Bertelsmann Buys J Records, Combines with RCA

By | November 19, 2002 at 12:00 AM

Veteran record executive Clive Davis, whose ouster from Bertelsmann AG’s Arista caused an uproar two years ago, returned to the fold on Tuesday by selling his half of J Records to the company and taking the helm of a combined label group.

As Bertelsmann’s music group, BMG, focuses on cutting costs during a prolonged industry downturn, the group said on Tuesday it would buy the 50 percent of Davis’ J Records it did not already own for undisclosed terms and combine it with its legendary RCA Records, home to stars like Christina Aguilera.

Davis – pushed out in a management struggle as head of Arista, the label he founded 25 years ago – will return as chairman of the newly formed RCA Music Group.

Some industry sources pegged the deal at $20 million.

The deal marks the third joint venture BMG – with the smallest global market share of the five big record companies – has absorbed or exited in the past few years, after acquiring LaFace Records and selling its stake in BadBoy Records.

BMG is also expected to complete its acquisition of the remaining 80 percent of Jive-Zomba Records in coming months.

Bob Jamieson, chairman and chief executive of the existing RCA Music Group, will leave his post and is in talks with BMG about a future role with the company.

J Records was formed as a joint venture between Davis and BMG about two years ago, after he was forced out of Arista.

Bertelsmann committed about $150 million over five years to the startup, home to stars like Alicia Keys, Rod Stewart and Luther Vandross.

While J Records got off to a running start with hits by Keys, the label’s success slowed recently. Despite Davis’ reputation for lavish spending, executives on Tuesday brushed aside speculation the label had overrun its budget and told Reuters that BMG had not even come near to spending the $150 million it earmarked for the label.


Davis, credited with discovering artists like Bruce Springsteen and Janis Joplin and driving the comeback of Carlos Santana, said in a statement he was “happy to be working with BMG’s management, which has created a very promising culture for entrepreneurs.”

“We are thrilled to bring Clive back to BMG and to have him lead what we consider a powerhouse label at RCA Music Group. His genius at finding new artists and his proven track record will help lead the RCA name to new levels of creative performance,” said Rolf Schmidt-Holtz, BMG chairman and CEO.

Charles Goldstuck, who was president and chief operating officer of J Records, has been named president and chief operating officer of the new RCA Music Group.

“It’s fair to say that where J stands now in its life cycle, we’re pretty satisfied,” Goldstuck said, but added there were strategic and creative advantages in combining both labels.

Officials declined to say if any jobs would be eliminated. Both labels will continue to operate in separate buildings and under their respective names.

Several of the executives who orchestrated Davis’ departure are no longer with the company. Thomas Middelhoff was forced to resign in July as chief executive of Bertelsmann, the German-based media group.

During his tenure, he pushed the music company to improve its margins, but his efforts were overshadowed by management turmoil, including Davis’ departure.

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