20 Biggest Record Company Screwups

As promised, here is the rest of the list 10 through number one:

Youth Movement
#10 Columbia Records loses Alicia Keys, drops 50 Cent
Columbia had a way with young talent in the late ’90s and early ’00s. First, after plunking down a reported $400,000 to sign Alicia Keys, they turned her over to high-priced producers who tried to transform her into Whitney Houston. Frustrated, she bolted—and signed with J Records, where she has sold more than 20 million albums to date. Around the same time, another languishing Columbia prospect, 50 Cent, recorded “How to Rob” in a desperate attempt to get his label to notice him. But when he was shot nine times in 2000, skittish execs dumped him—and then watched as he became an unstoppable one-man money factory at Interscope.

Unintended consequence Fedoras and bullet­proof vests become essential urban-fashion accessories.

Spy Game
#9 “Digital-rights management” backfires even more badly than usual
In a 2005 effort to combat digital piracy, Sony BMG packaged millions of CDs with copy-protection software that automatically installed a “rootkit” on users’ PCs, which, in addition to preventing consumers from making more than three copies of their legally purchased CD, also made them vulnerable to viruses and hackers. Sony BMG initially downplayed the problem, but after the Department of Homeland Security issued an advisory, the label recalled more than 4 million CDs. Sony was accused of spying on its customers’ listening habits and was forced to pay several million dollars to settle class-action lawsuits that alleged violations of spyware laws and deceptive trade practices.

Unintended consequence Radiohead offer up In Rainbows for a bargain pay-what-you-like price.

Rap Attack
#8 Warner junks Interscope
When anti-rap crusaders wanted to deliver a body blow to hip-hop, they took aim at the Warner Music Group, because its corporate parent, Time Warner, was American-owned and publicly traded. When Ice-T’s “Cop Killer” became too hot to handle, Warner Music dropped him, but the label still enjoyed huge rap hits—particularly through Death Row Records, partially owned by their Interscope label. But when Republican presidential candidate Bob Dole attacked Warner Music in his stump speech, Time Warner panicked, ordering the sale of Interscope to rival Universal. Universal soon became the biggest record company in the world—in large measure due to Interscope hits by Tupac, Dr. Dre and Eminem. Warner Music went on a long slide and was finally sold in 2004.

Unintended consequence Time Warner shareholders never have to worry about who killed Tupac.

Something’s Happening, But You Don’t Know What It Is
#7 Music publisher gives away Bob Dylan
In the early 1960s Leeds/Duchess was a legendary music-publishing company but far from the hippest: It knew Tin Pan Alley but couldn’t find a Greenwich Village coffeehouse with a compass. Yet when Columbia signed Bob Dylan in 1961, they steered him to Leeds, where he happily signed a publishing deal with a $1,000 advance. The following year, Dylan’s new manager, Albert Grossman, got out of the deal with the disinterested publisher simply by repaying the $1,000. Dylan’s new publisher, the savvier M. Witmark & Sons, received 237 songs—many of them future standards worth tens of millions of dollars—in just the first three years.

Unintended consequence The receptionists at Leeds/Duchess never have to field calls asking what “All Along the Watchtower” is really about.

Nothing Exceeds Like Excess
#6 Casablanca rides strong sales straight to the poorhouse
No record label represents the coked-up inanity of the late ’70s like disco-driven behemoth Casablanca. In 1978, the label simultaneously shipped a million copies of four solo albums by each member of their biggest rock act, Kiss, so they could justifiably claim the records “shipped platinum.” The albums sold well—but not that well. Record stores returned hundreds of thousands
of unsold copies, inspiring comedian Robert Klein to joke that Casablanca’s releases “shipped gold and returned platinum.” The label continued to lose millions a year throughout the late ’70s, until part-owner PolyGram Records bought out founder Neil Bogart for $15 million in 1980.

Unintended consequence Hey, man—400,000 extra surfaces to snort drugs from!


