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CBS Records Goes Country : The sale of Nashville publisher Tree International for $40 million means the Japanese now own 'Heartbreak Hotel.'

January 04, 1989|Wm. K. KNOEDELSEDER Jr. | Times Staff Writer

Further consolidating the $1-billion-a-year music publishing industry, CBS Records has acquired Nashville-based Tree International Publishing, long considered the top country music publisher and the last locally owned publishing company in the country music capital.

The deal--worth about $40 million, according to sources--gives Sony subsidiary CBS Records ownership of more than 35,000 songs, including such often-recorded standards as "Heartbreak Hotel," "Green Green Grass of Home," "King of the Road," "I Fall to Pieces" and the Willie Nelson classics "Crazy" and "Funny How Time Slips Away."

For CBS Records, the acquisition represents only a partial recoupment of what it lost when Laurence A. Tisch--chairman of CBS Inc., the record company's former owner--sold off its music publishing division, CBS Songs, in 1987.

"This represents our re-entry into the publishing business in a big way," said CBS Records President Tommy Mottola. "Tree will be the cornerstone of our new operation, and we'll be very active in pursuing new companies."

Mottola called Tisch's sale of CBS Songs "a critical mistake, second only to selling the record company."

The acquisition also represents Sony's commitment to becoming a fully integrated entertainment "software" company in the United States. Sony reportedly has been seeking to buy a major Hollywood movie studio and recently made an unsuccessful bid for MGM/UA.

A music publisher owns or oversees song copyrights, licensing them for use in television, movies, advertising and other commercial contexts. The publisher collects licensing fees and royalties from the sale of recordings and performances, generally splitting the proceeds with the songwriter or copyright owner.

"Songs are the lifeblood of what we do," Mottola said. "You can't have a record or record company without songs. Even on Wall Street, where they earlier frowned on these things, they are now recognizing copyrights and publishing companies as very valuable properties."

"Music publishing is attractive because it has very good profit margins, it's pretty stable and it's a good offset to the more volatile areas of the entertainment industry," said Lisbeth Barron, an analyst for the New York investment banking firm of McKinley Allsopp Securities.

According to Barron, the Tree acquisition is "just part of the whole merger and acquisition thing that's been going on for the last few years. And they are running out of vehicles" to acquire.

Five years ago, for example, four major companies accounted for the lion's share of the then $750-million-a-year music publishing business--Warner Bros. Music, Chappell & Co., CBS Songs and EMI Music. Chappell was purchased from Polygram for $100 million in 1984 by an investor group put together by the New York securities firm of Wertheim & Co. Chappell was sold to Warner Bros. Music last year for a reported $250 million.

CBS Inc. sold CBS Songs to SBK Entertainment for $125 million in 1986, and SBK currently is in negotiations to sell itself to EMI for about $340 million, according to sources.

Other recent sales include singer Michael Jackson's purchase of ATV Music and the Beatles' song catalogue for $47.5 million; Polygram's acquisition of Welk Music for a reported $25 million, and Warner-Chappell's purchase of Birch Tree Music, the company that owns the copyright to "Happy Birthday to You," for $17 million.

One reason for the growing value of music publishing firms is that the so-called "mechanical" royalty--the money paid to a publisher by a record company for each recording of a song sold--has increased in recent years, from 4.5 cents a song to 5.25 cents a song. Another factor is the increased sales of recorded music brought on by new technologies such as the compact disc. As one veteran music publisher put it, "every time a record is sold or a song is performed or broadcast anywhere, some music publisher is getting paid."

All of which is fine for Buddy Killen, the 56-year-old former Grand Ole Opry bass player whose 100% ownership of Tree International just made him one of the richest men in Nashville.

"I feel just great," Killen said in a telephone interview. "If I felt any better, I'd have to take somethin' for it."

Killen was hired by Tree founder Jack Stapp in 1953 to audition songs and sing demos. In 1956--"it was Feb. 28th," he recalls--Killen found a song written by Mae Axton and Tommy Durden that he persuaded a young Elvis Presley to perform. The song was "Heartbreak Hotel," and "that really got the company going," he said. Killen became president and sole owner of Tree after Stapp died in 1980.

Killen acknowledged that some folks in Music City are not pleased that Tree has been sold to a company that's headquartered in New York and owned by a Japanese firm.

"I guess that feeling is natural, and I anticipated it," he said. "But I didn't just go off the deep end and sell. This was not a frivolous decision. I thought about it for years and negotiated endlessly. Tree belongs to Nashville, and I'm going to be sure it remains here. Nashville will be headquarters for CBS publishing. We will maintain the Tree name and the staff. I protected Nashville and the people here in the contract. I would never do anything detrimental to the music industry."

Killen will continue as president of the company and will be in charge of finding and acquiring other publishing catalogues. "I just want to have some fun with this," he said. "I'm not going to take one day off; I'm just going to keep on rocking."

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