Pumping up the jam for profits.

African-American record executives take on the music industry by charting new territories.

Anyone who wanted to put a serious hurtin' on America's black music industry just had to drop a bomb on the Atlanta Hilton & Towers Hotel during the annual "Jack The Rapper" convention and reunion, a three-day star-studded event that attracted everyone in black music from top executives and hot producers to hangers-on and wannabes.

But during the 15th annual gathering in August, the requisite deal making, networking and stargazing took second place to a historic event. For the first time the conclave was able to honor four--count 'em, four--black presidents or co-presidents of major record labels owned by the nation's leading record companies. Included in this prestigious roster were: Jheryl Busby of Motown Records Co. L.P. (see sidebar "The New Motown"), Ed Eckstine at Mercury Records (a division of PolyGram Records), Ernie Singleton of MCA's black music division and Sylvia Rhone of EastWest Records America (a division of Atlantic Records). Since this unprecedented event, history was made once again. Last September, Rhone added the titles chairman and CEO, plus an additional label to her resume. In a savvy marketing move designed to tap Rhone's knack of cultivating hot talent, Atlantic has now put 40 acts (black and white) under her charge. The newly formed Atco-EastWest label will offer rock, pop, rhythm & blues, jazz and rap.

While the general public thinks of black music in terms of the hundreds of singers, rappers and musicians heard and seen on radio and video, the true power and influence lies in the hands of less than 50 executives, who control the creation and marketing of nearly every black-oriented record heard today (see sidebar, "The Hit Makers").

Although African-American executives have developed money-making music for record companies for the last 20 years, this dynamic new breed of presidents, co-presidents, and senior vice presidents of major and independent record labels oversees labels that generate revenues of $20 million and more. It is this cadre that signs the $1 million recording contract, doles out the $500,000 promotional budget and approves a $250,000 budget for a music video. This ambitious and well-trained corps of young, black, creative, business geniuses are steering the careers of megastars like Michael Jackson, M.C. Hammer and L.L. Cool J.

The college graduates who flocked to Wall Street during the go-go 1980s are now staking claim to the entertainment industry where fortunes can be made overnight, and where perceptive, hard-working gofers can be named a vice president in less than two years. But the competition is fierce and missed music trends can quickly end careers, especially in the super-hot black music arena. And, the industry still has to address the findings of Fred H. Rasheed, director of economic development for the NAACP, whose report alleges widespread discrimination against African-Americans in the recording business. Although this 4-year-old study prompted CBS (now Sony) and MCA to sign "fair share" agreements, which promised to increase minority vendor and recruitment programs and promote more African-Americans into executive positions, the results have been slow in coming.

Veterans like LeBaron Taylor, vice president of corporate affairs/general manager for Sony Software Corp. and Sony Music Entertainment Inc., warn that most African-Americans are still relegated to the black music divisions at record companies. "There is still a myth that it takes a special individual to run a major entertainment corporation, and that executives from the black music divisions aren't qualified for the top job," says Taylor. "I truly don't believe that there will be a black CEO at the corporate level within the next 10 years."

The Bottom-Line Clout Of Black Music

As a president or co-president of a label (the corporate equivalent of a CEO of a subsidiary), the honorees at the Jack the Rapper convention are finally getting the power to move black music to the front burner of any record company's agenda. As Sylvia Rhone stressed when receiving her award, "It shows that African-Americans can not only create music, but control it as well. The world is watching us."

Indeed it is. Last year, the record industry sold $7.5 billion in compact discs, prerecorded tapes and record albums. And, according to the Washington, D.C.-based Recording Industry Association of America (RIAA), sales of 18.3% or $1.37 billion was generated by black, urban or rhythm & blues music. As one of the fastest-growing genres in American music, today's black music is big business. (See chart for sales performance of all music categories between 1985-1989).

