The Day After...

[Hits Daily Double Report]

The Day After Arista Chief’s Departure, Everybody’s Talking 'Bout Him

January 14, 2004

Following yesterday’s announcement that Arista President/CEO Antonio “L.A.” Reid was stepping down after nearly four years of running the label, press reports are attributing the move by BMG’s Rolf Schmidt-Holtz to financial housekeeping and saying it could signal the start of even more sweeping changes, regardless of whether the Sony/BMG merger is approved by regulators.

It is now widely reported that Arista lost some $100 million last year. And whether or not that figure is accurate, industry voices seem unanimous in praising Reid as a creative genius but a free spender whose loose purse strings eventually caught up with him.

Despite having a huge #1 hit with OutKast and garnering the most Grammy nominations of any label last year, Reid’s departure apparently was seen as in the cards by many. While Schmidt-Holtz characterized Reid’s ability to develop artists as “unparalleled,” one industry source told the New York Post that Reid lacked “financial restraint and financial responsibility.” This source cited lavish contracts for Whitney Houston, Toni Braxton and TLC as examples.

According to the New York Times, Schmidt-Holtz encouraged Reid to review expenses, especially given the merger plans between Sony and BMG. But The New York Daily News reports that Reid’s dismissal would have come even if a Sony/BMG merger were not a possibility, simply because of continuing losses. Nevertheless, that paper says BMG has no plans to replace Reid.

Rather, says the L.A. Times, the Reid ouster could represent the first step in a “sweeping realignment of BMG's domestic music division,” in which Arista may be folded into Clive Davis’ RCA/J or Barry Weiss’ Jive. The paper also speculates that the move could be an opportunity for Davis to seize a larger role within BMG. If the merger is approved, Davis is expected to lead label operations for the BMG side, with Don Ienner as his Sony counterpart.

London’s Financial Times echoes that speculation, saying Reid’s departure “seems certain to condemn Arista to a merger with another label.”

While Reid’s plans are unclear, press reports are not unduly concerned about his future: The L.A. Times cites sources as saying he has already talked with Universal Music Group and with Edgar Bronfman Jr., who soon will be in control of the Warner Music Group. The New York Times, meanwhile, reported that several artists were shocked that Reid was leaving and were upset that he would no longer be working with them.

In confirming that he had met with Reid Tuesday, UMG chief Doug Morris told the Wall Street Journal, “He's an extremely talented, creative guy, and people like that will always be in demand.”

In the meantime, according to the Post, Reid will walk with about a $5 million payout from the year-and-a-half left on his contract.

NEWSFILE: 14 JANUARY 2004