Deconstructing Pop Culture

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Weird Scenes Inside the Warner Music Group

August 7th, 2012 by David Kronemyer · 2 Comments

After I was unceremoniously fired from Capitol I spent Spring of 1993 writing and producing independent records for a couple of artists I was friends with. In July I got a call from Danny Goldberg to meet him at Maple Drive, an industry restaurant in Beverly Hills. I had known of him for years as a genuine record man. I had been (and still was) entranced by acts he had worked with such as Led Zeppelin, Stevie Nicks and Nirvana – bands comprising the soundtrack of my life. I actually had some contact with him in connection with a label venture he had an interest in, Gold Castle Records, which had been affiliated with Capitol’s distribution company. At the time, Goldberg was Atlantic’s West Coast Manager and was on his way to becoming Atlantic’s President. “There is promise and opportunity at Atlantic Records,” he told me. “How would you like to join the company?”

Unlike Capitol-EMI, the Warner Music Group had been an island of relative stability for at least two decades. Mo Ostin was head of Warner Bros. Records, Bob Krasnow was head of Elektra Records and Doug Morris was head of Atlantic Records. In addition to its own releases and exponential growth, Atlantic recently had established East/West Records, had a successful relationship with Interscope, and recently took over distribution of my colleagues at Rhino Records (Rhino had been distributed by Capitol Records since July 1986 but left to go to WEA in June 1992). Dave Mount, whom I knew personally, was head of WEA Distribution. Warren Lieberfarb was head of Warner Home Video and I knew Jim Cardwell, his general manager. Surely this would be a refreshing change from the unendurable corporate politics of EMI.

Of course Goldberg’s proposal was attractive and I immediately flew back to New York, where I met with Doug Morris and Mel Lewinter to formalize a deal. I would work on certain artist and soundtrack relationships originating primarily in Los Angeles (as opposed to New York). I also would be responsible for certain business affairs activities of three other emerging companies: a new media/technologies group run by Jordan Rost; A*Vision, a video company run by Stuart Hersch; and a books-on-tape joint venture with Warner Books called Time Warner Audio Books, run by Lori Weintraub. While it would not be completely accurate to characterize them as hobby companies, all three of them had something in common: they had nothing to do with selling records. What follows is a brief description of how this worked out.

Warner New Media

In the early 1990s the Warner Music Group’s efforts to comprehend the world of new media/new technology were in a state of confusion. Pre-internet, “new media” primarily meant interactive CD-ROMs. For some time Stan Cornyn, a long-time Warner Bros. executive, was head of a company called Warner New Media. Cornyn got fired in October 1992. In June 1993 WNM became amalgamated into a broader corporate effort called Time Warner Interactive. TWI also absorbed the remnants of Atari Corp., which Warner Communications disastrously acquired in June 1990. TWI’s Chairman/CEO was Geoff Holmes; its President was Terry Hershey; and its COO was Craig Moody. All three were fired in April 1995 due to a ubiquitous “change in direction” and the division was folded into Home Box Office.

Jordan Rost ran a division parallel to these initiatives. I’m not sure it ever even had a formal designation, but its overlap with WNM and TWI was considerable. Rost’s mandate was to acquire interests in baby multimedia companies that looked promising, and he did so with alacrity. Before I knew it Atlantic had contracts with what seemed like 20 incorporated mop-and-broom closets, each assiduously working away developing something or other. It almost seems laughable now in the days of high-speed Internet, but it was big progress back then to stream footage from a computer’s hard drive and devise an interactive menu that would relocate a player to different chapters on a DVD-ROM.

From a business standpoint, the main problem with this strategy was that considerable further investment would be required before anything could be brought to market. Then, the cost of all of the companies that didn’t make it would have to be amortized into the single one that did. Rost had a compelling, creative intelligence. But he left the firm before it was possible to discern whether any of his ventures would be able to segue into viable businesses.

A*Vision

The story was somewhat different at A*Vision, built from the ground up by Stuart Hersch. Today the consumer market for videos is driven by a combination of Roku, Hulu, Netflix, YouTube, RedBox, Vimeo and a few stragglers still selling finished goods like Best Buy. Then, however, there were no DVDs. Videocassettes were expensive and the consumer market was almost all rentals. Demand was gargantuan. So insatiable was consumer appetite that it was not uncommon to sell a half million copies of even a mediocre title.

Warner Bros. seemingly had the situation well in hand. Warner Home Video sold videos of Warner Bros. studio movies through video distribution channels, and WEA Distribution had begun selling them through record distribution channels. Hersch was able to discern an untapped niche within this schematic by diversifying into the so-called “specialty” market, primarily comprising exercise and fitness videos by Jane Fonda and Kathy Smith (“Buns of Steel, Abs of Steel”) and soft-core porn videos by Playboy and Penthouse. Later he expanded even more successfully into kid videos produced by companies like KidSongs, Tyco and Saban Entertainment (the Mighty Morphin’ Power Rangers). Critically for his success, none of this competed with Warner Home Video, which wouldn’t touch this material with a 10-foot pole.

