Bio: Founder of Sacramento's internationally famous record store, Tower Records. Today, Russ is retired from the record business and lives with his family in Sacramento California.
Q: Russ, let’s start from the early days when you got into the record business.
R: Well, my early days go back to 1941, which was the time of the 78s and the big band era. The music stores of that time were not much; there weren’t very many unique music stores. There were a bunch of maybe tiny ones, and then the music was generally sold in either record departments of department stores or music stores that carried instruments and sheet music and all of that.
The unique dedicated record store was sort of just emerging at that time. Now, of course during the war, they all sort of flattened out and nothing much happened. But after the war, slowly the industry began to get its footing again. Manufacturing of product regained itself and the music itself began to change, I think mainly because the popularity of the big bands in the thirties and forties went away because the big bands, when they came back from the war, couldn’t travel anymore and therefore they were more or less disbanded. As a result, music sort of went into some evolutionary changes, along with the mixture of populations and what have you that took place in the world.
But by the time the fifties came around the emergence of one-stops and rag toppers and things like that began to happen, as well as the strengthening of the labels. That was the early times. I think the development of the new technologies in 1949 and ‘50 made a huge change too, which was the introduction of the 45 and the LP, which changed the way people listened to music in their homes, improved the quality of what they listened to. All those things, I think were very, very important. It just evolved from there.
Q: Up until that time musicians would have to limit their solo time to fit the space on an LP.
R: Well, they were limited, that’s true; with the 78’s they were limited to the three minutes or so on a record and, although there were a few twelve-inch ones that went out to four or four and a half minutes. Then you had classical music, too, which were much longer—longer selections and all.
Q: What excited you and made you want to enter the record business?
R: I think it was just a job. It was a kind of a fun job, actually. My dad was in the drugstore business, and we just put a record department in the drugstore, which by itself was pretty rare. I mean, the whole idea of the music companies—music companies in the early days, the big labels, always set themselves up on a pedestal a little bit and looked over, or down their noses at their customers.
So the idea that a drugstore would have the impertinence, if you will, to go into the record business was a little bit shocking to them, but they went along with the gag. And as far as I was concerned it was just a place to work. And we had fun. We really had fun. That’s one of the sad parts about the overall industry today, it’s not any fun. During the wonderful times from the sixties to the nineties it was great; everybody was having a ball.
Q: It seemed walking into Tower Records that everyone from the manager to the employees loved what they were doing; everyone loved music.
R: Well, there was a reason that was true in Tower—it may have been true in others as well—but it was that we had an attitude about local management and local response—we wanted our people that worked for us to be—it was their store, not my store, not a corporation store, that sort of thing.
One of the things that kind of destroyed us was the drift towards centralization of management. When the management of the stores—what store did you hang out at, by the way?
Q: Being in San Diego it was the Sports Arena and La Jolla stores.
R: Well, the Sports Arena store was an incredible store. It was real small by comparison, but my God, what they did in there was just a kick, and it was because of the people that ran it down there. All the stores were pretty much like that—I think that was one of the more special ones because they compressed all of that stuff into that 7,000 feet, and just piled it vertically and horizontally and every other way. It wasn’t us up here in Sacramento that were telling them exactly what to do. The employees are what made it great.
Q: As you know, there were employees that were there for years and years and years.
R: Yeah there were, a lot of them. The original managers down there were pretty special too, I remember.
Q: A special part of Tower Records was its extensive catalogue of past and present music, allowing people to become educated music listeners.
R: Well, we tried to do that, that’s for sure, and of course that was a combined effort. Our attitude was to carry as much as possible, and the companies helped us a lot in making sure we had it. That store particularly opened in 1972, I think, and during the seventies and eighties and nineties there was a lot less albums available, surprisingly—you’d think it would be just the opposite—than what’s been thrown out in the marketplace and produced for the marketplace in the last, say, five years, or four years where there’s been an avalanche of new materials being recorded. That’s from the ease of making records, the ease of being able to pull stuff up and reissuing it and so on. There’s so damn much more out there that it really becomes very difficult to put it all in one place except on a list.
Q: Who can keep up? In the old days someone had to screen and listen to each sample that came in to see if it might be worth putting on the shelf if there was room.
R: No, I don’t think we did that. We, as far as we were concerned would buy practically everything that was released.
