Island Def Jam Brings on Da Noise

How Lyor Cohen is cranking up the volume in a downbeat market

Lyor Cohen couldn't help himself. Speaking at a September marketing conference sponsored by Rolling Stone, the imposing 6-foot, 5-inch CEO of Island Def Jam Music Group let loose. "Our industry is run by fat, lethargic, incompetent people," he snarled. "And that's how we got into trouble in the first place. If you put our executives against the Fuller Brush men, I would choose the Fuller Brush men any day."

Needless to say, Cohen is persona non grata among industry brass. But it's not just because of his incendiary tongue. Cohen, 43, has thumbed his nose at the status quo ever since he came on the scene in the early 1980s as a road manager for Run-DMC following a successful stint promoting rap acts on the streets of Los Angeles. Now, as head of a thriving collection of labels whose 70 artists range from R&B newcomer Ashanti to Jersey rock icons Bon Jovi, he's goosing revenues in new ways while the rest of the industry continues to feel victimized by CD piracy and Web file-sharing. Total U.S. music sales were down 13% on a unit basis in the first half of 2002, after an 11% drop for all of 2001, according to music-sales tracker Soundscan.

Cohen isn't one of those wringing his hands. Instead, he's fashioning himself as a sort of post-Napster music exec, focusing less on what's being lost over the Net and more on promoting his talent in ways fans will pay to hear. He is cutting prices on new-artist CDs to help generate buzz. While most competitors are cutting back, he has opened offices worldwide for Island Def Jam, part of Vivendi Universal's Universal Music Group. And he's creating nontraditional units that promote his artists aggressively, including a movie soundtrack arm and a branding unit that will seek corporate tie-ins. Says Michael Nathanson, an analyst at Sanford C. Bernstein & Co.: "Somebody is finally realizing the model is broken and needs fixing."

The risk, of course, is that commercializing his artists too much will alienate fans. "It's a tightrope walk," says Simon Williams, CEO of brand consultant Sterling Group. "You have to wrestle with whether you're in business for the sheer magic of the music or the sheer need to make money. It's all about what's credible to fans." So far, Cohen has proved he can read fans' appetites. Born in New York to Israeli parents but raised mostly in Los Angeles, he founded Def Jam with rap impresario Russell Simmons and producer Rick Rubin in 1984 and sold it to Universal 15 years later for $120 million. Rock label Island was added to his mix after Universal bought Polygram. Market share of current albums by Island Def Jam has grown from 5.4% in 1999 to 8.23% so far this year--and sales are expected to rise 25% this year, to about $700 million.

That's a bright spot in a rather bleak music scene, but Cohen's latest initiatives are still roiling the industry. For one thing, cutting prices sends out a message that music isn't worth much, say critics. "I don't grasp the economics," sniffs one music exec. But Cohen says he's out to make a splash and get his artists recognized even in today's cacophonous music market. "Remember, it's all about breaking acts," he says.

So on some releases for new artists, he's offering a $2 rebate to customers-- and a rebate to retailers as an incentive to go along. Then, after two weeks, when the discount has presumably spurred sales, he jacks up the price to an even higher level than normal for a new artist. Ashanti's debut CD sold 523,000 units in the first week under this scheme in April, the single largest debut of a female artist. Fans in the first two weeks paid only about $12, depending on the store, but latecomers have paid about $17 ever since. Ashanti has gone triple platinum, with 3 million CDs sold so far.

Movie soundtrack sales were down last year, but Cohen decided it made sense to start up a soundtrack division anyway. The idea is that Island Def Jam can help studios hype flicks ahead of their release, and movies can help promote artists and their songs. It worked with the song Hero, written and performed for Spider-Man by Island artists Chad Kroeger and Josey Scott. Released on Apr. 8, it made the Top Five before the movie opened in May.

Cohen's separate branding unit is another first. Already, Island's Hoobastank's Crawling in the Dark was used in a Mountain Dew commercial that started airing in June, and Island's Andrew W.K. has had songs in two Coors beer spots. "Lyor helped create a huge platform for all of us," says Tracy Perlman, director of entertainment programming for the National Football League. It was Cohen who hatched the idea of having Bon Jovi kick off the NFL season with a nationally televised concert in Times Square on Sept. 5.

But what about competing with free tunes on the Net? Cohen shrugs. "The answer isn't going to come from some finance type in a suit," he says. "So we better start listening to the kid with the braces, pockmarks, hair down to his shoulders--who wears the Slayer T-shirt. That's where the answer is." So far, Cohen is all ears.

By Tom Lowry in New York

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