How Universal Music Group's New Top-Level Troika Brings Peace (For Now)

1:30 PM PST 04/07/2014 by Shirley Halperin, Billboard, Ed Christman, Billboard
Todd Williamson/Invision/AP

Island Def Jam "unbundled" to create three separate labels in Island, Def Jam and Motown.

Island Def Jam Motown is no more. Instead, three free-standing fiefdoms will curry market share favor in a friendly firefight.

Universal Music Group’s April 1 announcement that it was splitting Island Def Jam and Motown into three standalone labels was met by cheers as insiders hailed UMG chairman Lucian Grainge’s decision to empower the imprints as individual brands and promote several company veterans.

In an internal memo to staff, Grainge outlined “the challenge of constantly re-evaluating our organization and ensuring that we maintain the proper balance between cooperation and competition among our labels.” Indeed, by naming IDJ veteran Steve Bartels ceo of Def Jam (home to Kanye West and Rihanna), David Massey president of Island (Bon Jovi, Justin Bieber) and Ethiopia Habtemariam president of Motown (in addition to her duties as head of urban at Universal Music Publishing Group), the music company with the largest market share -- 38.8 percent in combined album and track sales in the first quarter of 2014, according to Nielsen SoundScan -- provides ammo for a friendly fight, with each unit angling for the biggest slice of the pie.

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Industry observers postulate that the democratic split, which also sees veteran music exec Barry Weiss step down from his role as chairman and ceo of East Coast Labels, is meant to assuage the three executives, all of whom were gunning for a bigger role or a loftier title within UMG, by providing each with a fiefdom of his or her own.

With this move, “everybody gets what they want,” says a source. “Bartels gets to be the big cheese, Massey, who’s very sharp, gets more bona fide sources of A&R and promotion and Ethiopia gets the title she deserves and answers Capitol’s need for an urban department, while [Capitol Music Group chairman] Steve Barnett gets the most talented African-American woman in the business.”

In addition to adding more personalities to the mix, the restructuring also realigns the market share race. Sources say that Island’s sales will be counted under the Republic Records umbrella; while Motown will contribute to Capitol’s total tally. “Nobody works for free,” adds the source, “there has to be something in it” for the label taking on the extra responsibilities and pressures.

As it is, IDJ's 3.7 percent in market share will be split up, with Def Jam Recordings taking its 1.69 percent along and Island and Mercury's 2 percent share going to Republic, making it the biggest label group in the company with nearly 8 percent in total combined U.S. album and track sales; and the No. 1 label in the U.S. industry in combined current album and current track market share, with 10.2 percent as of March 30.

STORY: Music Executive Barry Weiss Steps Down as Island Def Jam Motown Reorganizes

But even with all these plans outlined, plenty of questions remain, like why now? As is not atypical among giant, publicly traded corporations, efficiency is cited as the main factor. “Island Def Jam was not running effectively,” offers another insider privy to the behind-the-scenes talks. “Nothing was getting done and leadership was sending mixed messages.”

This was especially true of Weiss who, while “very well-liked,” was seen as “an air traffic controller,” adds the source. “Everyone just went around him.” And though Weiss helped restore IDJ to profitability, he couldn't make his mark in A&R. A perceived impotence felt like a far cry from Weiss’ glory days at Jive Records (now RCA), where he spent 20 years overseeing the incredibly profitable recording careers of such blockbuster acts as Britney Spears, Justin Timberlake and Usher.

Still, Grainge is believed to have fondness for Weiss, who joined UMG in 2011 with what some suggest was a four-year contract, and an option for a fifth year, and was especially appreciative of the veteran exec’s calming manner during a key time of transition for UMG -- when the label acquired EMI’s recorded music arm in September 2012 for $1.9 billion.

As for Weiss’ next move, sources say that the company is talking with him about a joint-venture label. “Barry has plenty of options” within the UMG family, insists one colleague. It would appear Grainge agrees, noting in his announcement to staff, “we’d love to keep him in the family.”

Other major outcomes of UMG’s reorganization include allotments for additional staff and several A&R initiatives meant to strengthen the company’s position in attracting new talent. That includes upping IDJ evp Karen Kwak to the newly created position of evp of A&R, U.S. Recorded Music. She’ll now have oversight over all of UMG’s labels. Also promoted to evps and co-heads of A&R are Def Jam’s Dion “No I.D.” Wilson and Kyambo "Hip Hop" Joshua in a structure similar to that of the U.K., where the British Grainge, a CBE, came up in the music industry.

The one major UMG player not mentioned by name in the “Message from Lucian” email? Monte Lipman, chairman of Republic Records, which currently claims the No. 1 label spot thanks to smash hits by Lorde and Ariana Grande and big albums from Drake and Florida Georgia Line from Republic's distributed labels, Cash Money and Republic Nashville.

With the removal of Weiss, it now leaves Monte Lipman standing toe-to-toe with Capital Music Group's chairman/CEO Steve Barnett and Interscope's president and chief operating officer John Janick.  But even before the dissolution of IDJ, Lipman had already emerged as a contender for UMG's most powerful label head (Interscope elder statesman Jimmy Iovine aside) thanks to his label performance over the past two years, according to company insiders.

Some speculate that a larger role is on the horizon for the seasoned executive, who runs Republic with his brother Avery, the label’s COO. “With Monte, it's slow and steady wins the race,” offers a high-ranking observer. “You have to think, in three to four years, what does it look like?”

For now, it’s unclear if label presidents Massey and Habtemariam will report, respectively, to Monte Lipman or to Capitol’s Barnett. Even higher up the ladder is UMG evp/cfo Boyd Muir and evp of U.S. labels Michele Anthony, the latter of whom will also be integral in overseeing what's happening at those labels, even if none of the label presidents are reporting to her.  After all, “she’s Lucian’s eyes and ears,” says a source.

One thing we do know definitively: Grainge is not skimping on his empire’s near future as these new investments come on top of the more than $150 million the company spent in reviving Capitol Music Group, whose iconic Hollywood tower will now house Motown.

The company is still working out how shared services -- finance, business affairs, sales and production, among them -- will be handled and whether the individual labels will go back to having their own sales departments. Where marketing is concerned, one company executive suggests that IDJ may align with Def Jam, while Island could inherit the IDJ staffers who work rock acts. Nevertheless, both of the label groups do have separate A&R centers.

Details have yet to be hammered out as meetings between the new heads are still being scheduled. Says the UMG insider: “Nothing has been set in stone.”

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