Zomba Records Ltd. Business Information, Profile, and History

Company Perspectives:

Zomba is the largest independent music operation in the world. Jive Records is the flagship label of the Zomba Label Group, which also encompasses the record labels Jive Electro, Silvertone, Verity, Volcano and Reunion, among others. Zomba is home to some of the biggest contemporary pop, R&B, gospel, hip-hop and rock artists in the world, including teen phenomenons Backstreet Boys, Britney Spears, NSYNC and Aaron Carter; Grammy Award winner R. Kelly; hip-hop icon Mystikal; and Volcano's multi-platinum rockers Tool and 311. Jive Records, in particular, is known for consistently breaking the hottest acts. In fact, two-thirds of Jive's artist roster has achieved Gold or Platinum status--a claim no other record label can make.

History of Zomba Records Ltd.

Zomba Records Ltd. is the largest independent record company in the world. The firm operates a number of labels, including Jive (one-fifth owned by Bertelsmann Music Group), Volcano, Mojo, Reunion, Essential, and Verity, and also has music publishing, record distribution, equipment rental, recording studio, and artists management interests. Although Zomba's releases range in style from rap to gospel to hard rock, the company is best known for glossy pop hitmakers Britney Spears, the Backstreet Boys, and 'N Sync, all of whom record for Jive. The firm is owned by cofounder Clive Calder, who serves as its chairman and CEO.

Beginnings

Zomba traces its roots to 1971, when aspiring South African musicians Clive Calder and Ralph Simon formed a new business to release records, promote concerts, and publish music. Calder, from Johannesburg, had never attended college, but had played bass guitar in local bands and later worked as a talent scout for music industry giant EMI. Simon, a keyboard player, had become interested in rock music during a year of study in Connecticut, where he attended concerts at New York's famed Fillmore East. In 1975 the pair moved their base of operations to London, where they renamed the company Zomba, after the capital of the African country of Malawi. According to legend, the members of a tribe there had superior hearing. In 1978 the company expanded its reach to New York City, and three years later Zomba formed a new record label, Jive (named after the African style of music called "township jive"). During this period the company had its first hits with singer Billy Ocean, hard rockers Def Leppard, and early rappers Whodini. Zomba's publishing business also was doing well, signing deals with British punk/new wave stars Elvis Costello and The Boomtown Rats. Another key relationship was developed with South African record producer Robert "Mutt" Lange, who had worked on hits like AC/DC's "Highway to Hell." The input of Calder, who often chose his acts' songs and worked with them in the recording studio, was an important factor in the company's success as well.

During the 1980s the rap-oriented Jive label had hits with acts that included A Tribe Called Quest and DJ Jazzy Jeff and the Fresh Prince, while divisions Zomba Management and Zomba Music Publishing became powerful forces in their respective areas. The decade also saw the firm establish recording studios in the United Kingdom and the United States. A new label, Silvertone, was formed in 1988, and it soon had hits with Stone Roses, a British group, though the act was later lost to Geffen Records. Silvertone focused on rock and blues, working with only a handful of artists including Buddy Guy and John Lee Hooker. At the end of the decade Jive found further success with contemporary rhythm and blues performers Boogie Down Productions and Kool Moe Dee.

Partner's Buyout in 1990

In 1990 Zomba caught the attention of EMI, which made a serious effort to purchase the company. It was ultimately turned down, and Calder subsequently bought out his partner's stake in the firm. Simon later moved to San Francisco to start his own label, Scintilla. By this time Zomba's recordings were being distributed by Bertelsmann Music Group (BMG), which in late 1991 bought a 25 percent stake in the company's music publishing business, expanding on a previous investment. The deal gave BMG sub-publishing of Zomba-owned compositions in some foreign markets, as well as part-ownership of Zomba's production arm and its background music catalog. The company's publishing organization was having success at this time with songs featured on Michael Jackson and Bryan Adams releases.

