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Company Town | THE BIZ

Looks Like Arista Records Is Back in the Groove With Reid at Helm

November 21, 2000|CHUCK PHILLIPS

It's been an excruciating year at Arista Records, home to such stars as Santana, Kenny G and Whitney Houston.

After a bloody corporate battle ended in the ousting this summer of Arista founder Clive Davis, as well as the two bosses who orchestrated his exit, rivals began predicting a prolonged death for the shell-shocked New York label, a subsidiary of German media giant Bertelsmann.

But Davis' successor, Antonio "L.A." Reid, 44, surprised critics this month by delivering "Stankonia"--a chart-busting smash from rap duo OutKast that has quickly sold more than 800,000 copies and put Arista back on the pop music map. "Stankonia" is the second-most-popular album in the U.S. this week, outselling new collections by U2 and Madonna and trailing only soul sensation R. Kelly, whose "TP-2.com" dominates the nation's music sales charts, according to SoundScan.

"When I took over Arista, everybody said it was going to be the worst thing that could ever happen," Reid said in an interview. "According to the naysayers, all the artists were going to walk out. All the employees were going to quit. They said the company was doomed to fail. It was very tough for me, trying to come in here and replace the greatest record executive of all time. But look what we did this week. Arista is back dominating the charts again."

OutKast isn't the only act generating respectable numbers for Arista under Reid. Recent albums by rapper Pink and British singer Dido have also made some noise this fall, selling about a million copies each.

Nevertheless, Reid is not oblivious to the challenges that lie ahead, particularly because he took over the reins at Arista immediately after Davis delivered his best financial performance in 25 years.

Before Davis was forced out the door, Arista released blockbuster hits by Santana and several other acts that contributed about $40 million last year in U.S. profits to Bertelsmann's bottom line. During Davis' last year, Arista also contributed as much as an additional $40 million in U.S. distribution fees as well as nearly $20 million in foreign revenue for Bertelsmann.

Reid concedes that he can't match those profits in the upcoming year--no matter how strongly OutKast performs. Still, Reid has gone a long way to calm the waters at the demoralized label. No major artist has defected since he took charge in July. And while most of Arista's top executives followed Davis to his new Bertelsmann-financed J Records venture, Reid has quickly installed his own management team of respected professionals.

Reid, a former guitarist and Grammy-winning producer who started out making hits for such dance acts as Bobby Brown and Paula Abdul, is getting high marks from competitors, who say his Arista talent scouts are running neck-and-neck in every artist signing competition on both coasts. Rivals also credit Reid with restoring credibility to Arista in the artistic community, where he has had no trouble attracting top executives, songwriters and producers to join his team.

Still, nothing seems so daunting for Reid as resolving the drama that drove Davis out the door. Artists and competitors immediately sided with Davis, 66, an industry veteran who had launched the label 25 years earlier and had run it autonomously with great success, resisting pressure from Bertelsmann to come up with a succession plan.

Reid was brought into the Bertelsmann family by Davis while he was running LaFace Records, a successful Arista-affiliated label Reid had founded with his partner, Kenneth "Babyface" Edmonds. LaFace, which released a string of R&B and rap hits from such stars as Toni Braxton, TLC and OutKast, crafted a joint-venture deal with Davis that helped significantly bolster Arista's market share and profit throughout the 1990s.

It was only after Davis rejected Reid's request to buy the second half of LaFace three years ago that Reid decided to go over Davis' head and began negotiating directly with Bertelsmann music chief Strauss Zelnick to consummate the purchase, sources said.

During those discussions, Zelnick proposed that the German conglomerate might buy the second half of LaFace if Reid would promise to relocate the label from Atlanta to New York and take over as president of Arista, sources said. Zelnick immediately began to groom Reid to become president of Arista and even enrolled him in a six-week executive course at the Harvard School of Business. It wasn't until late in 1999 that Zelnick informed Davis about the succession plan.

That's how the corporate battle began. Before it ended, however, Davis wasn't the only Bertelsmann executive to lose his job at the corporation. Barely four months after Reid took the reins at Arista, Zelnick and his boss, Michael Dornemann, were also replaced by Bertelsmann.

"This is the first time I've ever worked inside of a major corporation and let me tell you, I had no idea that this thing was going to go down the way it did," Reid said. "You know, you read about these kinds of shake-ups at other companies. But until it actually happens to you, it's impossible to imagine the emotional impact it has on you.

"It certainly is a very strange situation. But frankly, the way I see my role--no matter who is in charge--my job is to identify, develop and nurture the artists who make the music this company runs on. I'm a music man. That's why they hired me to take this job and that's what I plan to continue doing.

"However the corporate stuff shakes out, we're going to pump out some hits here at Arista."

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