HITS Daily Double
"If there are millions of customers searching for and loving music on the Net, my first approach should be, how can we satisfy them instead of suing them?"
——Rolf Schmidt-Holtz, BMG Chairman/CEO


An exclusive HITS dialogue with BMG Chairman/CEO Rolf Schmidt-Holtz

During his two years as Bertelsmann Music Group Chairman/CEO, German native Rolf Schmidt-Holtz has been a very busy man.

The 53-year-old longtime German television and magazine executive was officially named Chief Creative Officer at Bertelsmann in January 2001 by the conglom’s then-top dog Thomas Middelhoff, who placed Schmidt-Holtz in charge of running the company’s BMG music operations.

Schmidt-Holtz, who admits he was not a music man when he first took over the company, has silenced those who questioned his appointment, while becoming more of a self-taught record exec every day. In the role of boss, he has made moves that have seen the combination of J and RCA to form the RCA Music Group under industry legend Clive Davis, whom he brought back into the BMG fold. He has allowed Antonio "L.A." Reid to grow into a leading label head at Arista. And now he is overseeing the integration of Jive/Zomba into the BMG group after its acquisition for $2.7 billion last year.

The likeable executive is happy with the way things are coming together for his company. Here, after a record year year at BMG, Schmidt-Holtz takes time from skateboard lessons with Avril Lavigne to share some German sausages with HITS’ in-house hausfrau, Marc "Sprechen Sie Deutsch?" Pollack.

What’s your take on the future of the record industry?
Everybody is talking about the downturn in the music industry. I’m quite bullish on BMG because, as you can imagine, I feel quite good about what we have achieved in the last year. And since it was a record year for us, I really want to keep momentum going, to keep BMG as strong as possible. We are in a difficult marketplace, but if we find the right hits and the right artists, then we can still make a decent living in music. And, as soon as we find the right business model online, we will have a major recovery. I am 100% sure of this.

Specifically, what kind of marketing, promotion, sales and online initiatives are you undertaking to combat this downturn?
To overcome a downturn, the best solution is, finding global artists and finding the hits. Take Avril [Lavigne]. We have achieved success by finding these kinds of artists, this kind of music, instead of thinking theoretically about marketing and promotion.

So it’s more about the music.
It’s not more about, it’s only about the music. This is what I have learned. The music comes first, and then we can talk about marketing and promotion. We did a decent job at marketing Elvis again, which is fine. But without Elvis’ music, without his voice, without this new quality of recording, we wouldn’t have been as successful.

Let’s look at BMG’s individual labels. You made a huge move to combine J and RCA and appoint Clive Davis to lead the unit. What is his mandate, and how quickly do you expect a turnaround?
We are already feeling his impact. If you have executives and creative people like Clive, everybody around him sees immediately there is something different going on. And that’s what happens within the RCA group. The first decisions are made creatively. Then he involves the others, and he will do and deliver what he has done all his life—great music and hits. And this will change the character, the atmosphere, the power and the perception of the RCA Music Group.

When RCA re-released the Elvis material last year, the timing of the rollout was questioned. Do you have any other large-scale catalog reissues in the works?
Let me put it this way—you can plan something, but if you have Elvis’ greatest hits, it’s easier to roll out a worldwide campaign. Our success has shown us we can do it. We can be successful in basically reinventing a worldwide artist. We focused on Elvis the whole year. Very experienced music executives dedicated 100% of their time to this and it paid off. So I feel we can do the same with other artists. Maybe not in the same range. But again, it encourages us because we feel we can do it and BMG had never proven it could do something like this in the past. We feel good about it.

Do you believe that Christina Aguilera’s marketing campaign was a little too racy and worked against her?
Again, it’s the music first. It’s a great, great album and she sings wonderfully. But back to your question. Was it too racy? Not too racy for me! Maybe it was a little bit controversial. We are not here to define or change artists’ images. That’s what I truly believe. We are here to help artists express themselves. Let the music fans decide. It was in heavy rotation around the world, so I think the fans voted. We are not here to tell Christina or any of our artists what they should look like or how they should dress. If she feels that she wants to express herself that way, then that’s the way it will be. I’m 100% fine with it.

Have you had any run-ins with her manager, Irving Azoff?
No problems at all. Basically, if I remember correctly, we talked once or twice about the release date and that was all. The rest was fine. Late last year, Christina took time out to come to BMG’s offices to perform and thank the people on RCA who worked on the record. It was a very special moment and Irving was there.

It’s no secret that Dave Matthewsdeal is up. How big a priority is it to keep him in the RCA family?
We would love to keep him, if possible, because he’s a great artist. But in the end, we can only do deals that make sense. And I’m very optimistic that we’ll find a way to do that.

You must be happy with the way L.A. Reid has adapted to running Arista.
More than happy. I would like to be serious about this because this is the Man of the Year within BMG, if not Bertelsmann itself. Looking at what he took over and what he has developed out of it. What he has shown during 2002 is just outrageous. I feel so positive and good for him, and, of course, for us. We had a record year in 2002, an all-time high for BMG and a big part of this success is L.A. Reid. I first met him just two years ago, and what he has achieved in those two years has earned my full respect. I congratulate and thank him. If you listen to him, and I have talked to him a hundred times in these past two years, you feel like L.A. is music. And I can’t say any more; that’s what it is. He is music. He feels music, he smells music, he talks music and obviously, he is the kind of man you need to run a label.

