If only that were the total of PolyGram’s problems. But no. Its woes have been coming in waves. In the days before the trial, the visionary who founded Island, Chris Blackwell, publicly lambasted Levy, who quickly ousted him. The new man hired to r evive the legendary but long-cold Motown Records, also a PolyGram label, was being met with wide skepticism. And a trade paper had stirred up another fuss, reporting–wrongly, PolyGram says–that the chief of its A&M label was poised to quit over the exp anding power of the chief of sister label Mercury Records. At least, thank goodness, there was ““Bean,” PolyGram’s quirky international hit movie from England.
Litigation, racial minefields, turf jealousies. To some top PolyGram bosses–Levy, a Frenchman; a Briton, film chief Michael Kuhn, and a third, music chief Roger Ames, from Trinidad–such headaches must seem distinctively American. And they’re hard ly what the Netherlands-based company, 75 percent owned by the Dutch electronics giant Philips, had foreseen when it launched a blitzkrieg on the U.S. entertainment industry. After staking powerful claims on the volatile recording industry in countries a round the world, PolyGram pushed into the mother lode of the music business. Since 1989 it has sunk more than $1 billion into American record- label acquisitions, mostly of industry icons. Its stateside market share, now around 13 percent, puts it within range of the likes of Warner Music and Sony Music. But the foray has produced mixed results–from Mercury Records’ rebound to Motown’s lingering malaise–and much tumult: rancorous executive departures, reorganizations, lawsuits and restiveness in the r anks. The problems partly reflect the industry’s overall sluggishness, though PolyGram (revenues, $5.5 billion; profits, $415 million) still reaps fortunes from the music business because of its strong global position. But critics and even some fans say PolyGram’s tight financial oversight, typical of European companies, has clashed with the loose-limbed style of the U.S. entertainment industry. The heavy-handedness has been especially hard on some of the freewheeling but successful entrepreneurs, like the ousted Blackwell at Island, who came with PolyGram’s acquisitions. Some have openly complained the company reneged on pledges to invest in their ideas–assertions Levy disputes. Others say PolyGram, with foreigners in all top posts, doesn’t understan d American culture.
The turmoil in the music operations couldn’t have erupted at a more inopportune time. Next year, parent Philips will decide whether to divest itself of PolyGram. Even more urgent, PolyGram wants to be a major player in movies, where it has now ente red a critical, costly phase of a long-term expansion strategy that will require more top management attention. To move up from its current minor-league status, PolyGram must begin to produce and market a consistent slate of bigger-budget movies to gain favor and bargaining power with U.S. theater owners and to feed its newly launched U.S. distribution system.
From the start five years ago, PolyGram’s movie plans were ambitious: to build a studio and film-distribution system from scratch, concentrating first on countries beyond the United States before targeting the world’s largest movie mar- ket. The co mpany has been pouring money into the effort–more than $1 billion in the United States alone so far, including $225 million last week to buy a library of 1,000 existing films.
Yet it remains years away from the big leagues and continues to hemorrhage money. In addition to Working Title, the London-based production company behind ““Bean” and ““Four Weddings and a Funeral,” PolyGram owns Interscope Communications (““Jumanj i”), Propaganda Films (““The Game”) and several other production companies. It also owns Gramercy, which distributes small films like ““Bean,” one of the industry’s biggest profitmakers this year. ““Bean” was propelled by PolyGram’s hefty foreign distrib ution network, which the company is trying to replicate in the United States. In September, PolyGram unveiled its new American distribution system with the release of ““The Game.” ““It’s always a gamble when you are the guinea-pig picture,” says Michael Douglas, the movie’s star. ““But they promoted themselves to exhibitors very impressively.”
For now, though, the turbulent music business may remain a distraction for Levy. At 50, Levy is an elusive figure, awkward in public and seemingly more comfortable with numbers than with people. What’s his management style? ““Be tense,” he told a m eeting of PolyGram’s worldwide executives this year. The meaning? ““We should have discipline,” he says. PolyGram-style discipline has not gone down easy at the record labels–and particularly not at Motown, whose departed CEO, Andre Harrell, had a spend thrift reputation. ““I haven’t done well on Motown the way I’ve managed it,” Levy admits. To rectify that, in August PolyGram inserted Motown into the newly created Mercury Records Group, headed by industry veteran Danny Goldberg. Goldberg has had a hot hand at PolyGram, lifting Mercury from the market-share pits to the No. 2 label. Then last month he named George Jackson, a film producer, Motown’s new boss–a choice that left many industry executives agog because Jackson isn’t from their ranks.
At least that nasty lawsuit with Dru Hill is out of the way. The new group had burst onto the music scene with a million-selling album–but its members had little to show for it. And soon, seemingly everyone–the group, along with its various manag ers and advisers–was squabbling with Island’s black-music division. The dispute led to an alleged physical fight, followed by a lawsuit in which the group sought to break its Island contract. The affair took an embarrassing turn for PolyGram during a de position, when its U.S. president declared that few African-American men would have a job if criminal records were taken into account. PolyGram demoted him, and the two sides settled for $6 million. Chalk it up as yet another expensive lesson for PolyGram in America.