Motown president and CEO Jheryl Busby, 41, projects as much as $100 million in sales for Motown Records for 1991 (up from $36 million in 1988), and it is widely believed that during those halcyon days of the late 1980s, MCA's black music division contributed more than 50% of the parent company's bottom line. According to wunderkind Benny Medina, vice president, artists & repertoire (A&R), black music at Warner Bros. Records, Warner grossed about $300 million in 1990. Nearly $75 million or 25% of that came from his 25-person black music division. With big acts like Ray Charles, Prince, James Ingram and newcomer Tevin Campbell, Medina has positioned his label as a major force in urban and pop music in five short years. CEO Rhone told BLACK ENTERPRISE that the EastWest part of her Atco-EastWest label anticipates revenues of $22 million during 1991. These sales serve as a true barometer of the heat that black music generates on nearly every aspect of American music--from McDonald's commercials to the new standards performed at weddings.

"Black music is the pop music of the '90s. . . . Our music is what the people want," declares Ruben Rodriguez, president and CEO of Pendulum Records and senior vice president, urban music, at Elektra Records. Americans are so hungry for black music that Black Entertainment Television's (BET) founder, president and CEO Robert Johnson was able to use it, and its music videos, as the foundation for growing his 33-million-subscriber Washington, D.C.-based cable network.

Thanks to the music video revolution, black music now attracts mainstream listeners across America--a fact that will translate into hundreds of millions of dollars in increased sales over the next decade. This crossover appeal for black music has not been lost on the executives at BET's chief competitor, the 55-million-subscriber MTV Networks. The surprising success of MTV's once-meager showings of black videos has convinced that company's executives of the increasing crossover appeal of black music. MTV, which already offers black-oriented programs such as "Yo! MTV Raps," is launching its own all-black music videos station within the next 24 months. The idea of two all-black music cable stations doesn't sit well with BET's Johnson; however, the industry's black power structure welcomes the opportunity to market black acts to white teens.

In The Beginning. . .

Gaining the respect of the music industry has been a difficult process for black artists. During the 1920s, 1930s and 1940s, "race" or "colored" recordings by Bessie Smith, Ma Rainey, Billie Holiday and Louis Armstrong were heard only sporadically on white-owned radio stations (generally late at night) since there were few stations aimed exclusively at blacks. As Nelson George points out in his book, The Death of Rhythm & Blues (Pantheon Books, N.Y.), "The relationship between recorded music and radio would provide to be crucial to the evolution of rhythm & blues, since it was to be the first major American musical style to emerge from the playing of records on the air."

During the early 1960s, the music of black-owned independent record companies such as Berry Gordy's Motown hit the airwaves, and the dance tunes of the Supremes and the Miracles attracted a mainstream following. At the same time, Memphisbased Stax Records, led by Al Bell and home to Otis Redding and Isaac Hayes, was holding up the popular "soul music" banner. By the early 1970s, Kenny Gamble and Leon Huff's Philadelphia International sound with lush strings, clever arrangements and a rhythm all its own, started gaining popularity.

Spurred by the success of these labels, CBS commissioned a Harvard University study to explore the full economic potential of the black music market. The study compared the music market to case studies of the beverage industy's efforts to target black consumers. The positive findings of the study convinced CBS to hire blacks to develop a full-scale black music department.

The success of powerhouse producers like Gamble and Huff also convinced CBS of the marketing and distribution opportunities of this cutting-edge record label and its Mighty Three music publishing arm. Touting an all-star lineup of Harold Melvin and The Blue Notes featuring Teddy Pendergrass, The O'Jays, and Billy "Me and Mrs. Jones" Paul, Philly International soon became the crown jewel in the newly formed CBS special markets department (the name often used for black music departments in the 1970s.) Gamble and Huff recently sold their publishing rights to Warner Bros. for $15 million.

Early on, black music departments were usually run by white executives who hired young black men and women in A&R to develop the talent. But as black music sales became crucial to a company's bottom line, these "youngsters" began to rise within the corporate hierarchy.

Chief among them was LeBaron Taylor, who, by 1974, was vice president of CBS's black division. Before CBS, Taylor headed A&R for black music at Atlantic Records and served as general manager at the legendary black-oriented Philadelphia radio station WDAS. Taylor was also a co-partner at Rich Tic, a division of Golden Records in Detroit, before it was sold to Motown in the mid-1960s.

Taylor, often cited as the first African-American who should have run a major label, was responsible for grossing $120 million in one year (1978-1979) as he oversaw the recording careers of superstar groups like The Jackson and Earth, Wind & Fire. Taylor's 69-person division and associate labels (i.e. Philly International) brought in a full one-third of CBS Records' revenues during this period.