Now that the Jive/Zomba deal is done, will Barry Weiss stay on as the head of a stand-alone label within the Group?
Yes, he will. As an organization, Jive has been successful over a long period of time and has its own history. I think we have to respect that, and we must start our venture in the spirit of independence. I know that the Zomba people will appreciate that very much.

Jive/Zomba has had huge success in the past with teenpop. Does the label need to redefine itself with the waning of that genre?
I don’t think so. Just look at Justin Timberlake. A great record, a great artist. I do think that we have to think about where we are and where we could go. All of us have to do that in these tough times. But there is no need to redefine Zomba from scratch. They just have to redevelop momentum, and I’m sure they have all the skills needed to be very, very successful.

Will BMG ultimately be comprised of three individual label groups?
BMG is a dynamic and vital music major standing very solidly and comfortably on four pillars: Arista, RCA Music Group, Zomba and BMG Publishing. I feel that we have gained ground creatively, and if you compare us with the BMG of two years ago, I feel very comfortable sitting in this seat.

Do you believe the Internet will ever create a revenue stream?
Is this the million-dollar question?

More like the $50 million question.
Sorry, I’m a little bit out of fashion here. I’m sure that there will be a valuable business model for the online delivery of music. No doubt about it. I expect this within the next three years. Could be a year, could be three, I don’t know. Nobody knows. But I am optimistic, because the need and the desire for music is increasing. And if you look at music for other media, like broadband, radio, television, whatever, music is a major ingredient and people only want more of it. It’s only a question of a little bit of time and development and we will find a business model. I am quite optimistic that the music industry will not only recover but has a great future ahead of it after a period of between one and three years, during which we may still suffer. But if we find two things—an online business model and additional revenue streams—we will have a very promising and great future.

Do you have mixed feelings about some of the company’s history, like investing in Napster?
It was basically a good idea to embrace new technologies in order to find new distribution for music. Unfortunately, it didn’t work out practically. But I think, as a music industry, we probably should have embraced the new technology earlier in order to incorporate and find the models, instead of only fighting its legality.

Everyone has just fled to the alternatives.
Absolutely. In the end, I feel the music industry’s attitude has not been great. If there are millions of customers searching for and loving music on the Net, my first approach should be, how can we satisfy them instead of suing them? I believe 100% that we have to defend and fight for securing intellectual property; no doubt about that. But at the same time, we should have put more energy into finding a way to satisfy our customers. The perception of the music industry to the kids was that the industry is fighting them. They didn’t say they’re fighting Napster, or KaZaA or whatever. They said, they’re fighting us, and this is a pity. Back in my days in the magazine and TV businesses, I can’t remember a day when we turned our backs on an audience. Instead, we went crazy trying to find the audience.

Sony Music seems to have followed BMG’s lead in taking a veteran TV executive and putting him at the top of the music division.
[Laughs] It must be because we TV guys look so beautiful.

Is it a natural progression?
I would not say it’s a new chapter. I would say, there are talented people outside of the music industry who understand creative people and artists and how to reach a mass audience. Why should they not be able to learn? And that’s what I have done. And I’m not finished yet. Surprisingly enough, we’ve had some success. By the way, approaching the music industry with an attitude toward learning and maybe being a little bit more modest in how we approach people—caring about employees in Malaysia as well as in the United States, the U.K. and Germany instead of just our goals in making more money—might be a good thing.

Putting a straight money cruncher in at a music company hasn’t worked in the past when you think about Dornemann and Zelnick at BMG, Fifield and Southgate at EMI, Morgado and Fuchs at Warner.
What matters, in the end, is whether you find the right people and how you treat your people—the artists and the audience. Then comes the financial part. I never said my goal was to make money. That’s so stupid and so obvious. My goal was, first of all, to find the right management. Because, if I have the right five people, I can change the world. Because these five people find five other people, and if they and their colleagues treat others the way they want to be treated, we will win. At BMG, we place importance on mutual respect. I’ll tell you this, all this theoretical bullshit you could learn at the Harvard Business Schools of this world is completely useless. It’s a very simple, down-to-earth thing. It’s about the people you work with. Maybe that sounds a little too simple, but that’s what it’s about.

You’ve become somewhat of a star on our website. What do you think of the hitsdailydouble cartoons?
I love them, I really do—despite being the victim. It’s funny, we are all sitting in the office and somebody shouts, "Come in here. I have to show you what these HITS guys have created. It’s great." When I watch the cartoons, I think these guys must be having fun, you know.

Dennis and Lenny wanted to invite you to the office.
When I get to L.A., I will try to visit. I’m curious to see if I’m right or wrong about you guys. I always thought, if people, on a regular basis, can create this kind of fun, they must be a fun bunch. It’s not easy to have fun at work. The fact that you can keep this kind of atmosphere going for so long… Congratulations. That’s a very difficult thing.