Hersch was a smart executive, though not much on administration; for example, when I first looked at some of his contracts, they did not specify if royalties were payable on a wholesale or a retail price, which seems kind of basic. As the market became saturated and interest in specialty video declined, A*Vision’s fortunes waned in tandem. In January 1995 it became WarnerVision, then slowly was amalgamated into Warner Home Video. In October 1995 Hersch attempted to put together financing to buy the company, but couldn’t pull it together. He left and went on to a successful career with the Kushner Locke Company.

TimeWarner Audio Books

Lori Weintraub had worked for Hersch at A*Vision. Somehow Morris had convinced Larry Kirshbaum, then head of Warner Books, to enter into a joint venture with Atlantic to sell books on tape. This sounded promising in principle; however, it quickly became apparent there were several serious structural problems.

The basic concept was that Warner Books would sell titles through book distribution channels and WEA would sell them through record distribution channels. Now of course spoken-word audio has been displaced completely by Amazon and Apple’s iTunes. Then, however, it was an emerging medium, sold primarily on audiocassettes. Books-on-tape comprised only a sliver of book distribution channel sales, and large chain bookstores (Borders, Barnes & Noble) were skeptical. Record retail channels didn’t want them at all. I met with Dave Mount and two of his executives, George Rossi and Fran Aliberte. “You’re clogging up our open-to-buy with Musicland, Tower and TransWorld,” they said, “when we could be selling them Led Zeppelin and Hootie & the Blowfish (“open-to-buy” refers to inventory availability funding that large chain stores allocated to each of the major record distributors). Taking into account fixed costs (recording, payment to AFTRA voice talent) and marginal costs (manufacturing, marketing and distribution), I couldn’t get the financials to make sense.

A second problem was the issue of “split rights.” At the time, book agents separated book-on-tape rights from the original hardcover book rights, just like they did with paperback rights. The publisher of the original hardcover book wouldn’t get these subsidiary or ancillary rights unless it paid to do so, and frequently it didn’t. Since they were sold separately, an audiobook version, if released at all, would come out months after the original title, making it impossible to piggy-back on any of the original publisher’s marketing and promotional spend. And, because profitability was non-existent to begin with, there never were sufficient funds to market and promote what was in effect a secondary, less viable form of media.

The third problem was lack of synergy. One might think that with a large international multi-media company like Time-Warner, it would be possible to facilitate transactions with other corporate divisions. While they would not be for a below-market price – after all, each division was rightly concerned for its own profitability – at least there was an introduction, a meeting, and the prospect of expedited approval for a transaction. This, however, proved not to be the case. Dan Romanelli was President of Warner Brothers Consumer Products, which handled licensing for all of the properties owned or controlled by the studio. “You will license Looney Tunes characters over my dead body,” he said. The same thing was true with DC Comics, which owned Superman, Batman and numerous other iconic figures. This was long before now when audiences have become habituated to seeing cartoon characters in blockbuster movies. I met with Chantal d’Aulnis, then head of licensing. “You will license Superman and Batman over my dead body,” she said.

I reported these discouraging results back to Weintraub and recommended we try something else. I had relationships with authors of rock books such as Pamela des Barres, who had written a sexy memoir of her days as a groupie, “I’m with the Band,” and Danny Sugerman, who wrote “No One Here Gets Out Alive” about his days with the Doors. “Seeing as how these are about musical artists, maybe they would sell better through WEA,” I suggested. I had a relationship with U2, they were a fan of William S. Burroughs, so I got them to contribute a track to an audiobook of “Naked Lunch.” I also had relationships with companies like LucasFilm, Saban Entertainment and the BBC; and, Hersch had relationships with Playboy and Penthouse. “We could do a series of titles with them.” Unfortunately Weintraub took my mention of the concept of “series” too literally and before I knew it she had committed to doing something like 25 titles with each of them, whereas I had envisioned a more modest start like one or two titles with options for more. She had an idea – a good one – to do a series of “romance novels” on tape. But once again, the relationship with the producer devolved into animosity over production and marketing commitments. So, rather than being assets, these got converted into liabilities. There also were distractions and false corporate moves made by Warner Books such as “The Diary of Jack the Ripper, which (after considerable expense) was canceled because the underlying title proved to be a fake; and tape recordings O.J. Simpson had made in jail compiled into “I Want to Tell You,” which resulted in massive over-manufacturing and returns after the public lost interest.

