When former Arista Records president Clive Davis finally unveils his long-awaited new label this summer, don't look for Whitney Houston, Carlos Santana, Kenny G. or any other Davis-signed Arista act to come along for the ride.
Despite rampant press speculation, and guitarist Santana's three-month-old emotional plea (Santana claimed he would follow Davis "whereever he goes"), Arista's stable of multi-platinum stars -- like so many other artists faced with the choice of following a beloved record exec to a new label -- are staying put.
Observers shouldn't be surprised. Pressed to name a single major act in the past decade that had exercised a so-called "key man clause" and opted out of a contract because a trusted label chief had hit the road, several managers, industry lawyers and record company executives polled could think of just one: the Foo Fighters.
When Capitol Records president Gary Gersh (the former Geffen A&R whiz known for his soft touch among artists) was fired in 1998, Dave Grohl's post-Nirvana project exercised its key man clause and went free agent, eventually signing with RCA Records. Sources say the band landed a big cash advance and a sweetened royalty rate.
One act in 10 years. Perhaps it's time to finally bury the myth. So much for the image of a grateful artist attaching himself to a guru's hip and blindly following to fresh pastures. "It's an urban legend," says Jim Guerinot, manager of No Doubt and Offspring, and president of Time Bomb Records. "It's part of this romanticized version of the business," says one major label exec.
Adds another platinum act manager: "It's this big press hype of loyalty and friendship and deep relationships. Fuck that. Ultimately, it's about 'What have you done for me lately?'"
On the surface, the key man concept makes a lot of sense. Artists who make their labels enough money deserve an insurance policy on their contracts that says if their favorite boss leaves, the artist is free to go, too. (The music business didn't invent the feel-good provision; its dealings are just more public.) It's considered the ultimate in contract prestige. "You're talking the Garth Brookses of the world," says manager Ron Stone, who runs Gold Mountain Management, home to Tracy Chapman and Ziggy Marley. "They're very hard to get. The major record companies will not do it as a matter of business because the executive turnover rate is too great; the life expectancy of a record company president is shorter than a professional baseball player, like two or three years."
Today, manager Alan Kovac, president of Left Bank Management, which represents the Bee Gees, Lucy Pearl and others, wonders if there are any remaining executives whom artists would want to align themselves with. "Who really matters at the label? If I were Shania Twain, I'd want a key man clause with [producer and songwriter] Mutt Lange. He's a key man." (For the record, Twain has a better deal: Lange is her husband.)
In the past, certain label execs weren't above flaunting key man clauses as a way to boost their own worth, even if the clauses never existed. The most famous case revolved around Walter Yetnikoff, who ran the then-CBS Records (today Sony Music) as his own kingdom. Battling with CBS's new buttoned-down owner Laurence Tisch (the "evil dwarf" as Yetnikoff dubbed him) in the '80s, the record exec made sure Tisch knew that if he was squeezed out, Bruce Springsteen, Michael Jackson and Barbra Streisand would march with him. Tisch reportedly had a CBS lawyer look into the contracts; even though the attorney reported back that key man clauses weren't allowed at CBS, Tisch played it safe. (When Sony let Yetnikoff go in '90, not a single artist balked.)
Still, there have been some effective examples. Back when record companies were run by their founders, long-term personal relationships were cultivated with artists. Ahmet Ertegun did it at Atlantic; Jerry Moss, at A&M; Mo Ostin, at Reprise and later Warner Bros.; Chris Blackwell was essentially Island; and key man clauses cemented their family approach.
Meanwhile, it is smaller labels that make the best use of such clauses today. "We have key man clauses in a lot of contracts," allows Danny Goldberg, founder of indie Artemis Records, and former president of Mercury and Warner Bros. "Artemis is a brand new company and artists want to know they're signing with me, and want assurances that I'll be here."
For the most part though, the music industry has matured into such a big business that most key labels are now part of publicly owned companies that answer to Wall Street. There, quirky clauses that can jeopardize key company assets and undercut market value are not exactly embraced.
Says artist attorney Ken Hertz, "It is an extreme conflict of interest to allow an artist to tie their obligations to the executive. That said, recording contracts are easily renegotiated, and while these artists may not be able to leave, they use the turmoil as an opportunity to complain."
And that's what key man clauses, real or imagined, have morphed into: negotiating tools against venerable labels that have just lost a high-profile boss. "It's the best way to get a fat new contract," explains one manager. "The clause isn't used in the way it was intended. It's more a ploy to increase royalty points or get a home studio built."
"Whitney Houston has some sort of key man clause," notes Stone. "But whether she exercises it or not, it's a gun to the head of Arista, because she gets to dictate to them." According to industry sources, that's exactly what she's done, winning a handsome new contract.
Meanwhile, Santana, whose blockbuster comeback album, "Supernatural," has been consistently credited to Davis' vision at Arista, didn't have a key man clause in his contract. Why? When Davis signed him just a couple of years ago, the guitar wizard was not highly sought after. Yet with all the public turmoil surrounding Davis' exit from Arista (in a messy spat, parent company BMG eased Davis out to make room for younger executive blood), Santana was in the driver's seat. BMG couldn't afford the public spectacle of Santana battling to get off Arista in order to accompany Davis (i.e. if Santana thinks Davis is such a genius, why did BMG give him the hook?), so the company wound up throwing a ton of money Santana's way.
There are other reasons artists don't leave home to follow their favorite executives. The biggest lure is generally catalog -- those old albums that keep selling and selling and selling. "Catalog can constitute 25 to 50 percent of an artists annual income," notes Stone. But if an act jumps ship, he no longer has a say in how those previous records are marketed or reissued. Labels play off that too, offering to boost the royalty rate on those old records, and even bank on consistent future sales to hand out big advances.
Like the man said, "It's all about the Benjamins."
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