Another youngster on the fast track was Larkin Arnold, the man who masterminded Capitol Records' black music expansion during the mid-1970s. Arnold later went to CBS/Epic Records as corporate senior vice president, where he signed and oversaw the fortunes of both white and black acts. With his background in entertainment Law. Arnold, who currently heads his own firm in Los Angeles, was one of the first record executives to negotiate for a percentage of royalties earned by acts like Michael Jackson.

And then there is Jheryl Busby, current president of Motown Records and former senior vice president, black music, at MCA Records. (In 1988, founder Berry Gordy sold Motown for $61 million to syndicate of white investors, MCA Records, Busby and others.)

After creating a black music division at A&M Records during the early 1980s, Busby was lured to MCA Records by then-president Irving Azoff and given complete autonomy and authority to set up a black music division that would sign its own artists and handle its own promotion, marketing and advertising. During his first four years at MCA, Busby signed, developed, and worked with New Edition, Bobby Brown, Patti LaBelle, Gladys Knight and Guy, along with the two hottest producer duos of the decade Jimmy Jam & Terry Lewis and L.A. and Reid & Babyface (see sidebar "Control: The Importance of Owning A Label"). Busby then watched as nearly every album these artists released reached platinum status (one million units or more sold). MCA Records' sales figures soared to an astounding $80 million during that peirod. Berry Gordy's Motown, which held the No. 1 slot on the BLACK ENTERPRISE 100 from 1973 to 1983, saw its market share and record sales decrease dramatically as MCA Records became of acknowledged leader and purveyor of black music in America.

"Hiring Jheryl Busby at MCA helped to open doors (at other record companies)," says Ed Eckstine, co-president of the revitalized Mercury Records, son of the renowned Billy Eckstine, and the first black person to head a non-minority-owned, established major record label. (Eckstine assumed the title in January.) "Today, there's a big black influence in the entire music industry and [that influence] is in a growth pattern." And while he says there is respect and a spirit of cooperation among these executives, Eckstine acknowledges the tough competition. "Busby and I are friends; we started out in the business together. But on Tuesday and Wednesday, when I go to the ratio stations [to pitch new records for their weekly playlist], I want to kick his a--."

The Players And The Game

Such an intense spirit of competition for radio airplay, record sales and chart positioning in Billboard magazine (the industry's leading ranker of hit records) can be explained by both their love of the music and their love of the money they earn. Most of the executives who head either their own label, or the black division of a major record label, are under 40 years old, have a strong grounding in developing and promoting talent and absolutely love music and the business. Some of the new kids on the block with marketing and finance responsibilities came to the industry with degree in hand. But the vast majority have cut their teeth in the business at radio stations (as deejays, program directors or promoters). Top executives earn salaries, bonuses and equity ranging from $500,000 to over $1 million a year. A senior vice president marketing at a major label pulls in $235,000 yearly, while 30-year-old vice presidents of A&R departments can easily earn more thatn $100,000 per year, plus points on their artists' hit albums.

PAYING THE PIPER
Type of Music              Percentage of Dollar Value
Purchased(*)         1985    1986    1987    1988    1989
Rock                  43      47      47     46.2    42.9
Pop                   17      14      13     15.2    14.4
Black Urban           10      10      12     13.3     14
Country               10      10      10      7.4     6.8
Classical             5        6      5      3.5      4.3
Jazz                  3        3      4      4.7      5.7
Gospel                4        3      3      2.5      3.1
Other                 8        6      7       6       8
Total dollar value  $4.39   $4.65   $5.57   $6.25   $6.46
(in billions of dollars)
(*)Represents all recorded music: disc singles: LPs; CDs; cassettes; CD singles;
cassettes singles; music videos.
Source: Recording Industry Association of America Inc., Market Research
Committee, Inside the Recording Industry; A Statistical Overview, Washington,
D.C., 1991

Although some black executives feel they are compensated equally with their white counterparts in the pop or rock divisions of a record label, others say there can be as much as a 20% differential (with blacks on the low end). "While I think the record industry has come further than any other industry in letting people of color advance, we're still working hard to get out piece of the pie," says 33-year-old Benny Medina, who is also producer of the NBC television hit sitcom, "The Fresh Prince of Bel Air." "It's important that we get rewarded, and not let ourselves feel like 'we're lucky to be here.' That kind of thinking tends to make one fearful of his or her job and question your ability."

