or understanding of [black] culture," she says.

CROSSING OVER

To have real industry clout, black executives can't stop at marketing music to African-Americans. They must also be adept at getting their product into the mainstream, where their acts can really "blow up." The "cooly-high-harmonies" of Motown's Boyz II Men is a prominent example of an R&B act with true mass appeal.

"Unless a record crosses over, we can be in a bad position," says Sharon Heyward, president of Perspective Records. "There are few outlets for R&B music. We need to get on The BOX or MTV."

That means tapping into international markets as well. Black music entrepreneurs must reach out to established overseas markets for black music, such as the United Kingdom, as well as new markets, such as the new South Africa. Again, alliances with the multicultural giants should help the black labels to meet this challenge.

One critical crossover venue is new media technology, which includes, among other things, the Internet, CD-ROMs and laser discs. Unlike many of her predecessors, when Cortes cut her deal with PolyGram, she also finagled funds to focus on multimedia projects after Loose Cannon was more established. "I don't live in a music cocoon," says Cortes, whose 10-year plan includes music, movie script development and the marketing of ancillary merchandise, ranging from apparel to pinball machines.

Heyward hired a consultant to help Perspective keep up with technological advances. The jam/Lewis duo, responsible for recreating the image of Janet Jackson, enabling her to produce multiplatinum albums, will be renegotiating their contract with A&M Records in 1996. The team is looking to expand onto the Internet, CD-ROM releases and explore other interactive media options.

Black music companies have linked up with Hollywood to market their acts through movie soundtracks. "Soundtracks are a new market," says Lisa Jackson, executive vice president and general manager at Spike Lee's 40 Acres And A Mule Musicworks. "Music is almost part of the script."

Reid's LaFace learned the value of soundtrack recording years ago when the group worked on Eddie Murphy's multiplatinum Boomerang soundtrack, which featured songstress Toni Braxton. The popularity of the movie helped to make Braxton a household name long before her first album was released by LaFace.

However, access to multimedia technology - and and the power it represents - still remains in the domains of the PolyGrams and Sonys, not the Motowns and LaFaces. Loose Cannon's Cortes admits that whatever she buys is with "PolyGram money."

For now, that is the price of opportunity. "Sometimes our creativity outweighs our business acumen," 40 Acres' Jackson acknowledges. "But we don't have to dissolve like we did in the '60s and '70S."

MONEY TO BE MADE

Today, the focus is on deals like Harrell's much-touted $50 million deal with MCA. The seven-year deal splits the profits between Uptown and MCA, and enables Harrell to pump out the sounds of Heavy D and the Boyz and Mary J. Blige, as well as executive-produce films like 1992's Strictly Business. Most recently, Harrell served as executive producer of Fox's new television series, New York Undercover, a police drama following two young cops, one black, one Hispanic.

At Uptown, Harrell is positioning himself in the footsteps of his mentor Russell Simmons as a full-scale entertainment mogul. To date, Rush Communications owns five record labels, several management companies, a film and television branch, a radio production company and a clothing line.

The success of Simmons and Harrell make it dear that there's a lot of money to be made in - and through - the music business. But power costs. Whether negotiating $1 million (the size of former Harrell protege Sean Combs' deal with Arista Records) or $100 million, here's a simplified breakdown of who makes money on these deals, and how. First, they get, say, $600,000 annually as an overhead allowance from a Big Six entertainment conglomerate. The black label is responsible for producing a project with a total additional recording fund of about $250,000 to $300,000 for each artist. Promotion and marketing can tack on even more. For example, to cut a video could run $75,000; to promote and market it, another $ 1 00,000 per artist. A label projects how much money an act's album should make; ideally, the cost of production and marketing should be no more than 10% of total sales.

Every nickel received by the black label and artist is an investment, which is expected to be paid back by record sales. On a basic low-end deal, the black label wants to make 16% to 20% of the retail music sales. The label signs an artist and forks over 12% to 14%, then keeps the remaining 4% to 6% as profit. In plain terms, of the $15 you paid for that CD, the artist gets $1.50 and the label gets 50 cents - but only after all the front money received from the ma or record company has been paid off.

HE WHO DEFINES, CONTROLS

The emergence of the new school of black labels "is good and bad," according to Sha-Kim, Queen Latifah's partner at Flavor Unit Entertainment.

"It's good that black people are realizing that equity is the way to go," Sha-Kim explains, "but bad because some people are not serious about the business. They're starting labels as an ego trip."

Be it economic equity or ego-tripping, the wave of label deals has prompted the creation of new power brokers and, some say, just as many record executive tumbles. As the majors pump big bucks into independent labels, they sometimes decide to cut black music staffers or eliminate black music departments altogether.

Some black music executives feel a sting when an act that was once banished to the black music division, where it was developed, promoted and nurtured to success by black executives, is handpicked and sent to the pop division for whites to reap the glory. And since black music is consistently being relabeled, the black executives end up with their heads in the guillotine.

"As black music becomes pop music, whites need to have job security," says Jackie Rhinehart, senior director of artist development and publicity at Uptown Entertainment.

Consider the last decade alone. R&B and reggae begat rap, which spawned the hip-hop culture, which includes the gangsta genre, which then quickly crossed over into the mainstream. While gangsta rap continues to deliver platinum-level results, its graphic depiction - some say glorification - of violence and misogyny has created a growing backlash against the genre, particularly in the black community. Now the majors are shopping around for another style of black music to name and market. One possibility: "Jungle Music," a new sound coming out of London's black community.

"The Top 10 on the pop and black charts are similar again," says Uptown's Rhinehart. "Soon it will be time for the industry to redefine black music, and a shake-up may soon follow."