In 1992 Zomba acquired controlling interest in a classical music label, Conifer Records Ltd. Founded in 1977, Conifer was the United Kingdom's largest distributor of classical and spoken word recordings and the owner of six record labels. In 1993 Zomba set up a new film and television music division called Zomba Music Services, which would offer prerecorded music and publishing services for soundtracks. In addition to the company's roster of hit artists and songs, the new operation owned the rights to an extensive collection of specialty recordings that ranged from marching bands to Hungarian folk music. Zomba units Coombe and First Com already offered similar services, but the new division was expected to take a more aggressive approach toward marketing. The year 1993 also saw formation of a joint venture, Portman Music, with Portman Entertainment.

In February 1994 Zomba bought Brentwood Music Group, Inc., a Christian music company. The 14-year-old Brentwood had seven record labels and a publishing division, and distributed its products to more than 40 countries. Jive Records had signed two black gospel acts the year before, and Zomba later launched a gospel label, Verity. At the end of the year the company branched out yet again, this time with a move into Latin music. An estimated $5 million was spent to acquire the catalogs of Grever International S.A. of Mexico City and Golden Sands Enterprises, Inc. of San Antonio, Texas, both of which were owned by the Grever family.

In early 1996 Zomba sold the Conifer operation to BMG, citing the need to focus on its Jive and Silvertone labels, and bought Hilton Sound, a British audio equipment rental company. Hilton was folded into Zomba's previously established Dreamhire, which had offices in the United Kingdom, New York, and Nashville, making the company the world leader in this field. In the summer Zomba bought three-fourths of Windsong Exports and Pinnacle Distribution, a London-based company owned by Steve Mason. The deal also included 80 percent of Rough Trade Records Germany and all of Rough Trade's mid-European operations, which were later renamed Zomba Distribution. Windsong operated several record labels, and Pinnacle was the largest independent music distributor in the United Kingdom. The year also saw Zomba sign a long-term deal with Britain's Channel Four to supply it with soundtrack music.

BMG Buying into Jive in Late 1996

In the fall of 1996 Zomba sold 20 percent of its record division to BMG Entertainment for an estimated $25 million, further cementing ties between the two companies. The division included Jive and Silvertone as well as the Christian music companies, the Dreamhire equipment rental business, film music operation Segue Music, and the Battery recording studios. The same month Zomba acquired another Christian record label, Reunion Records, from Arista Records Nashville, a BMG company. Reunion was one of the top "contemporary Christian" imprints, with artists such as Michael W. Smith and Kathy Troccolli.

In November Zomba signed an agreement with Virgin Music Group Worldwide for the latter to handle distribution in Latin America, Africa, and some European countries. The move completed a reconfiguration of the company's distribution system that had been underway since a contract with BMG International had lapsed. Zomba now dealt with 13 different companies to distribute its product around the world. The privately held Zomba, which offered little public information about its finances, had estimated revenues of $500 million by this time.

Zomba's Christian music arm expanded again in 1997 with the purchase of Benson Music Group from Music Entertainment Group. The Christian operations were subsequently consolidated into the new Nashville-based Provident Music Group, with Provident Music Distribution created to service the Christian specialty-store market. Distribution to mainstream retailers of Zomba's Christian releases, which included crossover hitmakers Jars of Clay, was handled by BMG. The company also opened a new office and studio in Sweden as part of a joint venture with the Cheiron company during the year.

In the spring of 1998 Zomba bought Volcano, a two-year-old rock record label that had Tool, Matthew Sweet, and the O'Jays under contract. A short time later the company sold half of the label to Q Prime, Inc. Zomba was now enjoying its biggest hits ever with teen-oriented vocal group the Backstreet Boys and former Mouseketeer Britney Spears. Their label, Jive, also had success with harder-edged releases by slain rap star Tupac Shakur.

Further Expansion and Bigger Hits in 1999

In 1999 Zomba continued its expansion, creating the London-based International Record Group and forming new companies in Australia, France, Singapore, and Canada. In July Zomba's Jive label had three of the top five albums in the United States: the Backstreet Boys' Millennium (number one), Britney Spears's Baby One More Time (number four), and Too $hort's Can't Stay Away (number five), making it the top label in the country.