You only had to buy one of it for something like that. It wasn’t that difficult. And maybe there were twenty or thirty thousand—well, in those days probably only ten or fifteen thousand new releases a year so it wasn’t that hard to do, actually. We weren’t making judgments, necessarily. In the real early days we actually did, and the salesmen would come around and they’d play the records for us on turntables before we’d buy them. But I think through the bulk of the period that Tower was in business, why, more or less, especially towards the earlier days, the big stores would try to carry as broad a spectrum of the releases as possible. But again, as time went on and as more and more companies went into business that became more difficult.
Q: Was the transition from LPs to CDs a powerful moment in the music business for you?
R: Well, it caused one thing that happened that was very interesting - people replaced their collections. People who had small collections of the kind of music they liked not only bought the new releases that were released on CD by the artists and music they liked but they also replaced a lot of the music that they had already on LP. The CD certainly was a much better product than that which preceded it. Unfortunately, like the music industry, the record industry made a terrible mistake. At the time they reduced that profit margin for retailers under the idea that it cost more to produce the CD, and as a result they kind of changed the financial dynamics of the industry. When CDs first came out they were expensive to produce, but as time went on the cost of producing and manufacturing the CD went down, and instead of those savings being passed along to the dealers and the public, prices were raised. And through a long period of time, prices went up to a level which became a little bit untenable. At the same time they took one of the most important elements of the retail music business out of the market. They took away singles, which was a terrible mistake on the part of the record industry. And therefore, if you listened to a new song or a new record of some sort and liked it, you couldn’t buy it unless you bought the whole CD that was ridiculously expensive for the one song that you wanted. So you chase an awful lot of people out of the buying market, and ultimately it would chase a lot of people from the buying market into the free downloading market, which really changed everything around.
Q: Do you feel that record buyers would have stayed loyal if the record companies had given them reasonable options across the spectrum to acquire the music they wanted, instead of just albums?
R: Yes, I think that they would have stayed loyal to the degree they continued to collect more records, but at the same time, how do you compete with free? And then the technology itself and the way people, young people especially, listened to music changed, so it was a case of you’re listening to music on your computer, or later on listening to music on your iPod made a pretty dramatic difference as well. So there’s all these different forces happening pretty much all at once, but even so, I look back at the major record labels and big businesses that ran these labels as sowing seeds of their own destruction because of a kind of selfishness on their part.
Q: Was it a case of the money was too good causing the industry not to go after the companies that offered free mp3s?
R: Like anybody in the entertainment business, they think only in terms of what can be achieved quickly. And so they’re not saying what we’re doing here is going to maybe destroy our market by destroying these young people growing up and keep buying it; we’re going to get more money out of them now and make more money. And the truth of it is they did. They did; they made a lot of money.
But I think they were wrong at least in not appreciating the fact that you’re in a young people’s business, and if you don’t keep engaging young people, if you want to sell something—if you want to give it away that’s another matter - but if you want to sell something you’ve got to engage young people to get them into buying your product as opposed to chasing them somewhere, putting them somewhere else.
Q: How did people in the industry feel about mp3.com and Napster.com?
R: Oh, they hated it.
Q: So why didn’t they shut them down in court?
R: They couldn’t. They tried, they really did, and well they ultimately did shut Napster down. But it didn’t matter because by the time they shut Napster down they had Kazaa, and they had Limewire and they had a million other ones. So once the genie was out of the bottle, as they say, there wasn’t much you could do.
I don’t think the industry or the manufacturing people understand it all that much, that’s for sure. They were confused, and maybe none of us did, who knows. I don’t think anybody had good solutions to things. But you have to keep focusing on marketing to young people, because old people just grow up and die. After all, even though older people are a huge part percentage-wise of the record-buying market today, if you don’t keep bringing the young people into the market you don’t have a future, and that’s what happened.
Not that young people don’t still like music, although I question a little bit about the quality of music they produce too, so, but that’s something....that’s out of my field.
Q: Russ, many people in their thirties and forties and are saying that the quality of music now is getting worse and worse.
R: Well, I would say the same thing. The only thing is, at 84, I’m not sure I’m a good judge. You see, I don’t trust my own judgment. How can I make a statement and say, “I think music—the music sucks, and I hate rap and I don’t like hip hop and the quality of the beat is pretty shitty.” If I say all those things, well, I’m speaking from an 85-year-old voice, you know? And who the hell cares about that, you know?
Q: Anyone who is a serious music collector recognizes that record companies have let the quality control factors. It’s not about the music so much anymore, is it?
