HITS Daily Double


Rapping It Down With BMG’s Zelnick
Since being elevated to the post of President and CEO of BMG Entertainment in 1998, strauss zelnick',390,400);">strauss zelnick',390,400);">Strauss Zelnick has streamlined the company's worldwide music operations, increased its profits and boosted its marketshare.

So why does this well-spoken, intelligent and knowledgeable 43-year-old executive, who is universally credited with reviving BMG's RCA and Windham Hill labels, driving joint ventures like LaFace and Jive and allowing Arista to thrive, continually find himself embroiled in controversy?

The former 20th Century Fox President and COO, who has been running BMG Entertainment in either a worldwide or North American capacity since 1994, talks exclusively to HITS' ace reporter Marc Pollack about his dealings with the two Clives, a consolidating music industry and the future of the online business, among other topics.

Under your watch, BMG has emerged re-energized, making significant marketshare gains and dominating U.S. chart action. What went into re-establishing the company as a major player?

It starts with a terrific team. A lot of the people involved were already here when I came on board and some were brought in after. We wanted to become the most innovative, creatively vital and most efficiently run music company. With the turnaround of RCA Records under Bob Jamieson and the enormous growth of BMG Distribution under Pete Jones, our creative mission is being realized.

How do you maintain the successful roll?

Never look behind you and always look forward.

Do the successes of the past few years put added pressure on you to continue this upward climb?

Because of the success BMG has had recently, the creative opportunities keep happening. But it's still important to stay ahead of the game; constantly questioning and wanting to know more.

Music groups go hot and cold. How do you keep posting such profitable numbers?

Instead of focusing on past successes, how can we do more? How far forward can we take these projects? There is always more that can be done; it just takes progressive thinking.

Joint ventures and distribution deals have been key in BMG's successes. Do you intend to continue current alliances? Are you actively seeking new deals?

We will absolutely continue to support our current alliances. We are selectively looking at other opportunities, but the key for us is to be selective.

The extremely successful Jive Records deal expires in the coming year. How big a priority is it to keep Clive Calder's company under the BMG umbrella?

As you know, we have a minority stake in Jive and we value our relationship with them very highly. We hope to continue our successful allegiance in the years to come.

The media and the industry's attention has been focused on the reported fallout between you and Arista founder clive davis',390,400);">clive davis',390,400);">Clive Davis. Now, a new joint venture with Davis is coming to fruition. Were things between the two of you blown out of proportion?

As CEO, I have a responsibility to make decisions based on what's right for the company, and that includes making sure that we had an appropriate succession plan in place at Arista. I've never changed what I've said about clive davis',390,400);">clive davis',390,400);">Clive Davis. He is an extraordinary person and a true music man. My strong desire has been to do right by him. I have nothing but the highest regard and deepest respect for Clive and what he has accomplished for Arista and the industry.

Regarding the new Davis venture, when do you expect the deal to be finalized?

We're still in negotiations. [Ed: Sources said the deal will likely be announced in August.]

Will Davis be taking any Arista artists and/or executives with him?

That's a part of what we are trying to sort out. There are some executives and artists who will no longer be under contract when the joint venture is launched. Obviously, they can do what they want. Those with contracts are being addressed.

You were behind the elevation of respected hitmaker Antonio "L.A." Reid to the Arista throne. He has said he wouldn't have accepted the position if some artists and executives left with Davis. Are you conflicted in any way by the potential tug-of-war between Arista and Davis' new company?

L.A.'s mandate is to continue to build and grow Arista. He comes in July 1, and we are looking forward to many successful years with him at the helm.

Switching gears a bit, there have been some big changes at BMG corporate. Your boss, michael dornemann',390,400);">michael dornemann',390,400);">Michael Dornemann, no longer oversees TV and is now exclusively focused on music, and board supervisor Mark Woessner, widely considered an ally to the music gents, has stepped down. Have your relationships with Dornemann, Thomas Middelhoff and/or other BMG execs changed? Do Dornemann's new duties affect or interfere with what you are trying to do at the company? How important is the company's executive stability?

michael dornemann',390,400);">michael dornemann',390,400);">Michael Dornemann has always been my mentor and enormous supporter. I see no changes coming from these moves. We both value the relationship we have and the effects that the longevity of that relationship has on the company.

With the pending AOL-Time Warner and Vivendi-Seagram deals, are there added incentives for BMG to make a major play in the desire to stay competitive?

We are well beyond critical mass at the moment. When I joined the company, we were a lot smaller. We are the only music company that has grown in marketshare and profits without making a major acquisition. I've found that in the creative business, one can argue that smaller is better. It allows for a much more focused approach. I don't believe we will be involved in any of those significant mergers.

What's your take on those deals?

Some of them can be very good deals. There is value in executing the deal itself that sometimes overshadows performance.

BMG has become, among the labels, a leader in the online music space. You've already made a deal with MP3.com; what's next?

We are focused on developing a legitimate downloading system by the end of the year. We, as a company, are on the cutting, if not bleeding, edge of this development.

Where is the online distribution of music headed?

I have a huge belief the Internet will change the way we in the music industry conduct business. We are still a couple of years away before we can start transforming these developments into part of our revenues. We want to develop a high-class delivery service first, and then we'll worry about where the money will come from. I'm of the belief that if we build it, consumers will come. There are obviously piracy concerns at the moment, and there are four ways of approaching piracy: legislation, enforcement, encryption and alternative methods of delivery. BMG is focused on all four points.

Why was RCA recently reorganized, and when do you expect Bob Jamieson and Jack Rovner to get their promotions?

The reorganization of the RCA Label Group was initiated to maintain the high creative output that Bob and Jack have initiated and to cut down on back-office expenditures. Bob and Jack's promotions [to CEO and President, respectively] are still in the negotiating phase.

With all the changes facing the industry, can BMG retain its place as a top destination for talent?

The company has succeeded in becoming a creative place where talented executives and artists want to be. And we have created an effective business structure with the lowest overhead in the industry. We don't believe in throwing things against the wall and seeing what sticks, [unlike] some companies that take the approach that they have a high volume of releases and hope for a hit.