Geffen Records Inc. Business Information, Profile, and History

History of Geffen Records Inc.

Geffen Records Inc. is the second record label founded by David Geffen, the richest, most successful entertainment mogul of the 20th century and certainly one of the most controversial. A series of business deals highly favorable to Geffen left him with a personal fortune approaching $1 billion. The record labels he founded and has since sold are both identified with a legacy of highly respected popular music, produced by artists ranging from Bob Dylan to Peter Gabriel. David Geffen is also one of three founders of the entertainment enterprise Dreamworks SKG with partners Stephen Spielberg and Jeffrey Katzenberg.

Beginning in Brooklyn

Geffen's mother, Batya Volovskaya, was a Jewish emigré from the Soviet Union. She had fled the World War II pogroms of the Ukraine to Brooklyn, and later learned most of her family had been killed. As a seamstress, she was the breadwinner of the family. She is credited as the source of her younger son's drive and business savvy. Geffen's father, an intellectual dilettante, died when Geffen was 17.

As a child, Geffen dreamed of becoming an entertainment mogul. The life of Louis B. Mayer in particular inspired him. Upon graduating from high school, Geffen promptly departed for Los Angeles. Then, after returning to New York, David Geffen forged UCLA graduation credentials to land a job in the mail room of the William Morris talent agency. His stint as a trainee there indoctrinated him in the pace and the lifestyle of the entertainment business.

Geffen eventually became an agent for the likes of Buffalo Springfield, Peter, Paul and Mary, and Janis Joplin, harbingers of an emerging musical scene. The hippie politics of the 1960s opened the way for folk rock, an infusion of rock and roll with the tradition, artistic aspirations, and populist leanings of newly revived American folk music.

Geffen took folk artist Laura Nyro under his wing, helping restore her career and confidence, and eventually left the Morris agency to become her full-time agent. The deal he engineered with Columbia on her behalf made him a millionaire at age 27.

Geffen returned to California and soon became known as an aggressive advocate for other acts. In 1969 he became a vice-president at Creative Management, the forerunner of ICM. Afterwards Geffen formally switched from the role of agent to manager in forming the Geffen-Roberts Company with Eliot Roberts. Geffen owned three-fourths of the partnership.

Asylum in the 1970s

Geffen founded Asylum Records, bankrolled by Atlantic Records, in 1970. It featured stars such as Joni Mitchell and Linda Ronstadt. Geffen announced Laura Nyro would be the first artist signed to the label, but she in fact surprised him by signing with Columbia Records. California songwriter Jackson Browne, whom Geffen had earlier tried to pitch to Atlantic, was first to record for Asylum.

In both the Geffen-Roberts management company and Asylum Records, Geffen allowed the artists unprecedented creative control. This proved attractive to some of the most-successful performers of the 1970s, including Ronstadt and the rock band the Eagles, who found their start on Asylum.

The Eagles worried about the conflicts of interest of Geffen-Roberts acting as both their manager and record company--essentially, both employee and employer--while at the same time controlling their publishing revenues. After parting company with Geffen, the Eagles achieved a dizzying level of success and eventually recovered their publishing rights through a lawsuit.

In 1972 Geffen sold the company to Warner Communications for $7 million, "the biggest number [he] could think of." He agreed to work for Warner for an additional five years. Asylum and Elektra were combined in 1973, the former taken out of the control of Atlantic Records, also a Warner subsidiary. Geffen was assigned to lead the label. He suggested all three labels be combined with Atlantic head Ahmet Ertegun and himself serving as co-chairmen. But the deal was scuttled by other wary Warner executives. Geffen would have a long relationship with Warner, eventually buying Jack Warner's estate.

Bob Dylan signed with Elektra/Asylum in 1973, where he had his first number one album, Planet Waves. The label failed to satisfy Dylan, however, and he soon returned to Columbia Records. This seemed to wound Geffen and he left to head Warner's film division for a brief, undistinguished time.

Warner Boss Steve Ross dismissed Geffen in 1976. At the same time, Geffen's doctors gave him a diagnosis of bladder cancer, prompting Geffen to leave L.A. and enter semi-retirement. He landed a teaching position at Yale University and became a devotee of Studio 54.

Revitalized in the 1980s

After being informed that he did not in fact have cancer, Geffen returned from his hiatus and persuaded Warner Brothers head Steve Ross to provide the start-up capital ($25 million) for a new label, Geffen Records, in return for a 50 percent share. Although Ross was known for lavishly rewarding his executives, this deal was surprisingly generous. Geffen also reserved overseas distribution rights, which he assigned to Warner archrival CBS Records for $17 million.

However, it was not an auspicious time to re-enter the music business. Industry sales had fallen for the first time since World War II. Favorable results eluded the ambitious start-up. John Lennon's career with Geffen was cut short by murder. Other high profile signings, Donna Summer and Elton John, failed to meet expectations. Geffen did manage to sign other respected artists who performed fairly well: Peter Gabriel, formerly with Genesis, and Joni Mitchell.