R: Well, don’t forget, the record business is really a people business. A lot of the talent has been fired out of the record companies. They became too expensive, perhaps, for the record companies; they had to go off on their own. The great A&R people sort of disappeared. Another element of the whole sales force is an effort to make something happen and expose things; all of the marketing departments of these companies are all gone. There’s nobody there. They’re trying to make money off of a business but all of this experienced talent is gone, and the new talent that they’re developing, or the new talent that’s being developed by itself, is just not getting it yet. A part of the problem is you don’t have a marketplace to sell to.
You’ve got a virtual marketplace through the Internet, which isn’t entirely useless, but you don’t have a retail marketplace to sell to; there’s no customers out there. There’s no place to test anything.
The other issue that’s interesting is that the real success of music in the sixties and seventies were the social implications of the music, the importance of the music as reactive to what was going on in the world, socially, economically and politically. So it was something to talk about. The messages of a great many of the songs were important to people. I’m not sure that the messages— possibly I’m being crude here, or cruel, perhaps—self-analysis type of messages in songs is not as nice as the messages that came before, huh?
Q: People used to identify their values through the music they listened to. It seems that we’ve now come to a place where music is regarded as disposable.
R: I agree with you, I really do. One of the things that surprised me - because I’ve been in it sixty years or so, you see a lot of things – is trends develop and trends go away. Usually they don’t last all that long. And rock ‘n roll lasted a long time; music lasts forever—all those things are good. But somehow or another a popularity trend sort of came and went: the doo-wop in the fifties and into the disco of that period and so on.
I was surprised when rap and hip hop (although hip hop’s certainly an important dance type of music and a lot of fun) but I was surprised that whole style of music hung on for so long. It’s beginning to kind of wane a little bit now, but this is twenty years of it. It’s surprised me a little bit that that happened. Not that—you know, it certainly touched people. You can’t ever say that that musical movement didn’t touch an awful lot of people and they really heard it clearly, but I’m surprised that it hung on and something new hasn’t caught on in the last few years.
The Beatles said it in the early fifties in a very lyrical way and you don’t have to say it again. Maybe that’s what it’s about; I don’t know.
Q: Well, there is no rule book for how a band is formed, how a singer writes a song. Music is kind of a Wild West in that there aren’t a lot of rules except the rules of each genre. It’s incredible that the things that were invented and done happened.
R: That’s right. There was a great fusion, don’t forget, that started in the thirties and forties and fifties: the fusion of the regional music in America, which came from the fusion of European music, or northern European music. There’s a fusion from all music coming from all over the world, but you had that fusion of country music, and R&B, more or less black music, which created rock ‘n roll, rockabilly rock ‘n roll, and then the message that you could hang on top of those rhythms – and it had dance appeal.
Also, there were fountainheads of music all through our development period. We could go to places like Nashville and New Orleans and Atlanta and New York and Philadelphia and Chicago and San Francisco and Portland, Seattle—big cities. They’d become centers which then spread to the rest of the country. I’m not sure there’s any place in the country right now where there is a fountain of music. Now, maybe I’m just not seeing it, but I don’t see it all of a sudden coming out of some place. That was exciting, that all the musical streams that happened in America did start from some place, you know? They really did. Even Memphis, Portland, and Seattle where you had grunge, Nirvana and what have you.
Certainly what was happening in rock in the early sixties in San Francisco, and Los Angeles later on, were miracles. But where is it coming from now? I don’t know myself; it may be there.
Q: It’s very difficult to say. I don’t know if even musicians could answer that question.
R: Yeah… when new creativity is happening, they may not know it’s happening. It’s just happening by itself, in isolation. Perhaps. I don’t know, I just made that up. I don’t know where that came from.
Q: Well, like you said, Russ, the whole factor of human talent, and you can’t invent something…you can’t try to recreate the past: the Beatles only happened once.
R: That’s right.
Q: Movements are natural occurrences, with the collective effort of a lot of people. So if people want to try to manufacture things now, they may find that it’s pretty sterile; they’re not creating anything new.
R: In the past small record labels would find musical movements in cities and then go out and sell it. But there was a place to sell it to! There was a record industry, there were chains of record stores. There was a small circle around major cities - they would start there. Then it would spread by way of being exploited by radio. It wouldn’t spread from just one radio program in one city - it would be a bunch of programmers programming in every city in the country. If it’s good it catches on. If it isn’t good, it doesn’t catch on. It’s that simple. Then it would sell, people would copy the style, and a movement would be going for awhile, and then the movement would peter out and something new would come in. Where did we lose that? I don’t know.
