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Additional Articles on Reid's Arista Exit
submitted by: Lisa D.
source: Los Angeles Times, The New York Times, New York Daily News, The Wall Street Journal, New York Post, The Hollywood Reporter, Daily Variety
Date: January 14, 2004
BMG Forces Out CEO of Arista in Shake-Up; The label has top-selling CD from rap duo OutKast, but financial results have been weak.
By Jeff Leeds, Times Staff Writer
In an abrupt shake-up, Bertelsmann Music Group ousted Antonio "L.A." Reid as the chief executive of Arista Records, the label that has owned the top spot on the nation's pop chart with its double CD from rap duo OutKast.
The move, announced Tuesday, was BMG's response to lackluster financial results at the New York-based label, once BMG's biggest U.S. unit. The company didn't name a successor to Reid, who sources said had about a year and a half remaining on his contract.
BMG, a unit of Germany-based Bertelsmann, said Arista would be managed by Executive Vice President Larry Mestel. He will report to BMG Chief Operating Officer Michael Smellie.
Sources inside the firm speculate that Reid's exit was the first step in a sweeping realignment of BMG's domestic music division, which releases music by such acts as the Dave Matthews Band and Britney Spears.
Bertelsmann and Sony Corp. have proposed merging their recorded music businesses.
If that deal is approved, insiders suggest, Arista now could be more easily combined with BMG's Jive Records or another label.
The move also could become an opportunity for Arista founder Clive Davis, who was forced aside upon Reid's ascent, to seize a bigger role. Davis currently runs BMG's RCA-J unit.
A BMG spokesman downplayed such talk, saying Reid's departure "is unrelated to our proposed joint venture with Sony Music."
Insiders noted that Reid's ouster came as Arista was on a roll with the success of OutKast, the acclaimed Atlanta act Reid brought to Bertelsmann in the mid-1990s through the label he ran at the time, LaFace Records.
Ranked the No. 1 album in the nation last week, OutKast's "Speakerboxxx/The Love Below" has sold an estimated 3.2 million copies since its release, according to Nielsen SoundScan, and is in line to win several awards at next month's Grammys.
Arista also has enjoyed solid sales recently from Sarah McLachlan and British singer Dido.
Reid has been criticized inside and outside the company for overspending on marketing and for money-losing joint ventures with outside music producers. Arista -- which Reid took over in 2000 -- lost an estimated $110 million last year, after heavy losses the year before, sources said.
The new album from pop singer Pink, another Reid protege, has been a particular sales disappointment.
Still, Reid, a Grammy-winning producer who started out making hits for such dance acts as Bobby Brown and Paula Abdul, has received high marks from competitors for nurturing young talent.
"He's one of the top creative people in the entire business," said Doug Morris, chairman of Vivendi Universal's Universal Music Group, the world's biggest record conglomerate.
"If a guy like that became available, we'd be more than interested."
Indeed, sources said Reid already had talked with Universal and Edgar Bronfman Jr.'s newly acquired Warner Music Group. Representatives for the companies declined to comment.
Reid was brought into the Bertelsmann camp by Davis, who struck a joint venture agreement for Arista to distribute albums from LaFace, the label Reid founded with partner Kenneth "Babyface" Edmonds. LaFace, which released a string of R&B and rap hits from Toni Braxton, TLC and others, significantly bolstered Arista's market share and profit throughout the 1990s.
Trouble started when Reid began discussions with then-BMG chief Strauss Zelnick to sell LaFace to the company. Zelnick proposed that BMG buy the stake in the label it didn't yet own if Reid would promise to relocate from Atlanta to New York and take over as president of Arista, sources said. Zelnick began grooming Reid for the job, enrolling him in an executive training course at Harvard Business School.
Zelnick's move outraged the legendary Davis, who rejected the succession plan as a move to shove him out the door of a label he founded more than two decades earlier.
Davis' battle with BMG ultimately enraged many executives and Arista artists, and Zelnick was later shown the door by former Bertelsmann chief Thomas Middelhoff. BMG first tried to placate Davis by financing the start-up of his joint venture, J Records, then brought him back inside the company to run a combined RCA-J label.