There's also the question of the "co-president" title. Two of the othe label presidents honored at the Jack The Rapper convention (Eckstine and Singleton) share the title with a white male ... and he's the one who oversees the budget. "I think it's a slap in the face to them," says Clarence Avant, owner of Tabu Records and acknowledged as the most powerful and influential black man in the music industry (see sidebar "The Invisible hand"). "Each is qualified to be a full president. Hell, Atlantic has finally realized the full potential of Sylvia Rhone who graduated from the University of Pennsylvania's prestigious Wharton School! It just goes to prove that, for all the advancements, the record industry is still 20 years behind in many ways." Avant also believes that black executives "make a serious error when they choose to stay solely in black music, because they'll never become total executives. Why shouldn't blacks be able to sign and work with white mainstream acts?"

Hiram Hicks agrees. As president of Hiram Management and H Records, to be distributed by Giant Records, the 30-year-old plans to showcase a white female R&B/hip-hop act to black and white teens.

But others feel differently. MCA's Singleton, who oversees 50 employees and controls budgets that total more than $100 million, cautions that "you don't destroy the forest to plant a tree. I don't think of [the co-presidency title] as a slap inthe face. I see it more as a vote of confidence. Major statements are being made as black executives are given an opportunity to run a company. After years of denial, we're now able to control major budgets and make major decisions."

Sharon Heyward, senior vice president/general manger, R&B music at Virgin Records in America, based in Beverly Hills, says that the co-president team (both white males) works well for her company's U.S. operations. However, as a 22-year music industry veteran, she also acknowledges that there is a problem in rising within some corporate structures. "At the entry level and midlevel, it's pretty cool.... You just have to do the work," she explains. "But when you get to the upper levels, there is still a lot of struggle ... and it's absolutely not the same kind of strugle for white males."

Women Who Call The Shots

Several black women occupy upper level management positions at record labels and chief among them is Sylvia Rhone, who was recently profiled in BLACK ENTERPRISE'S August 1991 cover story "21 Women of Power and Influence in Corporate America." Then there is Sharon Heyward who, with a stafff of 17 and a multimillion-dollar budget, controls the marketing of artists, such as platinum-selling After 7, British group Soul II Soul and Lalah Hathaway (Donny's daughter). After starting at the ground level as a secretary/receptionist and working her way through major corporations like RCA and CBS, Heyward was tapped to do promotions for black radio for Virgin Records and later developed its black music department.

"The record business is not like other industries where you have to spend a lot of time working your way up the corporate ladder," says Heyward. "It might be hard to get into, but once you're here, if you show potential, you move. Other areas of record companies are beginning to open up for black executives but, as is always the case we have to work longer, harder and be stronger than our white counterparts. However, Busby, Singleton, Eckstine and Rhone are proving that we are as capable of running the entire entity as anyone else."

That equality also holds true for Carmen Ashhurst-Watson, the president of the newly formed Rush Communications and 6-year-old RAL/Def Jam Recordings label, the independent black-owned company that is the dominant force in rap music today. Since 1990, she has overseen a staff of 42 employees who handle the day-to-day operations of the eight record labels and deal with the financial, business affairs and administration duties of this mini-conglomerate owned by 33-year-old Russell Simmons. "I'm sort of a weirdo in the record industry because I'm on the business, not the creative, side of black music," says Ashhurst-Watson with a smile. But she also explains that to expect Simmons (who is intimately involved in all the creative areas of his business for leading rappers such as L.L. Cool J and Run DMC) to focus on the mandane operations of a record company would be wrong. "He's much more interested in creating a legacy," she adds.