We lost it, I guess, when the Internet came in. Well, two things happened: one, the Internet and Napster that enabled free downloading; and the other, the withdrawal of single songs from the retail marketplace. Those two things, I think, created this huge change.
Q: I don’t think anyone could have predicted that iTunes would be the largest music retailer in the country. Who could have foreseen such a thing?
R: Now, I guess nobody. That people were able to get their musical fix with such low quality always surprised me. Another funny thing that happened was some of the companies, Sony especially, developed higher quality products, higher quality CDs, but the market dropped it. They had the technology to make a better product but they dropped it. Strangely enough, the one place they do try at least go with newer musical technologies is in Japan. That’s probably the only place in the world that they do.
Q: Right. Most of the mp3s people were downloading were 120 kilobytes sample rate, which is terrible.
R: Terrible. Yeah, and the irony that people can get anything out of listening to anything, particularly an instrumental thing of composition, or a classical or jazz composition, out of earphones poked in your ear is beyond me.
Q: The basic message that musicians are sending is: if you want good music, pay for it, because everything to make a high fidelity recording with good music takes resources; there’s no way we can say it otherwise.
R: Oh, I think you’re right. I believe in the fact that, obviously, that people should pay for music if they want to get better quality, technically as well as musically. However, when you get in between, you get people who begin to get a little greedy about how much you should pay for it.
That’s not so hot. And it’s not just the greedy record companies who are at fault; in many cases it’s some of the greedy artists—not all of them, but some of them, where they keep pushing that price level up to a point where it isn’t worth it.
And it chases people to go get it free, or find some other way of doing it. So there’s all these forces that come together that are unintended. I guess you’re entitled to make as much money on it as you possibly can, but there is a point where it gets beyond the tail, so to speak, and that happens in live performance concert tickets; that happens in the cost of CDs, which I think were too high; and it happens in a lot of ways. There’s a balance, though. People should pay for it, and there should be a striving for more quality, including the equipment that you listen to it on in your house… the live sound.
I mean, music itself will never go away. Predicting the future is difficult because if we’re going to have anything left of the physical collectible music, somebody has got to come up with a product that’s inexpensive and appeals to young people to want to collect. Unfortunately, the trends of collecting are going the wrong way, both in the music business and in the book business. In other words, people who buy a Kindle machine then don’t have to buy books anymore. If that gets as big as the iPod business, that practically destroys the bookstores in the country.
Which may not a good thing necessarily. I think what we have to have is both. We really need the technology that allows us to access music online inexpensively. We need the distribution of music free over the radio without having to pay the awful price of bad programming and too much advertising. There should be limits. Then a product has to come along, be it something different or something better than we have now, that people, young people, especially, want to collect.
If that happens, then we’ve got an industry that will begin to grow again. If that doesn’t happen, I don’t see where the growth is going to come from. There has to be a collectible in there that people can afford. I can’t predict the future, but the only thing I think that is absolutely constant is there will be a constant production and desire to make music. Good or bad, they’ll make it, that’s for sure, because it is part of our lives and we don’t get along very well without it.
Q: That’s right. If you were to say to someone, “Well, you can continue on but you can’t listen to music anymore,” It would be-
R: Terrible. I mean, music is a very integral part of our lives and always has been. And more dissemination of music from all over the world is a good thing. We still have an industry; it isn’t dead entirely. We’re still selling records, but you don’t have a product that kids want. That’s the issue.
Q: It just seems the conditioning, which was pretty well in place about going to the record store, looking for new music, and exploring—not just looking for new music but exploring different kinds of music—was a very good model.
R: Interestingly enough, I wonder, except for maybe a handful of used, small used record stores in San Diego, what the hell is there? They’re all tiny, and all of them are used, every single one. I bet you there isn’t a single....except for maybe an FYE store in a mall someplace, and they’re terrible.
There’s just nothing there. All the chains are gone; all the—certainly what Tower stood for is gone, which is a shame. The idea that there isn’t a Tower store or any major classical and jazz music store in New York City - which is the real cultural center of America - is terrible.
Q: In the process of becoming an educated listener, you expand from one genre to another genre; you begin to learn the history of that music; it becomes a life-long process and certainly enriches your life. But that process can only begin with exposure, with education, and it’s very difficult to start from scratch, on Amazon, for example, because you have to have pre-knowledge of what you’re looking for to start that search process. When you walk into a record store, everything is laid out in front of you and you can explore.
