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Sony Names TV Veteran to Head Its Music Division

January 11, 2003|Jeff Leeds | Times Staff Writer

In a move seen as daring by some, foolhardy by others, Sony Corp. named television executive Andrew Lack as chief of its massive music division.

The appointment comes amid expectations of wrenching change both for Sony Music Entertainment and an industry wracked by rampant piracy and falling sales.

Lack replaces Thomas D. Mottola, who abruptly resigned Thursday as chairman and chief executive of Sony Music. Mottola, who had been the longest-reigning record chief with a music background, built the careers of superstars such as Celine Dion, Mariah Carey and Jennifer Lopez.

The choice of Lack stunned industry observers. "It's totally bizarre," one top talent agent said Friday of the appointment. Lack, president of General Electric Co.'s NBC unit for the last 18 months, rose through the ranks at NBC and CBS as a TV news executive.

While he has no experience in the music industry, Lack is a longtime friend and confidant of Howard Stringer, another former news and network executive, who now heads Sony's U.S. operations.

Stringer said Lack's fresh eye was precisely what Sony needed in an era when new approaches to the music business will be even more important than cutting costs. "What I want to know is: How are you going to rebuild the whole relationship with the consumer?" Stringer said in an interview.

Stringer noted that consumers are pirating 2 billion music tracks annually, contributing to an 11% decline in U.S. album sales last year.

Some Sony sources expressed a degree of relief at Lack's appointment, saying they had feared the hiring of a potentially more severe cost cutter, such as former AOL Time Warner Inc. executive Robert Pittman. Still, they predicted that Mottola's exit may portend dramatic cuts.

"People's appetite for music and passion for consuming music has never been greater," Lack said Friday. "Yet the business model for how they're going to buy it, and where and how much they're going to pay for it is up in the air. I think it can be fixed."

The company owns the top-selling label in the United States, Columbia Records, whose roster includes Bruce Springsteen and the Dixie Chicks; but its worldwide profit has been plunging, with operating losses of more than $140 million for the nine months ended Sept. 30.

Sony's Japanese brass has been dissatisfied with the music division's recent performance and informed Mottola that they were unwilling to renew his lucrative contract, which was to expire in 2004. Mottola, who is leaving to start a Sony-financed label, couldn't be reached Friday.

Analysts say the company already has been through a tough restructuring. Stringer said Sony Music pared an estimated $200 million in costs during the last two years and it recently shut down a CD-finishing and warehouse facility in Holland.

Some Sony executives were wary of any further downsizing. "All I've been doing is cutting," said one senior executive, who spoke on condition of anonymity. "A lot of us feel like we cut enough."

In the television industry, Lack had a reputation for reviving faltering operations. When he took charge of NBC News a decade ago, it was losing $100 million a year and broadcasters were predicting the demise of network news. He cut costs but also pushed the company to open new revenue streams from cable channels and elsewhere.

Today, NBC has the most profitable news division in broadcast television. "He's a terrific executive," former GE Chairman Jack Welch said. "If anyone can turn around Sony Music, he and Howard can."

Many competitors in the music business nonetheless expressed deep skepticism that Lack would have the vision to lead the company.

"How is he going to know what do about manufacturing? What if there's a problem in Europe?" said one.

Perhaps more seriously, Sony insiders also questioned whether Lack, as a newcomer, can reinvent an industry in which he has no experience.

"They certainly didn't put in someone to take Sony to the next level. Musical artists don't make TV shows," one executive said. "Someone has to sign artists. Someone has to be inspired. Who is that person going to be?"

Another concern is how Lack will relate to the executive team put in place by Mottola, which includes second-in-command Michele Anthony, Columbia Chairman Don Ienner, Epic Records President Polly Anthony and financial advisor Mel Ilberman. There is speculation that Lack may appoint one label executive to oversee all of Sony's music operations.

In any case, Stringer said that Sony executives are more than capable of racking up hits while Lack concentrates on strategy.

The corporate turmoil unfolding at Sony is drawing comparisons to a similar upheaval in the mid-'90s that decimated Time Warner's music division, which is still recovering. Former Warner chief Robert Morgado ultimately was fired after forcing nearly a dozen creative executives out the door.

But others say there is precedent for an outsider to achieve a degree of success in the business. German giant Bertelsmann, for instance, appointed former TV network executive Rolf Schmidt-Holtz to repair its BMG music division. He has boosted the bottom line by cutting expenses, while still breaking such new acts as Alicia Keys and Avril Lavigne.

"Welcome and congratulations to him," Schmidt-Holtz said of Lack. "Obviously TV guys are taking over the music world."

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Times staff writer Sallie Hofmeister contributed to this report.

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