THE LEFSETZ LETTER: Jason

The destruction of the Warner Music Group is now complete.

I guess we can blame Bob Morgado. Drunk with unexercised power, he decided to flex his muscles. To upset the delicate balance between east and west, between Atlantic and Warner Brothers.

Is that why it worked? Because the two companies were so far away from each other? Or was it that they were competitive rivals?

Elektra had been destroyed after Jac Holzman left. Merged with Asylum, Joe Smith overspent it into oblivion. But then Bob Krasnow rebuilt the label, as a personal fief, only signing the best acts in each genre. There were three powerhouses. Run by egotistic, yet competent men with completely different personalities. The quiet Mo, the boisterous take no prisoners Krasnow and the kiss-ass Doug Morris. Mo was a quiet accountant, Krasnow was a terror and Doug was a cheerleader. Although tough, Doug's employees loved him. Atlantic was jamming records to instant success. And armed with this success Doug charmed Morgado. Told him HE, Doug Morris, could run the empire.


Bob Lefsetz, Santa Monica-based industry legend, is the author of the e-mail newsletter, "The Lefsetz Letter". Famous for being beholden to no one, and speaking the truth, Lefsetz addresses the issues that are at the core of the music business: downloading, copy protection, pricing and the music itself.

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But nobody could run the empire. It's kind of like Iraq. There were three separate countries, it was a delicate balance, pull just one lever, mess with the formula ever so slightly, and the whole thing went out of whack.

Which is exactly what happened.

Mo was right. His quarterly numbers were bad, but when his superstars released their records in the fourth quarter he'd equal Atlantic for the year, he'd surpass them. But Morgado had no long term vision. And Mo was old anyway. Time to make a change.

It's like he never listened to the Kenny Rogers track. You've got to know when to hold 'em and know when to fold 'em. Bob Morgado acted for no good reason, he took a corporate culture based on autonomy and turned it into a dictatorship, he gave Doug Morris the reins. That was the beginning of the end.

Soon Kras was gone. And without him, there was no label. Doug Morris gave Elektra to his protege Sylvia Rhone, but Sylvia was a marketer, not an A&R person. The reason Krasnow was so successful was he knew a hit. Atlantic was famous for WILLING a hit. Krasnow just signed left field stuff and it happened.

And then Mo was gone. Lenny too. Warner Brothers was their company. ALMOST as much as Elektra was Krasnow's. Suddenly, Atlantic throw it against the wall get airplay see if it reacts at retail dump it if it doesn't style was company-wide. From coast to coast.

Then there were even more changes.

Doug was fired. Danny Goldberg took over. Michael Fuchs, with no respect for the business, not knowing it's all about ears, let Interscope go, and it was all over.

Roger Ames came in, with a completely different style. Groomed in England, Ames was a micro-managing hitmaker. But one thing about Ames, he knew the numbers. He knew where every last Warner dollar was. He knew how to run the company. The people working there now are…clueless.

Phil Q. had to go. A promo man who'd failed at running his own label under Richard Branson, he was unable to pick up and run with the Mo & Lenny culture. Ames thought that Tom Whalley was an integral player in the Interscope saga, that he could bring Warner back. Tom was better than Phil, but the longer Tom was in the building it was clear that Interscope was one man and one man only, Jimmy Iovine.

Atlantic picked up the slack. Jason Flom blew up the building with Matchbox 20 and Kid Rock.

But then Dick Parsons got rid of the whole kit and caboodle. Washing his hands of a business of declining numbers and no clear exit strategy from its troubles.

Right this second Dick is looking like a seer. Because no one in the business wants to turn it around. They just want to carp about changing conditions. Or spew inanities like the iTunes Music Store and portable subscriptions will save the business. Stuff like Edgar Bronfman, Jr. says.

But give Edgar credit. In his world only one thing counts, money. And Edgar won for himself and his co-investors. As for the stockholders??