R: Well, there’s another reason, too; it’s a physical reason, that you can’t see on a computer screen the amount of things that you can see all at once if you’re standing in front of a record rack. You can see four or five hundred titles, believe it or not, within three feet of you, even though some of that vision is unconscious, and you see it very quickly, that you can’t do on a computer screen. It’s impossible to do.
Q: The seventies going into the eighties and the nineties were great times for Tower. When did you see a change happening in the business and what was causing it; were you someone that saw some of this coming early on?
R: Yeah, well I saw the dangers that were coming. Unfortunately, by that time we were kind of out of control in our own financial world. We made a lot of dumb mistakes, borrowed too much money and expanded all over the world. Luckily, some of it’s still alive in the world; that’s nice.
So, I couldn’t do much about it. I could see what was happening pretty well, but there wasn’t much we could do about it.
Q: When did you officially leave the company that you founded, Tower?
R: I didn’t. I was there ‘til the bitter end. I was there until the day it closed, but because of the financial aspect of it we...I no longer had any control. I was just an employee, and an employee they wouldn’t listen to, which was even dumber on their part.
Q: Apparently a judge that made the ruling between two bidding companies, and one wanted to liquidate Tower and the other would have kept it open. Is that an accurate statement of what it came down to?
R: It is, sort of. What happened was, when the new owners, which became the bondholders...their decision was to bankrupt the company because they couldn’t pay the bond interest anymore, or whatever. So when the company went into bankruptcy you have to find what they call a stocking horse bidder, and the only stocking horse bidder was a liquidator, if it could come up with enough money, because the demand for the money in order to do any of this stuff was from the bank; the bank was going to get all the money, which you can’t fault them for. I mean, it was their money, so they were going to get the first choice on all the money, and everybody else got second choice, and the bank got paid off a hundred percent. So the bank was calling the shots, in a sense. It happened to be CIP Bank, by the way, a bunch of disgusting people. Be that as it may, when it went to an auction, there were only two bidders because of the really bad job that the investment banker had done; they couldn’t find another bidder for the company, at that last time (there was a previous year somebody found somebody, but it fell apart).
Anyhow, the Houlihan Lokey was the company in Los Angeles, the investment banker who had done a really bad job of finding anybody to buy the company, so the only people they found was a liquidator, and then Trans World, which is the operator of FYE. It went to auction, and they said, “Well, we can get more for it if we break it up, we sell parts of it.” The website as being part of it, the name as being part of it, the various components being parts of it…we’ll get more for the bank, ultimately, and the creditors. However, there was a kind of a tacit decision made that if there were a difference of 500 thousand dollars, and the lower bidder might have been the company that would keep the company going, that would be Trans World, why, they would get it, and that’s exactly what happened; there was a difference. But then they all went to court and they all changed their minds and said, “No, we want the higher amount,” and you can go, “Too bad.” The only sad part about it, had Trans World gotten it, which would in theory kept the company going, they would have stripped it all out and closed half of it and changed the operating and everything else, because at the end of the day they ended up getting four locations... yeah, they got Nashville, Philadelphia, and two others (I’m not sure where they are). They actually took some of the store. But we all knew that while they were a better of two evils, both of them were pretty evil as to outcomes.
It was kind of ridiculous. Even though the bank did get paid off, it was kind of ridiculous to liquidate the company the way that they did. It didn’t have to be...it’s a shame, actually. It’s too bad. Somebody could have come in; even the record industry should have stepped in and said, “Hey, look, there’s a need for high-quality retail shops out there; let’s keep this thing going ‘til we can find an owner.” But none of that happened, so it collapsed; so that’s the end of that.
Q: What was the industry’s reaction when, in fact, Tower went into liquidation?
R: They were not happy; they were very sad. Then again, all these people have changed now; there are very few of them around, if any. But the people running the big companies and the people within the industry were very distraught and saddened. The American company, with video and records together, in 1999 was doing over 600 million dollars. So we were a big component of what was out there.
Q: Many classical and jazz labels and independent labels recieved much of their sales, 50%, from Tower.
R: Well, I’m not sure we’re that high, but certainly it was a big percentage because we were willing to carry it, and feature it, and nobody else was...certainly not Sam Goody, the largest chain at the time, and certainly not the big boxes that began to get into it.
Q: Did you hear from musicians calling you personally after hearing this big news?
