Can Rca Records Keep On Rocking?

The hot label is giving owner Bertelsmann some much-needed hits

In mid-November, Bob Jamieson was in Germany, kicking back in a Hamburg hotel. The chief executive of RCA Records had just flown in from Dublin, where the record label's most promising new act, teen diva Christina Aguilera, had made an appearance on MTV Europe's video award show the night before. Tonight, Jamieson was going to hit the town with the Foo Fighters, a hard-rocking band whose first RCA album had just entered the Billboard charts at No. 10. The next night he would be in the audience when the Foos played their own gig.

The tireless life of rock-'n'-roll exec has suited Jamieson well for 32 years--he has worked everywhere from France to Australia in everything from sales to artist development. Four years ago, he took on his biggest challenge by agreeing to head a label that was all but left for dead with a corporate parent that few took seriously. With new management and a few lucky breaks, RCA has crawled back into the Top 10 in a business that has never been more cutthroat, with consolidating giants pumping out more and more releases. While he takes pride in the turnaround, Jamieson isn't ready to celebrate. "It's not mission accomplished," he says. "In this business, one day you're hot, and the next day you're not."

CRITICAL PUSH. For now, though, the label is hot: He and his team beat out just about the entire industry to sign the Foo Fighters. They created a stir with Aguilera, whose debut entered the Billboard charts at No. 1. And they championed a surprise hit with Lou Bega's retro-techno oddity A Little Bit of Mambo. The question now is whether rca can break and sustain acts that will keep buyers coming back and profits flowing.

Indeed, despite its small size, RCA's push to reestablish itself as a "major" is critical for its parent, Bertelsmann's BMG Entertainment. BMG includes more than 200 labels around the world, but its biggest label is Arista, home of such artists as Whitney Houston, TLC, and Kenny G. While BMG has been on the rise, clouds are forming. The industry is buzzing with gossip about how long Clive Davis, the legendary producer, will continue to head Arista Records Inc. And the latest album by one of BMG's top stars, rapper Puff Daddy, has fallen short of expectations.

Perhaps most disconcerting, the biggest act on the RCA roster since Elvis Presley, boy band 'N Sync, has tried to jump ship to join independent label Jive Records--a partner of BMG's. That has led to BMG suing Jive to block the move. "That was extremely embarrassing. It was insulting," Jamieson says of the 'N Sync defection. "And although we are operating in a very positive way, there's no question that the morale [at RCA] was knocked about."

MORIBUND. Even without 'N Sync, morale at RCA had nowhere to go but up when Jamieson arrived in mid-1995. Bertelsmann had acquired the label from General Electric Co. in 1986, but a succession of management shifts failed to get the label on track. Jamieson, a Paterson (N.J.) native--who, when asked his age, says only: "I wake up every morning and think I'm 20 years old"--spent much of his career at the Columbia and Polygram labels. When BMG hired entertainment exec Strauss Zelnick to revive BMG's moribund North American music business in early 1995, Jamieson was heading BMG's Canadian operations. Zelnick offered him the RCA post. Jamieson turned to Jack S. Rovner, whom he knew at Columbia Records in the 1980s, where they nurtured the likes of Bruce Springsteen, to be his No. 2. Neil J. Foster, RCA's senior vice-president for finance and administration, was charged with revamping the outdated finance and reporting systems.

Although RCA now accounts for just over 10% of BMG's overall $4.6 billion in revenues, insiders say it is among the private company's most profitable units. That's because RCA distributes only its own releases, while much of BMG's overall market share comes through less profitable distribution deals and joint ventures like those with Puff Daddy's Bad Boy Records and Jive. Such deals have helped BMG up its market share in the key U.S. market, from 11.2% to 18.8%, since Zelnick took over. Among the majors, it ranks second only to Universal Music Group in year-to-date market share. RCA has seen its own share rise from about 1.5% in 1998, to 3.6% in the latest SoundScan label rankings (table), accounting for about half of the increase in BMG's share during that period.

CAMPUS HIT. In a business where more than 25,000 new albums flood stores, radio, MTV, and the Internet each year, RCA has fielded a string of hits by releasing only 17 or 18 new albums a year. "We pride ourselves in a much smaller roster [than others] and a higher hit ratio," says Zelnick. "Bob has been right a lot more than he's been wrong."

In addition to 'N Sync, which has sold more than 10 million units in the U.S., the label's biggest act during Jamieson's tenure has been the Dave Matthews Band, a favorite with the college crowd. Last year, RCA scored hits with singer Natalie Imbruglia and teen rockers Eve 6. But this year it burst through with Aguilera and her chart-topping single Genie in a Bottle. The Staten Island-born Star Search contestant was championed by a lawyer friend of Jamieson who sent over a demo. Aguilera's self-titled album has so far sold 4 million.

Part of RCA's success has been in identifying acts signed by BMG in Europe and tailoring them for the U.S. That was the case with Imbruglia, Bega, and 'N Sync--which hit it big stateside after retooling its music and adding new tracks at RCA's behest. Rovner says one of the label's strategies is to take several months longer than others to craft a successful marketing plan for each new album. "As a private company, we don't have to worry about making the quarter," says Rovner.

But it does have worries. The European signing strategy is at the heart of the lawsuit between BMG and Jive. Although handled by RCA in the U.S., 'N Sync's contract is with a German BMG subsidiary. That, the band claims, led to its members' receiving smaller royalties in the U.S. because it is treated as a "foreign" market for them. In any case, the band's signing with Jive created a firestorm at BMG, because not only does it distribute Jive--which accounts for more than a quarter of BMG's market share--but BMG owns 20% of Jive. Moreover, the distribution relationship with Jive is slated to expire next June, meaning the 'N Sync flap could lead the companies to sever ties. That could quickly sink BMG's market share back to fourth place among the five major music groups.

Zelnick wouldn't comment on the lawsuit, which is slated for a hearing in an Orlando court on Nov. 24. Regardless of 'N Sync's fate, RCA got a boost by signing the Foo Fighters, coveted by every label after leaving Capitol Records Inc. Gary M. Gersh, the former Capitol chief who is now the band's co-manager, says one reason the band chose RCA is that it had no other big rock acts consuming management attention. "It was a real attraction to the band to be the No. 1 priority in the company," says Gersh.

Of course, RCA won't be able to lure other big acts on that basis. And Jamieson readily admits that his company missed the movie-soundtrack craze and has little presence in the urban music market (dance, hip-hop, and rhythm and blues), which represents as much as one-third of all music sold. And while BMG execs rave that Christina Aguilera could be the next Barbra Streisand, rivals wonder if she'll go the way of Wild Orchid or Robyn, two recent RCA acts who never broke through. "They've had a flurry of hits, but what are those things?" says the music chief at one of the majors. "It's so expensive to have a one-hit record. You really need multiple hits and global success to make it work as a company." As he jets across Europe pushing his hot new acts, Jamieson could not agree more.

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