Arista Records Faces Tough Sledding in Davis's Absence

One of the most astute bits of folk wisdom is the old saying "If it ain't broke, don't fix it."

Top management at BMG Entertainment might have taken this into consideration last year when their slavish devotion to a company-wide mandatory retirement policy resulted in the ouster of legendary music producer Clive Davis. Arista had been one of the most successful labels in a desperate and volatile business, with top talent like Carlos Santana and Whitney Houston on its roster. Despite his track record and obvious youthful energy, Davis's age—he was nearing 70—caused certain executives at BMG's parent company, Bertelsmann AG, to pressure him into retirement. The German conglomerate expects workers and executives alike to call it a day at 65.

Age discrimination isn't an issue taken lightly in the United States. The move to oust Davis provoked protests both in and out of the music business, including a threat by Santana to leave the label and follow Davis to his next venture. Eventually, Bertelsmann arranged a compromise, installing Davis as president of a new BMG-funded label, J Records. Many of Arista's most promising talent and loyal executives followed their charismatic leader, leaving the label decimated.

The result: "Arista has had a very tough year," according to Robert Jamieson, head of North American operations for BMG. Market researcher SoundScan estimates that Arista's market share has declined to less than 4%, compared to the 6.6% it enjoyed with Davis at the helm. "Murphy's Law was operating in overtime," Jamison told Martin Peers of the Wall Street Journal, referring to a series of inept decisions made at the highest level in the Bertelsmann organization. External reports say Arista lost as much as $50 million last year, one third of BMG's recently-announced $150 million loss for the year.

Former R&B performer and producer Antonio "L.A." Reid was chosen as Davis's replacement, a role he has had difficulty filling. Arista, formerly one of BMG's best-performing units, has had few hits in the wake of the changes, and Reid, like all BMG executives, is under heavy pressure to generate profits. Whether he can do so is a matter of conjecture at this point. Reid claims to have built up a new management team with several promising new acts in development. "It takes a long time to restructure a company, to build a proper staff, to build a proper roster," he explained. "We feel we have made a lot of progress and we are very happy with the team we have right now."

The success of British pop diva Dido's No Angel has been a blessing for Arista this year. Reid hopes to continue the Davis tradition of success in the R&B, rock, and pop genres, with new releases from talent like Usher, 112, OutKast, Dream, Sean "Puffy" Combs, Blu Cantrell, and Reid's own former performing and producing partner, "Babyface" Edmonds. The coming months will prove whether any of them have sufficient magic to spare Reid the Bertelsmann axe.