R: Yeah, I was not happy. Yeah, I heard from a lot of people; I really did. I’m not sure a lot of people just called me up or anything like that. A few did. But I mean, every time I’d run into somebody I’d get comments about it. I really didn’t even realize how important it was, because it was just fun for us, we just did it. I didn’t realize how important it was to everybody’s lives. It was part of a lot of people’s lives, because music was so important to their lives, and we were the purveyors of a lot of different kinds of music. And we were all having a good time.
The industry didn’t like it. And of course, we were symbolic, really. As these stores disappeared, everybody complained about the overall industry sales going down. Well, if you don’t have stores to sell it, it’s bound to go down.
You’ve got to have doors out there, and there were a lot more doors out there to buy stuff and to make it available than there are today. What’s happening today is that the—because it’s all money, and because music from the big boxes was principally a loss leader product (although they sold a lot) where they just cut the price on a few hits to drive traffic in their stores . And as time goes on, when they make less money on music, they lose interest. And that’s what’s happened, really.
Best Buy is the best example of that. They don’t carry anything close to what they started carrying when they first went into it.
Q: Even Starbucks, of all places, which jumped into the music area, has pulled back.
R: Well, Starbucks, he was crazy. Shultz, he thought he was going to take over the whole damned industry. He did get lucky. [Laughs] He got lucky in it a couple of times, but they should never have been in the music business.
Q: What do you think about what Apple and, but particularly Steve Jobs, has done coming into the field?
R: Well, he took over. He certainly wrestled all the music companies to the ground, that’s for sure; they hate him. [Laughs] But he took over and he changed things around, that’s for sure. He became king of the hill. Whether it’s good or bad, I don’t know; but see, the proof is in the pudding. Right now, the overall downloading, the growth of downloading, is flattened out. I’m kind of looking forward to seeing what the first week or so of January is going to show us. In past years it would always jump at Christmastime and then stay on a plateau for the rest of the year, but the plateau, the levels between the plateaus are getting lower and lower. I mean, it only went up from, say, nineteen million a week to twenty million a week, or something like that. The growth really slowed down. And the overall add up of all the downloading, both albums and singles, doesn’t make up for anything close to the amount of drop that the physical did.
So, what do I think of Apple? You know, a pox on him, you know. It’d be unfair, because the product, the overall product, iPod and iPhone and all, are great products, you have to admit. But he did lock the thing up for everybody else, that’s for sure, by making that exclusivity sort of thing, where the only—it wasn’t that easy to download an iTune to any other device except the iPhone. He’s looking out for Apple, and not for the industry or anybody else. He’s looking out for his competition.
Q: Well, interesting comment on that point: Apple turned around and profited tremendously from the sales of their iPods and iTunes, which is all music-backed profit for the company, but they don’t give anything towards music education. They’re a non-giving company.
R: Yeah, that’s a good point, and they really ought to. But there really isn’t a hell of a lot of profit in the selling of music on iTunes; I don’t think they’re making a ton of money there. They’re making their profit on the product, on the hardware product. On the iTunes itself, when you think about it, there’s not much in it, even though there’s a fair amount of volume that they control. They’re paying sixty-eight to seventy cents for every song. They probably only pay seven dollars for an album. The three dollar part, that’s a lot of profit, but on a per song basis what has to be done is not a lot - the computer’s doing it. You have to pay a transaction charge for the money and it’s relatively expensive just to keep the website running.
Q: Then you consider the fact most of the sold mp3s are medium quality at best.
R: Yeah, that’s right, but I’m not sure that the listener cares. We always thought if we could convince people to buy the records and download them themselves, they’d get the download free, in a sense, and you still had your backup; you could still play the CD on a quality player if you cared about it that way. But again, the big thing that made the whole Apple system successful was the availability of songs - singles, in other words.
When the industry took away singles, from the physical side of it (in other words, you couldn’t buy them at all, no matter what, at any price), and then made the song available for ninety-nine cents, and then didn’t come up with any sort of competitive physical version of the same thing, they strangled themselves. They threw the baby out with the bath water, they really did.
Q: Has there been any other example of an industry that kind of, really shot itself in the foot and created its own dismantling, that we can think of?
R: I don’t know of any industry. Because usually industries - successful industries and companies - listen to their customers.
The record industry decided in their own selfish ways that they weren’t going to listen, that they knew better, that they knew what they wanted to do and their customer was—no matter what the customer wanted, they weren’t going to get it. And that’s a kind of a fundamental mistake, somehow. I don’t know of any. I’m sure there were, though, along the way. There had to be. The automobile industry probably didn’t listen to their customers for a long, long time—the American automobile industry.
