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COVER STORY : Keeping Up With the Jacksons : In March, Janet Jackson signed an unprecedented $40-million record contract. Nine days later brother Michael got a deal that guaranteed $65 million-plus. Suddenly, the recording business is looking like baseball with its escalating contracts. Will there be a spending frenzy? The record company execs say it'll never happen. The stars are already talking to their attorneys.

June 16, 1991|ROBERT HILBURN and CHUCK PHILIPS | Robert Hilburn is The Times' pop music critic. Chuck Philips is a frequent contributor to Calendar.

Don Engel, the Los Angeles attorney who is known in the record industry as the "contract-buster," says he's never seen anything like it.

"I'm swamped," he says. "In the last couple of months, I've been retained by eight artists and entered discussions with about 10 others. What we're talking about here is major artists trying to break contracts."

The rush to Engel--and other attorneys--followed news of the two biggest signings in record industry history:

* An unprecedented $40-million deal on March 12 between Janet Jackson and Virgin Records.

* An estimated $65-million-plus landmark agreement nine days later between her brother Michael Jackson and Sony Inc., which bought CBS Records in 1988.

Suddenly, the record business--which no one had ever accused of underpaying its superstars--is looking like major league baseball, where deals escalate so fast that a player salary that appears breathtaking one day is dwarfed by a new contract the next. Will these two deals touch off a spending frenzy? What do these two deals mean for artists who are just starting out, journeyman bands that would like to get in on the big money or proven million-sellers like Guns N' Roses or Prince? If Janet Jackson is worth $40 million, how much could Madonna get?

"I wouldn't want to be looking at Bruce Springsteen and (manager) Jon Landau right now, if I was Mr. Morita, after having just done that big deal for Michael," offers Irving Azoff, president of Giant Records, referring to Sony Chairman Akio Morita. "What does Bruce (who is also a Sony artist) deserve now?"

"There is no way that the two Jackson deals will become the model for the industry," says Al Teller, who succeeded Azoff as chairman of the MCA Music Entertainment Group. "It just won't work. If the components of these deals became industry standards, the record business as we know it would not be able to function."

But Engel--and other attorneys--disagree.

"This is a new era and the companies know it," he suggests. "When they say that this isn't the beginning of a trend, they're just putting on a brave front."

Engel likes the baseball analogy.

"When the biggest star in the league suddenly gets $10 million, then all the $3-million guys want to move up the ladder to $5 million," he says. "That's why all of a sudden so many multi-platinum artists are coming to me saying, 'I got to have some of the same things that Michael got.' "

This isn't just the age of MTV and corporate sponsorship in the $7.5-billion-a-year world of pop music. It's also a time when the Dow Jones financial charts seem to be as important to executives as Billboard magazine's weekly pop sales charts.

The recent series of dramatic corporate acquisitions underscored just how much money is at stake in the music industry.

The cycle began in 1986 with the $300-million purchase of RCA Records--the onetime home of such major sellers as Elvis Presley and Perry Como--by Bertelsmann Inc., the West German media conglomerate.

But that figure was surpassed two years later when Sony paid $2 billion for CBS Records, a deal that New York industry attorney Allen Grubman describes as "the day the record business was 'bar mitzvahed.' "

That Sony deal was followed by a buying fever in the industry:

* The Time Inc. and Warner Communications Inc. merger announced in June, 1989, a $14-billion deal that brought together two of the world's leading communication conglomerates.

* The purchase that same summer of Island Records by PolyGram, a subsidiary of the Dutch electronics company Philips N.V. Estimated price: $300 million.

* The $500-million acquisition in 1989 of A&M--the Hollywood-based independent label started by Herb Alpert and Jerry Moss--by Philips, which also owns Mercury, Vertigo, Polydor, London and Fontana.

* David Geffen's sale in 1990 of his Geffen label to MCA for $550 million in preferred stock.

* The purchase of MCA Inc. itself the same year by Matsushita Electrical Industrial Co. Ltd.--the Japanese electronics giant whose brand names include Panasonic and Quasar. Price: about $6.6 billion in cash and securities.

In addition MCA, in a joint venture with Boston Industries, paid $61 million in 1988 for Berry Gordy's fabled Motown label, and Capitol-EMI in 1989 bought 50% of London-based Chrysalis Records (whose roster includes Sinead O'Connor and Billy Idol). Capitol-EMI also paid $26 million earlier this year for the remaining 50% interest in SBK Records (home of Vanilla Ice and Wilson Phillips).

The deals demonstrate that investors are bullish on pop music.

"I think the record industry is one of the strongest industries in the world at the moment," said Virgin Groups President Richard Branson, the noted British entrepreneur who personally signed Janet Jackson to his Virgin label.

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