Author: Jim Feliciano

MCA, Boston Ventures Close $61 Million Deal

 

 

LOS ANGELES — The sale of Motown Records to the partnership of MCA Records and investment firm Boston Ventures closes the book on Motown’s history as America’s most prominent black -owned independent record company, but the deal has been structured to encourage at least partial minority ownership of the label.

After weeks of discussion, the purchase was sealed by the principals on June 28. According to Motown executive VP Al Bell, the sale price was $61 million. An informed source says the record label had sales last year of approximately $50 million.

Bell confirms that Berry Gordy Jr., founder and chairman of the 30-year old label, “has insisted that 20% equity ownership in the company be made available to minorities.”

The percentage of black ownership could go even higher: Jheryl Busby, MCA executive VP of talent acquisition and president of black music, who is the heir apparent to Motown’s presidency, may receive a 10% equity interest in the label as part of his contract.

Boston Ventures put up 80% of the purchase price, and MCA bought the remaining 20%. Taking into consideration the minority-ownership provision, Bell says, “MCA would end up with 20 %, Boston Ventures with 60%, and the minorities with 20%.”

Under this arrangement, says one source, the future minority shareholders would be able to buy equity from Boston Ventures at the “founder’s share” price – that is, at the per-share acquisition price.

The source adds that the terms of Busby’s stake in Motown are still under discussion; one scenario has part of the stock being given to him outright when he assumes the presidency, with the remainder being withheld as a performance incentive.

Busby’s appointment to the Motown post remains unconfirmed by MCA, which issued only a brief press release on the purchase. MCA Music Group president and chief executive officer Irving Azoff and MCA Records president Myron Roth were unavailable for comment.

However, a source says that an  agreement with Busby to take up the Motown reins is “90% done,” and many in the industry – including the outgoing president of Motown Record Corp. – are already discussing his ascendancy to the new post as a fait accompli.

Asked if Busby has been chosen as his successor, outgoing Motown Records president Skip Miller says, `”Being inside, I’d have to say he is. He’s the guy they’ve been talking to. I don’t know if he has a deal yet.”

A Capitol Records source has denied that Step Johnson, Capitol VP and general manager of black music promotion, has discussed the assumption of Busby’s duties with the MCA executive.

It is clear that Motown will be staffed by new executive and managerial personnel.

Miller was to depart Motown July 1, while Bell and Motown Music Group president Lee Young Jr. will sign on with the Gordy Co., Gordy’s diversified entertainment firm.

Motown spokesman Mike Roskind confirms that the company is laying off employees in the wake of the sale. Saying that the size of the staff is “still in a state of transition,” he characterizes the staff cuts as “nothing extreme and nothing conservative.”

A source at Motown says that VP of marketing Miller London and VP of R&B promotion Ronnie Jones will be among a small number of current staff members to be retained in the coming weeks.

“We have placed a great deal of our staff with MCA,” Miller says.

The Motown purchase involves only a part of the large entertainment conglomerate built by Gordy.

Under the terms of the agreement, MCA and Boston Ventures will purchase Motown’s trademarks, its existing contracts (including those of Lionel Richie and Stevie Wonder, the latter of whom agreed to continue with the label just before the sale), and its formidable catalog.

Not included in the sale is Jobete Music, Motown’s lucrative publishing company; the Hitsville studios; record pressing facilities in Arizona and Tennessee; a tape duplication plant in Michigan; and Motown’s film and television production companies.

Jobete, which some observers estimate is worth as much as $95 million, was reportedly included in the original sales discussions between MCA and Motown in late 1986, but was not a subject of the most recent negotiations.

Roskind says Hitsville will remain under Gordy’s ownership. “I’m not sure how [the pressing plants] will be disposed of,” he adds.

John Burns, executive VP of MCA distributing and manufacturing, says that in addition to handling the distribution of Motown product (an arrangement that began in July 1983), MCA will now manufacture Motown’s product.

“We’re going to use their tape facility for some of their overflow,” Burns says.

The sale of Motown climaxes three decades of glittering success and latter-day decline under Gordy’s leadership. The company, which enjoyed about 30 No. 1 pop hits between 1962 and 1971 (when the label moved its headquarters to Los Angeles), has been unable to develop the kind of major crossover acts it had in the heyday of the Supremes, the Temptations, Marvin Gaye, Stevie Wonder, the Four Tops, Smokey Robinson & the Miracles, and other top acts.

Last year, Motown was fourth on Billboard’s year-end list of top black singles labels and eighth among top black album labels; MCA placed first in both categories.

Ironically, the Motown sale was completed the week that its only recent hit album, Wonder’s platinum “Characters,” fell off the Billboard Top Pop Albums chart.

Observers view the sale of the label with both optimism and regret. “I’m very happy that Motown lives and will go on, because it’s an institution,” says outgoing president Miller.

“The realities say that Motown as a black enterprise has grown to the level of an institution,” says executive VP Bell. “Institutions grow to a point where they outgrow individuals or groups.”

Benny Medina, VP of A &R at Warner Bros. and a former Motown staff producer, says the sale was “a good thing based on the current state of affairs there creatively and economically.

This sale will keep alive a tradition of artistry and preserve those things that Berry Gordy built. Under Busby it won’t go by the wayside, as so many other black institutions have.”

Medina cites “a lack of creative vision” as the reason for Motown’s demise over the last 10 years: “Motown was based on first-rate creativity and the careful development of writers, artists, and producers.”

LeBaron Taylor, VP and general manager of corporate affairs for CBS Records Inc., whose Detroit-based Ric -Tic label was bought by Gordy in 1965, reflects on the sale with highly mixed emotions.

“I’m saddened by the fact that Motown was in the position that Berry had to sell or infuse the company with new capital,” Taylor says. “On the other hand, I understand it.

“Back in Detroit, it was our black company,” he continues. “There was a lot of pride – it was our culture. So we’re saddened by it, naturally.” END

Assistance in preparing this story
was provided by Iry Lichtman and Nelson George in New York.

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Credit source information: Billboard, July 9, 1988