And so, they did it themselves, they said, “We know better than you do, you buy it the way we make it.” That sort of thing. I would suspect that there’re probably a lot of other industries that have done it; we’re just not consciously aware of it.
Q: So now it’s four, or three conglomerates that own the majority of record labels.
R: You have the Warner and Sony, BMG, and Universal, but there’s an awful lot of labels under each one of those banners, and then you’ve got EMI, which is in a state of financial…disgust, I guess, is the only way I can put it; they’re really f****d up.
I mean, my guess is EMI’s going to be the property of Citibank, and Citibank isn’t going to want to own it, so they’re going to try to sell it to somebody, and the only conceivable buyer out there (and, of course, it’s very controversial) would be Warners. So, maybe way down the line, which they’ve wanted all along anyhow, was a merger there to make even a bigger company. But that isn’t a way—since the bigger companies are making themselves smaller, and less interested in the production and selling of music, and you don’t have any customers to sell it to anyhow, what’s the difference? But you do have the responsibility for a huge catalogue of music, which is in the hands of EMI and Warners and Sony and everybody else. The reality of the way the record business operates today is that a big part of it is independent labels and independent individuals who make good or bad stuff, and it’s pretty much distributed by the majors anyhow.
In other words, you have Universal that has Fontana and all the other labels that they distribute, and you have BMG that has Red, and you have Sony. So most of the independent stuff is distributed now by the large company. They sold off. It was Bronfman, this guy Bronfman [Edgar Jr], actually is the leader of it. The son of the Seagram’s family. Warners and EMI wanted to merge a long time ago, and then they weren’t allowed to by monopoly, controllers - it never happened. In order for it to happen, Guy Hands’ private equity firm in England called Terra Firma bought EMI from what was left of the EMI company, but they overpaid for it: they bought it at the height of the market. They overpaid terribly; they paid four billion dollars for it.
And then they decided they could run it, and they had no experience, and so they ran it right into the ground in a hurry. And so now they’re in deep trouble, because they’re not making money, and they’re suing their bank, and their bank is suing them, and all that stuff. Whatever shakes out of it is my guess (and it’s purely a guess because I’m not any part of it), is that the bank will end up owning it and the bank will want to get rid of it.
Whether they will find a buyer, I can’t absolutely predict, but that’s what I think might happen. And then, one of the things I think that EMI has tried to do when they bought it. It’s an English company, and they’re trying to run it—they run the world from England, which doesn’t work very well in America. All the companies are worldwide, but they’ve got to kind of be managed locally or they don’t work very well.
Q: The founder of Terra Firma, Guy Hands, who bought EMI before they were reposessed knew nothing about the record business.
R: Right. The problem is you get companies that get taken over by idiots. That’s what happened at Tower as a matter of fact, the same damn thing. The bond holders put this idiot, Allen Rodriguez is his name, in charge of the company, God knows why, and of course he had no experience, no knowledge, no concept, even, how it should run, and therefore he destroyed it. That seems to be a major problem in all kinds of industries all over the place: the banks take over; the banks put in what they think is good management, but the management doesn’t know a damn thing about the industry or the company they’re trying to run; and they think they do, but they don’t, but they haven’t got the background; and as a result, why, they fail.
Q: If you enter an industry that you know very little about, why would you put people in place that are completely ignorant to run the show?
R: Damned if I know, but it happens all the time, doesn’t it?And then companies fail. Once in a great while, somebody will have an affinity for things; they just seem to be good at it. I can name a couple of guys in the music business through the years that became immensely successful, yet they started out being attorneys; they were lawyers. Clive Davis, for one. And, maybe their hobby was music; who knows? But you’ve got to be good at what you doing if you’re going to run a company, you better be good at the product that that company is trying to sell, and like it. Believe it or not, there was a guy that got in charge of MCA Records at the time (which was an offshoot of Decca Records, one of the great original companies), that got to be maybe a chief—more or less chief executive of this company, and he made a statement, a classic statement, that said: “I never collected records as a kid and I can’t imagine why anybody would buy one.” But imagine...that he was boss. He didn’t last long, I’m happy to say.
Every business, particularly a sensitive sort of entertainment business, has to have the people who run it have got to love it. They can’t run it according to business, necessarily, business school principles. I don’t care what you’re making, or building, or servicing, or whatever. You’ve got to really understand the product that you’re dealing in, in order to really do it right.