Scrambling, and taking a cue from Hersch’s success, Weintraub diversified into children’s audio. In June 1994 TWAB formed a division called TW Kids. It quickly came into competition, however, with Kid Rhino, which Rhino Records had formed in February 1991. This lead to internecine feuding, but not before Weintraub successfully had closed deals with companies like Scholastic (“Babysitter’s Club,” “The Magic School Bus”) and Saban (again, for the then-ubiquitous Power Rangers). Even children’s’ audio, however, proved to be a challenge. The market segregated sharply into two price points: premium lines like “Rabbit Ears,” then distributed by Windham Hill; and ultra-low-cost budget lines, then found in places like the center aisle at K-Mart. Turns out most parents weren’t attuned to the aesthetic nuances of Meryl Streep reading the heartwarming story of the Tales of Gloucester and preferred instead to buy something as cheaply as possible for their children to listen to in the car. Neither fish nor fowl, TW Kids (and Kid Rhino) were situated perilously in the middle of this divide.

Although I was fond of her personally, Weintraub presented with several issues. She liked to pretend her father was the successful producer Jerry Weintraub, whereas in fact she was the daughter of a completely different and slightly less successful person, Sy Weintraub.  Sy Weintraub was known, among other things, for producing Tarzan movies and TV episodes; at one point he owned the film camera company Panavision, which has undergone several rounds of financial restructuring.  Counterparts with whom I dealt found it difficult to situate her in her position, perhaps only for the kind of inappropriate and sexist reasons people devise to explain away successful women. There was constant and annoying undercurrent to the effect she had a personal relationship with Morris. I didn’t believe this was so, as (had he been so inclined) Morris could have had the pick of anybody he wanted, and it seemed unlikely this would be her. There was speculation to the effect there might be some long-overdue credit in the favor bank owed by Morris, or someone else, to Sy. I only need to cite my wife Judy as an example of my support for strong women, and I sympathized with Weintraub as she tried to navigate what turned out to be a perilous course.

At times, though, she seemed like her own worst enemy. She had what might be characterized as an inconsistent management style. At business meetings she frequently seemed dissociated, like she was on some kind of mood stabilizer or something, so I ended up covering for her. She ordered fresh flowers every day for her office, a company expense that puzzled other employees in light of the relentless drumbeat to control costs. She had an ingratiating way of answering her telephone by pretending she was her own secretary, then taking a message for herself, which was problematic when callers weren’t fooled. She was angry that she never had been selected to appear in the Hollywood Reporter’s annual list of the “100 most influential women in show business.” “I’m just as good as Jamie Tarses” (head of ABC’s entertainment division from 1996 – 1999), she told me.* Today, it would be somebody like Judy’s colleague Dana Walden (head of 20th Century Fox TV). Being star-struck, and then trying to keep up with them, is a difficult endeavor. She tried hard to fit in with the in crowd to which she aspired to belong, going to lunch at restaurants where she thought they probably would be going to lunch, even buying a condominium in just the right neighborhood in Aspen, the better to see and be seen. I was worried for her about these kinds of coping strategies and the belief schema underlying them (e.g., hypothetically, “I’m just as good as Jamie Tarses; Jamie Tarses has a condo in Aspen; therefore I need a condo in Aspen; if I don’t have a condo in Aspen then I’m an inferior person”). This logic did not appear to be efficacious and it also appeared to cause her personal distress, which made me concerned on her behalf.

Finally, there also were cultural issues with Warner Books. Morris paid Weintraub a huge bonus in 1992. While I don’t have personal knowledge, Kirshbaum told me it was $1 million dollars, which he found infuriating, particularly considering Morris then journalled half of it back to Warner Books. This was the beginning of the end. TWAB limped along until February 1996, when Warner Books absorbed it. Distributing audio books is a legitimate function for a book company, but not a record company. The venture was disbanded and TWAB administration transferred back to New York. The titles Warner Books didn’t want were transferred to a new division called Warner Audio Video Entertainment (WAVE), and gradually vanished from sight. Weintraub left and in July 1997 became Executive Vice President of Krane Group, a film production company.

I found all of this activity tremendously enervating and have a great and still-unpaid debt of gratitude to Goldberg for interjecting me into the middle of this multi-faceted fast-moving dynamic. Matters quickly were superseded, however, by storm clouds on the corporate horizon. Also, I was about to introduce a new variable into the equation: my relationship with Mike Curb and Curb Records.

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*Jamie Tarses is the daughter of the TV producer Jay Tarses.  Tarses had worked for NBC since circa 1987, where she helped to develop television shows such as Friends.  She had a reputation as a real up-and-comer.  Later, she became President of AC Entertainment.  The way this happened was that ABC was owned by Disney.  This would have been during the Michael Ovitz era circa 1996.  Disney was trying to buy a company called Carsey-Werner Entertainment.  Tarses wasn’t getting along with her boss at NBC, Don Ohlmeyer.  The Carsey-Werner deal fell through, so NBC released her from her contract and she moved over to ABC.  She was 32 years old at the time, leading to headlines to the effect that she was the “youngest person and the first woman to preside over a network entertainment division.”  She got blasted out after a few years.