Reid could not be reached for comment.
"He is a huge talent magnet. I would never count out L.A. Reid," said Rob Walker, manager of hot production team the Neptunes and president of the Arista-affiliated Star Trak label.
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Arista Records
Founded: In 1974 by Clive Davis
Headquarters: New York
Major artists: OutKast, Pink, Dido, Avril Lavigne, Santana, Sarah McLachlan
Parent company: BMG Entertainment
Estimated 2002 sales: $33 million
Sources: Arista Records, BMG, Dun & Bradstreet
Chief Executive of Arista Resigns Amid Steep Losses
By LAURA M. HOLSON
LOS ANGELES -- Antonio Reid, the studio executive largely responsible for starting the careers of artists like Pink and Avril Lavigne, abruptly resigned on Tuesday from Arista Records, where he had been chief executive for nearly four years.
BMG, the global music division of the German conglomerate Bertelsmann, which owns Arista, said it had no plans to replace Mr. Reid and did not elaborate on his departure. But according to two music executives who have worked with Mr. Reid, steep financial losses at the label were a factor.
Mr. Reid, who is known as L.A., has a reputation as an executive with a deft eye for talent, having fostered the careers of stars like TLC and Toni Braxton. But he was also known as a big spender, giving musicians generous contracts and paying for lavish marketing campaigns and videos.
Mr. Reid did not return two calls to his office, and his assistant said he was out of the office.
The chief executive of BMG, Rolf Schmidt-Holtz, said little about the departure, issuing a terse statement that said of Mr. Reid: ''His passion for working with and developing some of the world's best artists is unparalleled. I sincerely wish him the best of luck in all future endeavors.''\
Mr. Reid got his start as a producer in Los Angeles and in 1989 co-founded LaFace Records. He joined Arista in July 2000, succeeding Clive Davis, who now runs RCA Records and J Records, Arista's sister companies at BMG.
Mr. Reid's breakout year came in 2002, when he seemed untouchable with young stars like Pink and Ms. Lavigne, who eschewed the sugary pop of Britney Spears and ruled the music charts. Several Arista artists, including Usher and OutKast, won Grammy Awards for albums released that year.
But last year was trickier for Mr. Reid. According to two music executives who have worked with him, the losses at Arista last year were too large to dismiss. While OutKast remained a standout at Arista, earning six Grammy nominations, blockbuster hopefuls like Whitney Houston failed to ignite sales as projected. Her last album, ''Just Whitney,'' entered the music charts at No.9 in late 2002 and did not muster much interest in 2003. Nor did Pink's most recent release last fall, ''Try This.''
During the heady days of the music business, less-than-stellar performance might be overlooked. But with music sales faltering, music executives are beholden to more bottom-line-oriented corporate executives. Just last year, Thomas D. Mottola, the longtime chief executive of the Sony Music Group, left the company after that division suffered losses.
According to one person close to Arista, Mr. Schmidt-Holtz encouraged Mr. Reid to review costs, particularly in light of the proposed merger of BMG and Sony, which is being reviewed by European regulators. It is possible that Arista could be merged into another label to save costs, though one company executive said there were no imminent plans to do so.
It is unclear whether any of Arista's artists will also leave. But one music executive said several artists were shocked Mr. Reid was leaving and were upset that he would no longer be working with them.
Music Producer Forced Out of Arista Records
By Phyllis Furman
Music honcho Antonio (L.A.) Reid, who catapulted chart-topping acts like OutKast, Pink, Avril Lavigne, Toni Braxton and TLC, has been forced out of money-losing Arista Records.
Reid got the word of the big shake-up yesterday morning from his boss, BMG chairman Rolf Schmidt-Holtz.
In the afternoon, the flamboyant music producer was seen packing boxes in his office. He is said to have had a year-and- half left on his multimillion-dollar contract.
The move comes as BMG gets ready to merge with rival Sony Music. It is looking to cut costs and consolidate its labels.