Edgar committed a quantum blunder. He hired the wrong guy.

Edgar should have stayed with Ames. Ames had a plan. He wanted to merge with BMG before Sony did. He had a vision of reducing costs. After all, it's a business.

But, if not Ames, a man who knew music and money, maybe someone charismatic, who could create something out of thin air would do, someone like the aforementioned Jimmy Iovine.

That would have been the only logical choice. Jimmy would have made it work. Jimmy's a snake who charms. Makes people do what he wants all under the aegis of credibility. It's HIS story that is the most fascinating in the business today.

But, instead, Edgar hired Jimmy's Universal rival, Lyor Cohen.

Mr. Cohen is not without talent. He's a martinet who drives his troops. But Lyor comes from the street. He's about will and intimidation. There's no educated savviness. And, no understanding of corporate finances. At best, Lyor is a Jimmy of the rap world. Oh, he built a rock label at IDJ, but then it faltered, the whole company faltered, Lyor was on his way out when Edgar rescued him.

Can you respect Lyor?

Maybe if you're an underling. But not if you're Tom Whalley or Jason Flom. Hell, you used to be a competitor, the guy put up bad numbers at IDJ, he knows very little about your area of expertise, white rock, and now you've got to report to HIM?

Oh, maybe there was a way to do it. To make nice. But injecting Julie Greenwald and Kevin Liles into the Atlantic mix was not it. Craig Kallman is like Zelig, he blends in, he survives. But Jason, the lifer, he chafed.

So you squeeze out Jason? Isn't this like getting rid of Krasnow and Mo? Eliminating elements that made the whole thing WORK? What Jason knows Lyor will never know. Atlantic has gone from a rock label with some black acts to a totally black company. A hip-hop company. Is this good for BUSINESS?

Jason is no Sylvia Rhone. Jason can create a hit out of whole cloth. It starts with the act, but that's thirty percent at most. Then, with a wide web of contacts, and relentless pursuit, complemented by peerless insight, Jason puts together a juggernaut of a marketing plan, he gives his acts a shot.

But Jason's at Atlantic no more.

One assumes Jason will end up at Universal. If he's smart anyway. Doug Morris learned his lesson. He operates behind the scenes now, wanting no public glory. And he gives his charges full rein, almost like Steve Ross did. Then again, Doug, unlike Steve, knows music and the business. He's there to HELP! Not to hinder, not to make trouble. Yes, Doug Morris is evidence that people CAN change.

EMI needs Jason. Kick out his old compatriot Matt Serletic, and give him the presidency of Virgin pronto.

Then again, will Munns and Levy tell him what to do?

Jason can't work at Sony BMG, that's like being in lockdown.

If only the music business were like automobile manufacturing. Refining production techniques to deliver quantity at a price. But make no mistake, to succeed in the record game you've got to be able to make something from nothing. Find a spark and turn it into a fire, a conflagration, on vision and will. Lyor can do this, but he's no longer in the trenches, he's an overseer. He's been Peter Principled up the food chain. Of the people with a track record of being able to do this only three are left. Jimmy, Jason and Clive. Clive's old, he's not going to live forever. Jimmy's a baby boomer, he's got some time left. Jason's the youngest of the bunch. You get rid of Jason? That just shows you're into power and games rather than the bottom line. You don't kick out your number one provider.

Then again, Jason doesn't fit in with the new regime.

Then again, neither does Tony Brummel. Tony's insane, one of the most difficult people to work with in the business. But he constantly finds hit acts. No, he finds acts that he turns into hits. If it were easy, there'd be a ton of Brummels out there. I only know of one.

But Tony's not in the league of Jason.

So, the ten year power struggle continues. A great company, the GREATEST in the music field, continues its downward spiral. Will they just merge it with EMI already and be done with it? Bring Ames back? Bring music lovers back? Let people who know the bottom line but are not RULED by the bottom line do their thing?

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