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The Rap On Rca Records : The Original U.s. Record Company Is Back In Groove

September 18, 1988|WILLIAM K. KNOEDELSEDER Jr. | Times Staff Writer

When RCA Records President Bob Buziak recalls the year 1986, he winces.

He'd given up a successful artist management business to become head of the record label, which was struggling through its umpteenth lackluster year in a row at a time when most of its competitors were racking up record profits.

Parent RCA Corp. was in the process of selling itself to General Electric Co., which in turn was partially financing the deal by selling off the record division to yet another corporate giant, the West German media conglomerate Bertelsmann AG.

"I recall meeting a series of corporate executives, fast-moving and fast-talking guys who sounded like investment bankers and all wore gray suits, yellow ties and big smiles," Buziak said recently of the RCA-to-GE-to Bertelsmann handoff. "And none of them wanted anything to do with the record business."

Two years later, however, Buziak is the one with the big smile. After weathering the ownership changes, a massive restructuring and a wholesale turnover of its executive team and artist roster, RCA is resurgent.

Now a division of the Bertelsmann Music Group, the New York-based label recently completed the most profitable year in its 87-year history--powered by the phenomenal success of the movie sound-track album "Dirty Dancing" and its sequel, "More Dirty Dancing," which together have sold more than 20 million copies worldwide, according to the company.

For the fiscal year ending July 1, RCA Records had gross revenue of $236 million in the United States, the highest ever, Buziak said. A privately held firm, Bertelsmann does not publicly report its divisions' earnings.

Despite Bertelsmann's years of experience operating Ariola Records in Europe, Buziak admits that he initially viewed the 1986 takeover with some trepidation. But his fears proved to be unfounded, he said, after BMG implemented a badly needed restructuring of the company and installed a decentralized style of management that allowed RCA to function as a "free-standing entrepreneurial business where we live and die by our own bottom line."

That wasn't the case with RCA Corp., which prior to 1984 reported the record division's operations in its annual report under the heading of "other products." And, according to Buziak, the way the company was structured at the time he was hired--"with no financial department for the label and all the divisional vice presidents reporting to the corporate balloon"--even he couldn't tell "how they based their annual numbers; the whole administrative process was a mystery."

What was clear, however, was the fact that America's oldest record company, the label that made history--and untold millions--when it signed up a swivel-hipped young hillbilly singer named Elvis Presley in 1955, had ceased to be a factor in the world of popular music.

"After Elvis and the moment of John Denver, there was a drought," Buziak said. "The company became a non-competitive, small appendage of the RCA organization that was only used as a vehicle to buy into Broadway plays that appealed to board members and certain people in New York and to record major middle-of-the-road artists that the financial community could identify.

Grand Life Style

"If I'd known how bad a shape the company was in, I would have thought twice about it," Buziak said. "But I didn't dig deep enough to know."

When he did dig, the first thing he noticed was that a kind of comfortable lethargy had settled on the company. "I found radio-dispatched cars downstairs wheeling in carts of booze, and production manager clerks staying in $185-a-night hotel rooms, and receptionists from temporary services who'd been working there for months--we'd spent $140,000 in two months on temps!

"People were living very well. There was this grand life style going on where everyone kept their mouth shut and their refrigerator stocked and had a very happy existence. And their attitude toward me was, 'We've seen you come and go before, and we'll still be here after you're gone.' "

At the same time, the company's big-name artists--Kenny Rogers, Diana Ross, Barry Manilow--weren't selling enough records to offset the huge advances dictated by their recording contracts. Rogers' contract, signed in 1982, guaranteed him more than $4 million an album for five albums.

"The first year I was here, the company had to take back $25 million worth of unsold records," Buziak said.

The company badly needed new--and less expensive--artists. But before that could be accomplished, it needed a new cadre of executives who knew how to find them.

According to Elliot Goldman, who served as president and chief executive of RCA Records and then of Bertelsmann Music Group from 1985 to 1987, the problems were largely institutional and historical.

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