But BMG sources said Reid's ouster would have come even if there were no Sony union on the horizon because Arista had been losing big wads of cash.
Losses reached an estimated $100 million last year as Reid spent lavishly to put CDs on the charts. He took the fall after a number of releases from highly-paid artists, including Pink's latest album, "Try This," bombed.
A big spender from the start, Reid took hundreds of employees on a retreat in Puerto Rico when he first took over Arista three years ago.
"Operating losses were significant and it couldn't go on," an insider said.
Reid's exit will be the first of many in the coming weeks as a series of music deals leads to a high-powered game of musical chairs.
Music honcho, Lyor Cohen who heads Universal Music label Island Def Jam, is being courted by Seagram scion Edgar Bronfman Jr., for a "serious position" at Warner Music. A Bronfman spokeswoman said he does not comment on speculation.
A decision on whether Cohen goes to Warner Music or remains at Universal is expected imminently.
And word floated yesterday that some Warner label chiefs, including Elektra boss Sylvia Rhone, might soon be exiting the music giant.
Reid, in turn, might be heading to Universal Music Group, possibly to start a new label.
Ironically, the Arista honcho is leaving just as one his biggest acts, OutKast, is No. 1 on the pop charts. OutKast is expected to shine at the upcoming Grammy Awards.
"We'll be getting a lot of thank-yous at the Grammys. OutKast will take Best Album," a source close to Reid predicted. "L.A. will be there," the source added.
In a statement, Schmidt-Holtz called Reid "one of the music industry's top record men. His passion for working with and developing some of the world's best artists is unparalleled."
Reid declined to comment.
Reid was hired to replace legendary music man Clive Davis at Arista. BMG paid $100 million to acquire La Face Records, the label co-founded by Reid and his partner, songwriter Babyface.
The move, orchestrated by Schmidt-Holtz's predecessor Strauss Zelnick, set off a firestorm of protest from music execs and superstars, who believed Davis should have remained at the helm of Arista.
Arista Chief Quits Ahead of a Merger With Sony
By Ethan Smith
Arista Records President and Chief Executive Antonio "L.A." Reid stepped down, a sign of further belt-tightening that may be on the horizon as Arista's parent, Bertelsmann AG's BMG, and Sony Corp. prepare to merge their recorded-music operations.
The move demonstrates that hit records may not be enough for executives in today's battered music industry. Mr. Reid's departure comes as Arista has been enjoying a big hit record with OutKast's "Speakerboxxx/The Love Below," which has sold more than three million copies and has held the No. 1 spot on the Billboard album chart for much of its four months in release. For several weeks, songs from the hip-hop double CD, including the ubiquitous "Hey Ya!," have occupied the No. 1 and No. 2 spots on the singles chart.
But Arista nonetheless posted an operating loss for the first half of 2003 and is said to have had a loss of as much as $200 million is the past two years. Bertelsmann is privately held and doesn't release detailed financial results. Mr. Reid couldn't be reached for comment.
The announcement came just days after Bertelsmann and Sony officially informed European regulators of their plans to merge their recorded-music operations everywhere in the world but Japan.
"L.A. is one of the music industry's top record men," BMG Chairman and Chief Executive Rolf Schmidt-Holtz said. "His passion for working with and developing some of the world's best artists in unparalleled."
However, BMG management is said to want an executive in the job "with more financial restraint and accountability," according to a person close to the situation. This person added that Mr. Reid's departure had nothing to do with the impending Sony merger. Nonetheless, the executive had a reputation for spending too freely, particularly on high-priced artist contracts that didn't pay off, such as the 2001 re-signing of Whitney Houston. That deal alone is said to have engendered a multimillion dollar loss for the label.
Mr. Reid's approach has been paying off of late on the charts, however. In addition to the OutKast set, Arista has had recent hits with folk-pop singer Dido, soft rocker Sarah McLachlan, and R&B diva Kelis. Even so, any perceived unnecessary spending likely would run counter to the new Sony-BMG structure, which is expected to wring $300 million in annual savings from the combined entity.