Other black female executives whose efforts contribute to the bottom line include Giant Record's A&R newcomer, Casandra Mills, a former artist manager whose first efforts netted the "New Jack City" soundtrack and a string of No. 1 hits including / Wanna Sex You Up by Color Me Badd; Gwen E. Franklin, vice president, marketing for Mercury Records' Rythm & Black Group, and LaVerne Perry, vice president, publicity, black music at Epic Records/Sony Music (who handles Michael Jackson and Luther Vandross). Other women to watch include: Tracey Nicholas Bledsoe, vice president, press and public relations at WEA (Warner-Electra-Atlantic) International; Ornetta Barber Dickerson, vice president of black music marketing for WEA and Jean Riggins, vice president of artist development for Capitol Records.

And The Beat Goes On

Black executives in the music industry view the future as full of promise, especially now that there are presidential "mentors" for them to emulate and follow. Bob Jones, vice president of MJJ Productions (Michael Jackson's business operation), stresses that "with the wealth that we control and the impact our music has on the world, black executives [must continue to] pull together, not push apart."

Jones who headed Motown's publicity operations for 15 years, also points to the need for the black music industry to seek out, train and employ savvy business men and women to run the operations side. "A few black executives now are in a position to make that happen," he adds.

Louil Silas Jr., executive vice president for A&R and artist development at MCA Record's black music division adds: "After some time, the company you work for should invest in you with either a label deal, or equity beyond a paycheck. I'm looking forward to heading my own operation that combines music, film and television.

"Our job as black executives," he asserts, "is to take it to the next level."

Another wild card in the mix is the foreign acquisition of U.S. record companies. It remains to be seen whether the new owners will be able to translate the success of black executives into bottom-line power. "Foreign owners must be sensitized to the issues of affirmative action and equal employment opportunity," says LeBaron Taylor of Sony. "But African-Americans must be prepared to take over more of the business aspects of running a record label, from negotiating the deal to finalizing the contracts."

THE NEW MOTOWN

Jheryl Busby's office would make an elegant movie set. But its occupant of the best office on the 17th floor at the Motown building is paying scant attention to his surroundings; today, he's fielding phone calls to (a) keep his company out of litigation with the Japanese-owned MCA Records; (b) assure Lionel Richie that the marketing plans for with his new album are on schedule and sensational and (c) clarify details of the company's expansion into licensing the Motown name, a merchandising maneuver that could generate millions of dollars in revenue over the next 10 years.

When Busby came abroad as president and CEO in 1988, Motown Records was floundering. The then-senior vice president of the phenomenally successful MCA Records' black music department was tempted not only by a 10% equity position, but the chance to rescue, and put his mark on, an American institution. So far, "Chapter II of the Motown Story" is working. During his inaugural year, the company's revenues were $36 million; he estimates 1991 will be in the $65 million/$75 million range and could reach $100 million.

"Berry Gordy sold Motown for $61 million and is now worth over $150 million," Busby says. "And there are plans to bring it under black ownership within the next five to nine years." The Boston Ventures holds about 70%; MCA Inc. holds about 18%, and a 10-year distribution deal for a 25% fee; Busby has 10% and singer/actress Diana Ross and others control the remaining shares.

Motown's 98-employee operation had been humming along with the tried and true (Stevie Wonder's "Jungle Fever" soundtrack), plus platinum-selling new acts (Boyz II Men, Johnny Gill, Another Bad Creation) when Busby realized that MCA was not living up to its contractual distribution and promotion agreements. Charing "ineptitude and deliberate misconduct," he filed a lawsuit to terminate the agreement. Among the items cited as "egregious distribution failures" was the loss of at least 500,000 album sales of the soundtrack from Spike Lee's Do The Right Thing. Despite the lawsuit, Motown, with the support of its largest investor, signed a distribution deal with Phillips Electronics N.V.'s PolyGram in September. MCA is fighting back.

Now Busby's hoping to inject Motown with the same musical magic he created at MCA. He's also recruiting top-notch executives to help him, such as Ivy leaguer and senior vice president/general manager Steve McKeever. "Times have changed, and Motown can't be what it was in the 1960s," Busby says. "Today, I want to position this company as a beacon to black executives and to black talent.

THE INVISIBLE HAND

Clarence Avant is a walking dichotomy. Often dressed in sweatsuits and sneakers discussing deals in the rough-and-tumble language of the street, this power broker has developed the strategies, chutzpah and contracts to become the most influential black man in the musice business and some say in the entire entertainment industry. Often referred to as "Godfather," Avant is one of the few men in town who can get Hollywood's three "Powerful Michaels" (Ovitz, head of Creative Artists Agency; Eisner, head of The Walt Disney Co.; and Jackson, the world's to entertainer) on the telephone with just one call.