In 1982 Geffen wooed eccentric and unpredictable folk rock legend Neil Young, offering him the creative freedom he craved in the face of a more lucrative offer from RCA Records. However, by November of the next year Geffen sued Young for $3 million for breach of agreement, for not making "commercial" records. This suit and a $21 million countersuit were both eventually dropped.

Geffen fared better in his theatrical productions, such as the film that made Tom Cruise a star, Risky Business, as well as the play Cats. In 1984 he stepped out of his A&R role at Geffen Records. Perhaps due to his string of failures at picking successful talent, Geffen delegated this duty to others. John David Kaldoner, Gary Gersh, and John Zutaut each picked big winners for the company, such as Aerosmith, Nirvana, and Guns 'n Roses.

In 1984, upon renewing Geffen's contract with Warner, Ross conceded full ownership of the still floundering company to Geffen in exchange for Warner's right to distribute the company's records for five more years. Geffen Records lost money in 1984, 1985, and 1986. However in 1987, Geffen's music, film, and theater projects brought in $88 million in revenues and a profit of $19 million. Geffen Records alone garnered more $225 million in sales in 1989.

The Alternative 1990s

David Geffen reported that he wanted to catch the last end of the wave of consolidation in the music industry fueled by the decade's merger-mad atmosphere. After shopping Geffen Records around to Thorn EMI, which offered $750 million, and Time Warner, he sold it to MCA in March 1990 for stock worth $540 million. This stock appreciated to $710 million after MCA itself was acquired by Matsushita Electric Industrial Co. in November. The deal made Geffen a billionaire, or nearly one, by most estimates.

Geffen Records grossed $225 million in 1990, releasing 33 titles. In 1990, Geffen started its DGC imprint for new talent. The next year, Geffen Records changed distributors. It dropped WEA for Uni Distribution nationally and BMG abroad. David Geffen credited the change with improving the label's fortunes in the mid-1990s.

David Geffen stayed busy outside the music business, producing a film adaptation of Interview with the Vampire, based on Anne Rice's bestselling novel. In November 1992, while addressing the AIDS Project Los Angeles benefit, Geffen casually announced his homosexuality, attracting a new level of press attention both positive and negative.

The year 1994 began with three Geffen acts--Nirvana, Beck, and Counting Crows--occupying the top three slots of the Modern Rock charts. These three groups, and Nirvana in particular, helped usher in a whole new, darker "alternative" sound that would dominate rock sales for several years. At the time, Geffen reckoned that it cost $300,000 to record a debut album&mdash≡uivalent to Asylum's entire budget in the 1970s.

The label prided itself on customizing its promotional approach to the particular needs of its various acts. Geffen used Minneapolis-based REP Co. to distribute certain recordings into smaller stores than those served by Uni. Geffen also struck up alliances with other labels such as Almo Sounds, recently created by Herb Alpert and Jerry Moss.

Geffen Records had a banner year in 1994, when its revenues were $505 million. Overseas sales accounted for $230 million. It released 33 titles in the United States. Twenty-eight of these reached the Billboard 200 chart in 1994, compared to only 18 in 1993. Twenty-four of the U.S. titles were also released overseas.

As Geffen's contract with Matsushita neared expiration, Geffen, Stephen Spielberg, and former Disney executive Jeffrey Katzenberg announced a new $3 billion entertainment venture, to be named DreamWorks SKG, in late 1994. After a slow start, the group finally proved itself with such acclaimed films as Amistad and Saving Private Ryan and would succeed in other media as well.

Geffen remained with MCA/Matsushita until April 1995, whereupon president and COO Ed Rosenblatt, responsible for operations since the label's founding, took over as chairman and CEO. After about a year Rosenblatt named Bill Bennett his successor as president.

Geffen Records would market SKG Records and Dreamworks records, as well as Almo. Another new label, Outpost Records, aligned with Geffen in 1995. In 1996 Geffen announced its Budget Gold Line, rereleases of older titles designed to appeal to such department store chains as Wal-Mart and Kmart; two years later it launched Delinquent Records specifically to release soundtrack albums.

A New World Order

Seagram Ltd. bought 80 percent of MCA from Matsushita for $5.7 billion in 1995, resulting in a new ultimate parent for Geffen Records. Both MCA and Geffen operated under the Universal Music Group. The labels soon announced a restructuring, with Geffen losing 20 employees.

Seagram's $10 billion acquisition of Dutch music giant Polygram N.V. in December 1998 hinted at massive layoffs to come for Geffen and its sister labels in the Universal Music Group and within Polygram. Twenty percent of the two companies' 15,500 employees were expected to lose their jobs. Seagram planned to consolidate U.S. operations of the combined company, unofficially dubbed "Unigram" at the time, into East Coast and West Coast groups, shedding 3,000 jobs in the process. Geffen Records was grouped with West Coast labels Interscope Records and A&M Records. Rosenblatt and other top executives were expected to depart. The label's talent roster was also reduced. After the merger the Universal Music Group stood as the largest music conglomerate in the world, controlling a third of the market with projected annual sales of $5 billion.