Doug Morris, chairman of Vivendi Universal SA's Universal Music Group, said he met with Mr. Reid yesterday about Mr. Reid's coming to work for Universal, although nothing has been finalized. "He's an extremely talented, creative guy, and people like that will always be in demand," Mr. Morris said.
Arista Bombshell: Reid Axed Despite 31 Grammy Nominations
By Tim Arango
Arista Records chief executive Antonio "L.A." Reid got the boot yesterday, though he garnered more Grammy nominations than any other individual label chief last year.
Reid's exit comes as Arista, part of Bertelsmann's BMG music unit, continues to bleed cash while pumping out the hits.
Arista lost about $110 million last year, according to people familiar with the label's finances.
Reid was notified of his termination in a morning meeting yesterday with BMG chief Rolf Schmidt-Holtz, and sources say the news did not come as a complete surprise for Reid. Rumors of his exit have circulated in the industry following BMG's plans to merge with Sony Music.
In a statement, Schmidt-Holtz said: "L.A. is one of the music industry's top record men. His passion for working with and developing some of the world's best artists is unparalleled. I sincerely wish him the best of luck in all future endeavors."
A person close to the situation said Reid lacked "financial restraint and financial responsibility."
This person mentioned lavish contracts for artists TLC, Toni Braxton and Whitney Houston as examples of Reid's lack of financial discipline.
One music industry executive said, "L.A. is a great creative guy, but he should not be responsible for running a business."
Last week Reid himself fired Mark Shimmel, Arista's senior vice president of marketing and artist relations, after the two bickered over whom to blame for the label's runaway spending, according to people familiar with the matter. Laura Swanson, the label's publicist, is taking on Shimmel's responsibilities.
Meanwhile, Larry Mestel, Arista's general manager and executive vice president, will be acting president, reporting to BMG Chief Operating Officer Michael Smellie.
Reid became head of Arista in May 2000, after the highly publicized ouster of Arista founder Clive Davis.
After a public outcry over the change, Davis returned to the BMG fold. And now Davis, head of BMG's RCA label, is enjoying the success of several hit records stemming from the "American Idol" television series.
Reid has produced a steady stream of hits and broken such new artists as Avril Lavigne, Pink and Outkast, whose recent album "Speakerboxxx/The Love Below" garnered six Grammy nominations. In total, Arista collected 31 Grammy nominations in 2003.
Reid's contract was due to expire in July 2005, sources say, and he'll walk away with about $5 million.
Because of his creative abilities, Reid is likely to be a sought-after executive for rival music companies. Sources say he has already met with Edgar Bronfman Jr., who is heading a group that has agreed to buy Warner Music, and Doug Morris, head of Universal Music, the world's largest record company.
In November, Sony Music and BMG announced plans to merge, and the deal is pending in front of regulators in the United States and Europe.
Arista Chief Ousted as Losses Pile Up
By Tamara Conniff
LOS ANGELES - In a forced exit, Arista Records president and CEO Antonio "L.A." Reid has stepped down from his post at the BMG-owned label, effective immediately, BMG chairman and CEO Rolf Schmidt-Holtz said Tuesday.
His departure comes on the heels of a hits streak with such artists as Outkast, Dido, Avril Lavigne, Sarah McLachlan and Pink. All are nominated for Grammy Awards, led by hip-hop duo Outkast, which scored a leading six noms. But despite the label selling millions of records, sources indicted Arista has suffered operating loses for the past two years, which is among the reasons for Reid's exit.
"'L.A.' is one of the music industry's top record men. His passion for working with and developing some of the world's best artists is unparalleled," Schmidt-Holtz said in a statement. "I sincerely wish him the best of luck in all future endeavors."
Arista's executive management will now report to BMG chief operating officer Michael Smellie. Arista executive vp and general manager Larry Mestel will continue to oversee day-to-day operations, sources said. The label's future, however, remains unclear.
Reid, who had about 17 months left on his contract, could not be reached for comment at press time.
