THE BIZ / CHUCK PHILLIPS : Interscope Emerges as Star Act for Seagram
Label President Looks Back on Year After Merger, Discusses Industry's
Last week marked the one-year anniversary of Seagram's $10.4-billion
purchase of PolyGram, which created the world's biggest record company
and triggered the most brutal restructuring in the industry's history.
In Los Angeles alone, more than 100 artists and 300 employees got the ax as
Seagram collapsed the anemic Geffen and A&M labels into Interscope
Records, the controversial Westwood-based company founded by record
producer Jimmy Iovine and financier Ted Field.
The messy task of executing the firings fell primarily to Tom Whalley,
Interscope's press-shy president who landed his own job after being fired 10
years ago during a shake-up at a competing music firm.
"The process of closing the companies was a brutal thing. Horrible. Something
I never want to go through again," Whalley said in his first-ever newspaper
interview. "I know what it feels like to be fired. It's devastating. That's why I
tried to handle it in as sensitive a way as possible. Did we handle every single
situation perfectly? In hindsight, probably not. But we tried extremely hard to
be fair. . . . Our goal was to forge something new here. And in that, I believe
we totally succeeded."
A year after the acquisition, Interscope has emerged as Seagram's top
domestic breadwinner, accounting for nearly one-third of the corporation's
whopping 27% share of the U.S. music market, according to SoundScan.
Competitors say that the post-merger Interscope Group's roster contains so
many superstars that the label has a virtual stranglehold on radio and MTV.
The new Interscope has done little, however, to shed its image as an
irresponsible upstart that profits from the sale of violent and sexually explicit
rap and rock. Expletive-laced blockbusters by Eminem, Dr. Dre, Eve and
Limp Bizkit were among the hits that have helped the label contribute an
estimated $40 million in profit over the last six months to Seagram's bottom
line, sources say.
And though Whalley and his bosses continue to be criticized inside and
outside of the corporation for spending too much to promote acts, sources
say the label is on track to meet its revenue projections for fiscal 2000. In
fact, the post-merger Interscope Group, now named IGA, has sold 30%
more albums this year than the three labels (Interscope, Geffen and A&M)
did separately a year ago. IGA ranks as SoundScan's second best-selling
label in the nation, behind Sony's Columbia Records.
"These guys are tough competitors," said Columbia Records Chairman Don
Ienner. "It seems like we're always in a fight with Tom trying to sign some act.
He's a real quiet guy, but look at how he runs that company. Just think about
how much innovative talent this guy has signed over the years."
Whalley has been a behind-the-scenes force at Interscope since its 1989
launch, signing some of the company's biggest hit makers, including Tupac
Shakur, Nine Inch Nails, Wallflowers, Limp Bizkit, Four Non Blondes and
Smash Mouth. The 47-year-old executive is regarded as one of the most
consistent discoverers of talent in the music business and has been involved
with recordings that have sold an estimated 30 million copies.
A former schoolteacher, Whalley quit that profession 20 years ago to pursue
a career in the music business. He started as clerk in the mail room at Warner
Bros. Records and worked his way up to talent scout in the label's artist and
repertoire division, where he worked with such critically acclaimed acts as the
During the mid-1980s, Whalley joined Capitol Records, where he ran the
talent division and signed such acts as Bonnie Raitt, Poison and Crowded
House. On Whalley's watch, members of his artist and repertoire team also
signed the Beastie Boys and Hammer, who ultimately delivered some of the
company's biggest hits.
He was fired in 1989 during a Capitol regime change and had trouble landing
a job until Raitt personally thanked him for believing in her during a nationally
televised speech at the Grammy Awards show. The next day, Whalley was
inundated with job offers--including one from financier Field, who wanted to
hire him to discover bands for a new start-up label later to be known as
By the time Whalley took the job, Field had already hired black music expert
John McClain. Soon after, the trio linked up with Jimmy Iovine, a record
producer who had been involved with such acts as John Lennon and Bruce
Springsteen. The foursome struggled during their first few years, scoring
sporadic hits with such teeny-bopper acts as Marky Mark.
It wasn't until McClain cut a deal with Death Row Records, a rap label run by
Dr. Dre and his partner Marion "Suge" Knight, that Interscope began making
any real noise in the music business. Death Row's gangsta rap quickly
generated sales of about 25 million records for Interscope, but also caused
tension with affiliate Time Warner after sparking protests from media
watchdogs and political figures.
With Death Row on a roll, Interscope also began to dominate the nation's pop
charts with a string of rock and pop hits from Nine Inch Nails, Four Non
Blondes and Wallflowers. When Time Warner dumped Interscope following a
lyric controversy, the label was instantly scooped up by Seagram's Universal
Music Group. McClain quit the company soon after.
Two years ago, Whalley also threatened to jump ship to run Disney's
Hollywood Records, but stayed and was promoted to president of
Interscope. After Seagram purchased PolyGram, Whalley took on a much
higher profile in the corporation's new IGA division.
"The actual, physical undertaking of the merger was extremely difficult
emotionally on a human level and a personal level," Whalley said. "But the
transition of moving from what we were to what we are now has gone
remarkably smooth. This is a much bigger organization, but we're still pumping
out the hits."
Not everything is clicking. Much of the music released by Interscope does not
sell overseas, where global record conglomerates typically reap their largest
profit margins. And although Seagram has exceeded analyst expectations
regarding its growth inside the U.S. music market, the company is having less
success growing the business in other territories.
Another problem for Interscope is that it has had trouble scoring hits with
recent releases by such Geffen and A&M stalwarts as Hole, Sheryl Crow,
Guns N' Roses, Sting, Bryan Adams, Counting Crows and Beck. Sales of the
latest recordings by those acts have been lackluster and some artists have
complained privately that their music is getting second-class treatment under
the Interscope umbrella. But that would not account for why expensive
projects by such Interscope acts as Nine Inch Nails and Marilyn Manson
have also bombed recently.
According to Whalley, the music business has changed dramatically over the
last three years.
"No matter how big you are, an artist has to treat every record now like
they're starting over," Whalley said. "It's a shocking development, but you can
no longer assume that radio is going to play it or that fans are going to buy it.
You just can't take anything for granted any more."
Apparently you can't even assume that one Seagram-owned label won't try to
steal another Seagram-owned label's act, as Whalley learned this summer
when war broke out between Interscope and Seagram's Def Jam/Island unit.
Sources say Def Jam head Lyor Cohen tried to offer Limp Bizkit leader Fred
Durst his own label pact, even though Interscope had a similar deal in the
works. Hours before closing the contract, Cohen backed down under orders
from corporate executives.
Whalley believes that Seagram and other music corporations need to find new
ways to grow the business. "Everybody knows what this business is about:
You make hits and you sell records," Whalley said.
"But everything is changing. Costs are booming and margins are shrinking. Of
course, the Internet offers huge opportunities, but nobody has any idea where
it will lead. The biggest task facing everybody in this industry is how to come
up with new ways to grow this thing."
A year after the PolyGram acquisition, IGA (Interscope, Geffen and A&M)
has emerged as Seagram's top domestic breadwinner, accounting for nearly
one-third of the corporation's whopping 27% share of the U.S. music market.
The label's roster boasts such stars as Limp Bizkit, Dr. Dre, Sting, Eminem,
Sheryl Crow, Beck, Enrique Iglesias, Smash Mouth, Hole, Eve and Counting
|U.S. Market Share
|*As of December - Source: SoundScan