The fall of 1999 saw controversy erupt when Jive Records signed 'N Sync, a teen-pop "boy band" in the mold of the Backstreet Boys. BMG had released 'N Sync's debut album the previous year and claimed to still have them under contract. BMG and Trans Continental Records, the management company that had groomed both bands, subsequently sued 'N Sync and Jive for $150 million for breach of contract. Soon afterward the Backstreet Boys began to hint that they wanted to leave Jive over concerns that the label could not adequately promote two similar groups. The dispute was settled in December when BMG backed down from its claim to 'N Sync, in exchange for a one-year extension of its profitable contract to distribute Zomba products in the United States.

The year 2000 saw Zomba continue to open regional companies, forming new units in Italy, Spain, Norway, Denmark, New Zealand, Korea, and Japan, making it clear that the music of Britney Spears and the Backstreet Boys was popular internationally, not just with 14-year-old American girls. The firm was now the leading independent record company in the world, fast approaching major label status.

In May 2001 Zomba created Ingenuity Entertainment to offer management services to film music composers, editors, and supervisors. International expansion continued during the year with the creation of Zomba companies in Brazil and Portugal. In August, after lengthy negotiations, Zomba again renewed its distribution deal with BMG for the United States and Canada, and entered into a strategic alliance with BMG's Australian division. The company also settled a copyright-infringement suit against MP3.com, an online music download service, and subsequently signed a contract with the firm to offer Zomba recordings online for a fee. The settlement terms were not disclosed, but were estimated to be in the millions. Zomba, which already had licensed tracks to MusicNet, later agreed to sell its recordings online through Pressplay as well.

In September the Jive label acquired Mojo Records, home to swing band Cherry Poppin' Daddies and ska-punk group Goldfinger. Later in the year Zomba put its British Battery studios and Dreamhire pro sound rental operations up for sale, due to a lack of recording activity in that country. At the start of November the firm's marketing units were put into high gear when Jive released the latest albums by the Backstreet Boys and Britney Spears. Zomba was now considered the most profitable record company in the world, earning an estimated $300 million in profits on $1 billion in sales. Despite its success, CEO Clive Calder remained little known outside of the industry, refusing interviews and shunning the celebrity status in which industry rivals David Geffen and Clive Davis reveled.

In slightly more than 25 years in existence, Zomba Records Ltd. had grown into the largest independent music company in the world, and also the most profitable. Although it was best known as the home of Britney Spears, the Backstreet Boys, and 'N Sync, the diverse company also found success with its publishing, recording, equipment rental, and soundtrack music businesses. Zomba's growing network of regional marketing companies was bringing it ever closer to the rarefied atmosphere of major label status.

Principal Divisions: Zomba Group of Companies; Zomba Recording Corp.; Zomba Label Group; Zomba Music Publishing; Zomba International Records Group; Provident Music Group; Ingenuity Entertainment.

Principal Competitors: Sony Music Entertainment, Inc.; Universal Music Group; BMG Entertainment; Warner Music Group; EMI Group plc.

Chronology

• Key Dates:
• 1971: Clive Calder and Ralph Simon form a music company in South Africa.
• 1975: Calder and Simon relocate to London and name the business Zomba.
• 1978: The company expands to New York City.
• 1981: Jive Records is formed.
• 1988: Zomba starts the Silvertone label.
• 1990: The sale of the company to EMI falls through; Calder buys out Simon's stake.
• 1994: The company moves into Christian and Latin music through acquisitions.
• 1996: The company purchases a controlling interest in British Windsong/Pinnacle; one-fifth of the record division is sold to Bertelsmann Music Group.
• 1998: The company acquires Volcano Records.
• 1999: Backstreet Boys and Britney Spears top the charts for Jive; 'N Sync signs with the company.
• 2001: Jive buys the Mojo label; new Backstreet Boys, Spears albums are released.