Whoa, Mama
#5 The RIAA sues a struggling single mom for digital piracy
n In the court of public opinion, it’s hard to find a more sympathetic defendant than a single mother of two, earning $36,000 a year. So what in the name of common decency was the Recording Industry Association of America thinking when it went after 30-year-old Jammie Thomas from Brainerd, Minnesota? The RIAA accused Thomas of using the P2P service Kazaa to illegally share mp3 files of 24 songs, including Journey’s “Don’t Stop Believin’,” the Goo Goo Dolls’ “Iris” and Destiny’s Child’s “Bills, Bills, Bills.” Thomas pleaded not guilty, blaming the shared files on mistaken identity, but last October a jury disagreed and fined her $222,000. That breaks down to a whopping $9,250 per song—more than six times her annual salary. At press time, Thomas was planning an appeal.

Unintended consequence The nation’s toddlers and fluffy kittens rush to erase their hard drives.

Pay (Somebody Else) To Play
#4 Indie promoters take the major labels to the cleaners
After the payola scandals of the ’50s, the government barred record labels from paying radio stations to play records. The solution: set up middlemen to do the dirty work! “Independent promoters” represented the labels’ interests to radio programmers, creating a massive cash flow of corruption. Even a mid-size hit could cost $700,000 in promo expenses—cash, vacations, drugs and other illicit rewards for mustachioed DJs—and labels ended up paying to get airplay for huge artists the stations would have spun anyway. A lot of coked-up DJs got nice tans, while the labels spent unnecessary millions and covered their balance sheets in bloody red.

Unintended consequence Colombian GDP spikes each time Mariah Carey releases a single.

Detroit At a Discount
#3 Motown sells for a pittance
In 1988 Berry Gordy Jr., reportedly losing millions of dollars on the label he had founded decades earlier, sold Motown and its incomparable back catalogue to MCA and investment company Boston Ventures for $60 million. How bad was that price? The next year, Herb Alpert and Jerry Moss sold their A&M Records to PolyGram for roughly $500 million. In 1990, David Geffen got about $700 million for Geffen Records and in ’92, Richard Branson unloaded Virgin Records to EMI for $960 million. And five years after buying Motown, Boston Ventures cashed out, selling the label to PolyGram for $325 million—a return of more than 500 percent.

Unintended consequence The Motown Atlantic airline, and Berry’s career as a trans-global balloonist, have yet to materialize.

Tomorrow Never Knows
#2 Decca Records A&R exec tells Fab Four, “No, thanks”
Dick Rowe was not the only record-label executive who passed on the Beatles in the early ’60s, but he was the only one who brushed off their manager, Brian Epstein, with the astute prediction that: “Groups with guitars are on their way out.” Epstein begged Rowe to reconsider, so Rowe hopped a train to Liverpool to check out the band live. When he arrived at the Cavern, he found a mob of kids trying to force their way into the club in the pouring rain. Annoyed, he smoked a cigarette, went home and signed Brian Poole and the Tremeloes instead.

Unintended consequence The Monkees

THE BIGGEST RECORD-COMPANY SCREWUP OF ALL TIME
#1 Major labels squash Napster
Shawn Fanning’s file-sharing service attracted tens of millions of users, but instead of trying to find a way to capitalize on it, the Recording Industry Association of America rejected Napster’s billion-dollar settlement offer and sued it out of existence in 2001. Napster’s users didn’t just disappear. They scattered to hundreds of alternative systems—and new technology has stayed three steps ahead of the music business ever since. The labels’ campaign to stop their music from being acquired for free across the Internet has been like trying to cork a hurricane—upward of a billion files are swapped every month on peer-to-peer networks. Since Napster closed, “there’s been no decline in the rate of online piracy,” says Eric Garland of media analysts BigChampagne, who logged users of son-of-Napster peer-to-peer networks more than doubling between 2002 and 2007. And that figure doubles again if you count BitTorrent.

Unintended consequence Your grandmother deciding to trade up from that dial-up connection