Q: Russ, could you share some of the great memories; you mentioned that you had a lot of fun years, and all through, up until the late nineties. What are some great memories that stand out for you?
R: You realize that when I’m talking about all the fun we used to have there’s a lot of fog involved there.
Well, we had fun because, I think, we had more fun because it was a community of people who liked each other. And they were dedicated to fun, and they had a lot of money at the same time. There was a lot of money being made, and there was a lot of money being spent. So we, in that sense, we enjoyed it. We all liked each other; it wasn’t adversarial, particularly.
The people who....the suppliers, and the people making the music, everybody liked each other. And that part of it, I’m not sure that exists today.
Q: What you describe is an atmosphere of work and an experience that a lot of people would like to have now.
R: Well, I’ll tell you one thing I learned, and it becomes evident that I was right all along, and that is that if something is going to function well, it has to be the product of a great many of people that make it work.
And they don’t necessarily make it work as a team, but they make it work because they individually want it to work. They want their own jobs to work; they want their own area of responsibility to work. And if they’re allowed to do that, to let their own—to be creative and to be responsible within their own sphere of influence (whether it’s a clerk in a record store, or an A&R guy, or a sales guy, or promotion guy, or a manager of a record store, whatever—the shipping clerk, who knows), everybody, if they’re allowed to do their job and not interfered with, and not try to be run by the great computer in the sky, they all get along better and it works, and they progress.
Q: If you could go back in time, what would you have done differently at Tower?
R: Well, one major lesson that I learned is that I would never have borrowed as much money as I borrowed.
Having borrowed as much money and gotten ourselves into such debt—and I have an idea this is also one of the major problems in the country today, is the amount of borrowing that’s going on, the amount—the idea is that you’ve built up such debt and then there comes a time when you can’t pay it back quickly enough. And that was a major mistake; I’d never make that mistake again if I could help it.
Q: What do you think the industry could have done in the nineties to have a better climate in the industry today?
R: Well, I think they should have been a little more careful of the way they were continually raising prices; I think they should have contained prices. And of course they should have—I keep coming back to this business of taking singles out of the market—I think was a major, major mistake. Some people, if they’re being honest, would agree with me on that. Who knows, I mean, everything evolves, and sometimes you can’t control the evolution of things, but they should have probably reacted a little more intelligently to the onset of the Internet.
They didn’t really approach it very sensibly. But part of that was the reason that they could never talk to each other. They could secretly talk to each other but they could never agree to do anything together because of the limitations of the anti-trust laws and all.
See, where I think they made a mistake in the way they reacted to the Internet; I think they made a mistake on the withdrawal of singles; I think they made a mistake in raising prices; I think they made a mistake in letting retail slip away from them…the whole thing got out of control. I mean, we weren’t the only chain of record stores that went bankrupt. There were others, and one of the great chains when they were flourishing was a chain called Camelot Records.
They had about 300 stores or something like that. They sold out; the guy that owned it sold out for a large amount of money (and we’d have to look back and say he’s the smartest guy ever in the record business because he walked away with 300 million bucks), but the company that bought them was a company that was buying retail companies, and of course, going through this process of putting down—they paid 300 million dollars—they put down forty or fifty million dollars and borrowed the rest.
Then when they started to operate it they didn’t know how to operate it, and it began to lose money, and the debt holders wanted their money so they bankrupt the company. And that happened time and time again, where these companies got bought out by financial interests, financial investing companies, and then borrowed a huge amount of money, which is just a predecessor to everything that’s gone on in the real estate business today which has caused our present economic problems. But this was going on in business, and certainly in the music business, where companies got bought out for large amounts of money, with borrowed money, and fell into difficulties as a result of it and went out of business. I’m not sure what you do about that; that’s the way it works.
Q: It’s going to take some intelligent people who care about music to building the next foundation of the industry.
R: Well, but go back to something more fundamental than that, though.
The real core of the whole thing is really music itself. And musicians and artists and songwriters and all the people that contribute to that part of it don’t really care about the business part of it, and it isn’t their function to care about the business part of it. All of their function is to create great music, great songs, and great messages.
And then, somehow or another, somebody’s got to get them out so people can hear them. And when it’s good, people will react back with it. Then maybe, somebody will come along and invent something that people want, and that’s cheap enough for people to want. But there’s got to be music and it always returns back to the idea that good music really is worthwhile.