His ascension to the Arista throne in May 2000 was mired in controversy. Reid, a former drummer and Grammy-winning producer, founded the successful Atlanta-based LaFace Records with partner Kenneth "Babyface" Edmonds in 1989 with a distribution deal with Arista. LaFace spawned such noteworthy acts as TLC, Toni Braxton, Usher, Outkast and Pink as well as ventures with Sean "P. Diddy" Combs for Bad Boy Records and Dallas Austin for Rowdy Records.
Reid was tapped by then-BMG president and CEO Strauss Zelnick to replace Arista's legendary leader and founder, Clive Davis. BMG was so keen on Reid's appointment that in 1999, they sent him to a 12-week executive management program at the Harvard School of Business. What ensued was a highly publicized power struggle that ended with Reid at Arista and Davis securing his own label, J Records, in a joint-venture deal with BMG reportedly worth $150 million. Reid faced an uphill climb when taking the reins of a demonized Arista in 2000. But after a rocky first year, he landed success by signing Canadian rocker Lavigne and allowing Pink to transition from R&B to rock.
Industry insiders speculate that the changes at Arista are part of BMG's downsizing preparations in anticipation of regulatory approval for the Sony-BMG merger, though one BMG executive insisted that the changes at Arista were unrelated. Bertelsmann AG and Sony Corp (NYSE:SNE) on Tuesday formally notified the European Commission of a binding deal to merge their music businesses in a 50-50 joint venture. The commission is likely to decide by early next month whether to give a routine clearance to the planned merger of BMG and Sony Music or launch an in-depth four-month investigation. It is possible that Arista will eventually be folded into RCA and J Records under Davis, who is now RCA Music Group chairman. While no official merger moves can be made before approval, both Sony and BMG are likely to continue to trim their operations.
During his time at Arista, Reid also parted ways with Bad Boy Records, signed an exclusive long-term agreement with Whitney Houston worth $100 million and inked a label deal with producer duo the Neptunes. Reid already has been in talks to take a role at Universal Music Group, sources said.
Regarding the proposed Sony-BMG merger, Philippe Kern, head of the music lobby group Impala, submitted a formal objection to the European Commission on Tuesday. He said the commission's assessment of the market in 2000 -- that it was an oligopoly -- is still valid. "The market shares are still the same, and the ability to control the market has not changed," he said in the complaint. "If anything, things have gotten worse since the market has become more concentrated."
CEO loses his groove with Arista
By Phill Gallo
Antonio "L.A." Reid has ankled as prexy and CEO of BMG's Arista Records.
Rolf Schmidt-Holz, chairman-CEO of BMG, made the announcement and has put chief operating officer Michael Smellie in charge of the label and its executive management.
A BMG exec said the move is not related to the pending merger of BMG and Sony Music, which is under review by the European Union. "The label has been terrific for artists, but we need fiscal restraint. We can't be operating with losses," the exec said.
Once the merger is completed, Smellie will report to Sony Music Entertainment chairman-CEO Andrew Lack, who will be chief exec of the new company.
Reid, who ran La Face Records with partner Kenny "Babyface" Edmonds starting in 1989, took the reins at Arista on July 1, 2000, the end result of a maneuver by BMG's then-honcho Strauss Zelnick to remove Clive Davis from the imprint's top job. Davis founded Arista in 1974 and, in late 2000, created J Records, which BMG now owns and distributes. Davis is the chairman of the RCA Records Group.
It's believed Reid had about 18 months left on his contract.
The Arista roster, which includes La Face artists, is led by Whitney Houston, whom Reid inked to a $100 million deal in 2001, as well as Avril Lavigne, Pink, Outkast, Sarah McLachlan, Santana and Dido.
One of Reid's early hires, former Palm Pictures and Island exec Larry Mestel, remains the label's No. 2, continuing as exec VP and general manager.
"L.A. is one of the music industry's top record men. His passion for working with and developing some of the world's best artists is unparalleled," Schmidt-Holz said in a statement. "I sincerely wish him the best of luck in all future endeavors."
BMG owns more than 200 record labels in 41 countries including Ariola, Jive Records and RCA. A decision to approve the merger with Sony or require more extensive examination is expected in the next six weeks.
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