Yet with all that "juice," Avant's mission has not been to advance himself, but to push black executives into the upper echelons of the entertainment industry. Many top black executives in the business say they owe their positions to him. He's the one who can pick up the phone and demand that a white CEO hire and promote more African-Americans and get results.

He is a consultant to everyone from Motown's Jheryl Busby to producers Jimmy Jam & Terry Lewis, L.A. Reid & Babyface and Narada Michael Walden. Avant is a premier "matchmaker" says his best buddy, Quincy Jones. "He's been there for everybody, and if he'd helped himself as much as he's helped everyone else along the way, he'd be a billionaire by now."

Not that Avant is suffering living in Beverly Hills. He's also an avid art Collector with a penchant for Romare Bearden and Salvador Dali.

"Even though Berry Gordy change white power thinking because he was able to run a major record label, we're still not part of their overall game plan," he say. "Black music is responsible for [about] 20% of the revenues in the record industry ... but we sure as shell aren't pulling in 20% of the dollars or enjoying 20% of the power."

The 25-year veteran launched his deal-making reputation managing Jimmy Smith and composer Lalo Schiffen. In 1971, he started Sussex Records and enjoyed a string of hits with Bill Withers. Dennis Coffey and The Gallery. The Godfather set up Tabu Records in 1975 and continues to run a tight, but friendly ship, with nine employees and an artist roster that includes Alexander O'Neal, Kool & the Gang, The SOS Band and Cherrelle.

"There will never to be an African-American running an entire majority-owned record Company, business affairs or legal department unless black record executives look beyond black music, learn about financing and aspire to own something," he says.

At one time, every kid wanted to be a singing star. Today the smart ones want to be the guy who produces the album or writes the songs--specially, with the likes of James "Jimmy Jam" Harris & Lewis, Antonio "L.A." Reid & Babyface Edmonds, and Teddy "New Jack Swing" Riley reportedly charging about $175,000 per song. Add $75,000 in production fees and studio and $1 million or more for a six-song package, and you can see why this side of the business has made instant millionaires of 20- and 20-year-olds, allowing a few to set up their own labels.

In an industry where one-upmanship is an art form, owning a record label is the quinstessential goal for superstar producers. Although anyone can start a record label, the smart way, say insiders, is to have a major company invest in the project. An artist or a producer/songwriter with a string of hits usually gets a lump sum, of which about 10% is nonrecoupable. BE sources report that: Jimmy Jam & Terry Lewis (the creative force behind Janet Jackson) got $4 million from A&M Records to start Perspective Records in Los Angeles; L.A. and Babyface (who shaped the sound of Bobby Brown) received the same amount from Arista to kick of LaFace Records in Atlanta; and Riley pulled in $18 million from MCA to start Future Records. The advances are treated as loans to be paid back through record sales. So far, so good. The 1991 debut releases on both LaFace (Damian Dame's Exclusivity) and Perspective (Sounds of Blackness' Optimistic) each went to the top of the charts.

"Now owning your label is much more than a glorified production deal," says Terry Lewis. "[These deals] involve equity, and owning the master [recordings] and the [publishing] rights. The goal is to build up the business to the point that someone wants to buy it."

While Black Radio Exclusive Editor Steven Ivory points out that no black female artist/producer/songwriter has her own label, the male roster includes Michael Jackson, M.C. Hammer, Prince, Tony! Toni! Tone! and Full Force; even film director Spike Lee has his own record deal. "It can be hard to wear two hats, but it does not feel natural," notes Nile Rodgers, formerly of the '70s disco giant Chic and co-president of New York-based Ear Candy Records. "Yes, there are a lot of small labels out here and some will bottom out, but there will always be some waiting in the wings with a clever idea."

Producer/songwirters are beginning to realize that owning a record label is not an instant return-on-investment proposition, it can take years before the profits start rolling in. "Yes it's challenging, but with a label you can have a legacy and the opportunity to diversify," says Lewis. "And hey, if I'm going to be the 'product,' then let me reap as much of the benefit as I can."