Stay Tuned By Stan Cornyn: 7 Arts Buys Atlantic, Too
Every Tuesday and Thursday, former Warner Bros. Records executive and industry insider Stan Cornyn ruminates on the past, present, and future of the music business.
7 Arts’ executive in charge of deals – Eliot Hyman -- having met with the heads of Warner Bros. Records, left his first meeting at the record label feeling his next step in making money out of this, was more of this “records” business, if such a step made sense. In a meeting at the label, Hyman had asked Mike Maitland if 7Arts buying a company like Atlantic Records, for instance, would that be “a good buy.” Maitland just had to say “yes,” because recently Atlantic looked like it was burning up the charts.
Hyman had also heard “yes, good idea,” from Frank Sinatra’s money man, Mickey Rudin.
With “yes” twice, feeling cozy, Hyman flew back to New York, to once again meet with Ertegun-Wexler-Ertegun about making a buy out, so he’d have two hot labels to offer in his next move: which was to sell his whole stake in Warner-Seven, including its labels, to...who knows?
Hyman’s 7 Arts management was disinterested in hits, charts, screenplays, box office; those things came and went. Hyman’s interest was fixing up, reorganizing companies he’d bought. Like house remodeling, you do it so you could sell the thing for a big profit.
And adding Atlantic to Warner-7, giving W7 two hot labels to sell, would be worth three times what it cost him to get one Atlantic. Easy.
So now, Hyman’s next step: add Atlantic to their menu.
He called Ahmet for a meeting. “I’m bringing my check book,” he added.
Finishing that call, Ahmet just felt deep down doubt. To sell? To Ahmet, selling Atlantic felt like selling his only child.
Ahmet Ertegun wasn’t so sure.
How to Make Cents Out of All This
Ahmet felt at home inside his Atlantic. With Nesuhi on one hand, Jerry on the other, the threesome was making money. They played by their own rules. They’d wink and chuckle and nudge as they signed deals and made hits... Ahmet felt Atlantic was “a perfect party.” He once told Jerry how it felt: “One of these days, we’re going to laugh ourselves right out of the record business.”
Atlantic had stumbled into eminence. From all black artists and R&B to now: Bobby Darin and hitting the pop charts. Would that continue?
That question became the unspoken angst: these guys from 7Arts were dangling big money, and that money -- in the millions -- felt secure to the Atlantic threesome. More secure than next week’s singles.
It’s just that, for Ahmet, he’d fought to be the top guy. If he did sell Atlantic, well, Ahmet didn’t feel like ever ever “reporting” to someone.
Hotter Never Lasts, Tho
Atlantic had just signed Aretha Franklin, too. Bigger than ever before. Got her away from Columbia’s Mitch Miller, who’d tried to turn Aretha into his Judy Garland. Jerry treated Aretha better. He worked closely with Aretha. He treated Aretha like a sister, getting her OK on every song, every note.
He treated her with R-E-S-P-E-C-T.
Despite Aretha and Otis Redding and all, sales of soul music were down. A new kind of music -- psychedelic -- seemed to be the rage. So maybe this was the end of R&B as Atlantic’s mine of gold?
Ahmet and Jerry and Nesuhi couldn’t stall off 7Arts much longer. “He” was coming to meet with them. Tomorrow.
To Sell Or Not To
The three decided to vote on it.
Jerry Wexler spoke up first. He felt restless. He’d like more financial security. He’d just divorced his wife, and that had cost him half of what he’d banked away. Jerry wanted security back, so Jerry voted “yes” to selling.
Ahmet Ertegun’s turn. He liked the richness he had found via Atlantic: a stunning town house on East Eighty-First, a top-class wife in Mica, a company to which he could charge every expense he could imagine, pre-tax. Running Atlantic, he’d become highly respectable. He voted “no,” for sake of his independence.
Nesuhi Ertegun’s turn now. He worried about the future of indy labels like theirs. Many of Atlantic’s competitor/companion labels had bit the cemetery: Imperial, Old Town, King, Specialty, Duke, Peacock, Modern, Apollo, Savoy, Chess, Exclusive, and others, others like Atlantic, but now gone.
And those other indy labels’ head guys, now out of work, sitting in midtown bars at 4:30 in the afternoon, bull-shitting about the better old days, lying about how busy they were these days.
Nesuhi, with mixed feelings, decided to sell. So that was the majority.
In the Door Comes Hyman
Hyman walked in to Atlantic with his numbers memorized; knew them better than his phone number. He and Alan Hirschfield had studied the Atlantic’s books.
They’d found that Atlantic was sitting on $7 million in cash. The cash was snuck away in odd accounts, there because it was hiding from the tax man. There because it was used for “promotion,” a word that sounded better than off-to-one-side pay outs to DJs. Payola had now become a publicized ugliness. W7’s Hirschfield had even seen Atlantic’s “disc jockey” files, which described most of the DJs in America, listing their shoe size, their preferences in women, drugs of choice, and cost to persuade. Cash.
To the Atlantic trio in the meeting, Hyman and Hirschfield offered 66,225 shares in W7, plus $4.5 million in cash, plus $3 million more for Atlantic’s collectable IOUs, plus a profit sharing deal for the next three years that should be worth another $4 million. On paper, it added up to $17.5 million. Deduct Atlantic’s cash stash of $7 million, which 7Arts would pocket the moment this deal got signed, and...tada...$10 million. For Atlantic’s three owners to divide between themselves.
This deal: to Wexler, it was about “the real American dream: capital gains.”
“Yes” Agrees Atlantic
That very day, having closed with Atlantic, W7 needed also to make one more move. Frank Sinatra still owned 1/3 of Warner-Reprise, and to combine Warner-Reprise with Atlantic, Sinatra had to agree to reduce his 33% ownership to 20% in the enlarged Warner-Atlantic. Sinatra’s attorney, Mickey Rudin, had pre-agreed to that deal. Wisely so.
Later that day in Manhattan, attorneys stayed up past dinnertime, signing all the papers needed. One who stayed up, WBR’s New York executive George Lee, signed the deal papers on behalf of WBR, doing what Hyman told him to. The cash transfer came out of WBR’s own bank account. Lee made the transfer.
Once all that was done, Lee was free, finally, to call his own boss, Mike Maitland, out in Burbank, who’d been left totally in the dark about this new amalgamation.
The phone call from Lee to Maitland shocked Maitland. This wasn’t like when Mike learned that Reprise would be moving out to Burbank. Now, this new “label” – Warner-Plus-Atlantic – had a different, snootier attitude.
Maitland was told that Ahmet Ertegun would report to no one.
What Ahmet got in this deal was what he really, really wanted...
Take care, TCB
When you come home (re, re, re, re)
Or you might walk in (respect, just a little bit)
And find out I'm gone (just a little bit)
I got to have (just a little bit)
A little respect (just a little bit)
Oh (sock it to me, sock it to me,
sock it to me, sock it to me)
R-E-S-P-E-C-T. Ahmet Ertegun wanted Respect. Aretha Franklin wanted it. But Mike Maitland wanted Respect, too.
But all that Hyman’s Warner-7 Arts wanted next was ... B-U-Y-E-R-S.
A difficult, sock-it-to-me “marriage” – Warner and Atlantic Records in one bed - lay dead ahead. And it was all about to go out on the market again.
-- Stay Tuned