CHAPTER 13

The Rhino Way to Negotiate

This chapter is expanded from a lecture I gave to Rhino employees.

The lawyer we used in the early days, who preferred to go by his last name, Ashley, was a smart guy who we would have been more inclined to continue with except for his habit of being very late in delivering agreements. He negotiated our contract for our second single, by Roky Erickson, with Erickson’s manager who was also a lawyer. Even though the fee was reasonable at $200, it greatly cut into our profit as we only sold 2,000 records. Within a year or so I took over our negotiating and contract drafting, even though I had never been to law school or had any legal training. My negotiating skills surfaced when I was a preteen trading baseball cards in a time in which the cards weren’t that valuable. I wasn’t cutthroat, but learned that in some instances I could get two cards in return for one of mine. For the next ten years I negotiated most of our contracts.

The main points of a record contract are easy to grasp: royalties and advance. A royalty is how much is paid for every record sold. An advance is an amount that is paid up front in order to secure the deal and as a guard against getting stiffed by the licensee failing to pay royalties on records sold. A nonrecoupable advance meant that, in the event the record generated less in royalties than was paid in the advance, the licensor would not have to pay back the difference.

Record companies try to pay as little as possible. A common royalty in the 1960s, for even a successful group like the Monkees, was 5 percent. A decade later a good royalty was considered to be 10 percent. It was a percent calculated on the list price of the record. For example, if an album had a list price of $5.98 and an artist was to receive 10 percent, then that would calculate to 59.8¢ a record. Record companies further diminished that amount in their contracts. From the days when records were pressed on shellac, which was prone to break, contracts contained a breakage percentage of usually 10 percent. Breakage didn’t occur when the medium changed to plastic (vinyl), so the companies kept the discount and merely called it a packaging deduction. Standard language was for the company to pay on 85 percent of the records sold. This was because, on occasion, as an inducement for a store to initially stock a record, or take a higher quantity than was desired, the label would give them one-in-ten, meaning that they would get one free for every nine they bought. (Because a store could return unsold product, certain heavily promoted albums in the 1980s were referred to as shipping gold and returning platinum, meaning that more copies were returned than sold.) This free-goods deduction was part of the calculation even if the label didn’t give any away as a sales inducement. Using the above example, that would diminish the royalty further, to 46¢ per album.

In the early days of CDs, manufacturing was more expensive than vinyl albums so labels hiked their packaging deduction to 25 percent. Within a few years manufacturing costs were more in line with that of vinyl albums, but record companies still kept it at 25 percent. In the digital age, labels extracted more from the artist as a means of paying for their technological costs and for the legal fees expended in chasing illegal downloaders. Here’s the breakdown from a typical download where the consumer pays 99¢ for the song on the iTunes store: 29¢ retained by Apple; 9¢ for the publisher; 46¢ for the label; 15¢ for the artist and producer. When labels license to a third party, like Rhino, the income is usually split 50 percent for the artist, 50 percent for the label. A label licensing to a company such as Apple for iTunes refuses to look at the income being subject to a similar split with the artist, but payable as an artist royalty, as though the label shipped physical product to Apple as it did to a store, generating much less income for the artist.

When I made our first license with a major label, with Warner Special Products (WSP) for a Best of Allan Sherman, we were given a standard agreement of a 10 percent royalty and an advance on sales of 5,000 copies. Unlike the major labels who had royalty deductions in all of their artist and producer agreements, WSP granted us no deductions as a licensee. As I soon found out, the agreement I signed with Warner Special Products, the licensor for all the Warner owned labels—Warner, Elektra, and Atlantic—was standard in the industry.

Among the initial best of albums I wanted to release was one that collected the recordings of the Standells, the 1960s rock group best known for “Dirty Water.” The group had recorded for Tower Records, an imprint of Capitol Records. In February 1979, I wrote our request to Capitol’s licensing person, Renny Martini, but he never responded. When I finally reached him on the phone, he replied that he couldn’t license it to us. When I asked him why, he wouldn’t give me any explanation. A couple of years later I found out the reason. Capitol didn’t own the masters. Why couldn’t he have just told me?

Richard and I wanted to reissue the recordings of Richie Valens and the Bobby Fuller Four, both produced by Bob Keane, but had difficulty tracking down the owner. I had been told to get in touch with PolyGram. Their response was, “We can’t license this to you at this time.” Because of Martini’s subterfuge, this time I pushed for a reason. PolyGram’s response was, “We don’t know whether we own it or not.” Paul Politi helped me get in touch with Bob, who was then selling home alarm systems. I made the deal with him, and it was a fruitful and long lasting relationship. The 1987 movie on Valens’ life, La Bamba—for which Los Lobos did the music—pushed our best of album past 200,000.

Because the established labels had a difficulty in relating to rock ’n’ roll in the fifties and sixties, most of the rock hits were on independent labels. These companies were often fly-by-night, or otherwise unsophisticated. What could we do if there was a track that we really wanted, but we couldn’t determine the owner? Ken Sasano, a great guy, music fan, and product manager at Columbia Records, told me that when Columbia couldn’t find the royalty recipient, it merely put the money into an escrow account in order to pay them when they were found. I learned later that Sasano probably meant that’s what Columbia did on masters they owned. He didn’t express that limitation to me, so I thought it was applicable for any record. As a result, we got into trouble.

In October 1982 we released a pumpkin-shaped, orange-colored record for Halloween that really played on turntables. It sold well enough to merit a follow-up the next year, a bat-shaped record. We felt it wouldn’t be complete unless we included Bobby “Boris” Pickett’s “Monster Mash.”

Bobby had been an aspiring actor living in Hollywood who moonlighted with a vocal group called the Cordials. During their rendition of the Diamonds’ “Little Darlin’,” he hammed it up with an impersonation of horror movie star Boris Karloff. The crowd loved it, and eventually Bobby agreed to make a record with that voice. It was a take-off of Dee Dee Sharp’s “Mashed Potato Time,” and although expectations were low, “Monster Mash” provided the perfect musical accompaniment to the exploding monster craze sweeping the nation in the early 1960s. It topped the charts in 1962 and made the top ten again nine years later.

The record was originally on Garpax Records—see what I mean about small labels—but its most recent appearance was on Parrot, a PolyGram imprint. I requested to license the record from PolyGram, but the licensing person claimed they didn’t own it. We tracked down Pickett and offered to license it from him, but he insisted PolyGram owned it. We called the label, told them what Pickett had told us, and they again claimed they didn’t own it. Once again we checked with Pickett, who repeated his understanding. I figured we would use the track and put the royalties in an escrow account, as Sasano suggested.

On September 30, 1983, a day before the record was to be pressed, I was in New York having an initial meeting with PolyGram’s head of licensing, Artie Fischer. When I told him what we were doing with “Monster Mash,” he blew up and told me that PolyGram owned the song. I was nearly speechless and managed, “But you told us twice you didn’t own it.” Fischer said it didn’t matter. When I offered to license it legitimately, he replied that it would take at least six weeks to get approval. I called Richard from his office and had him halt production.

We were down, but not out. Richard quickly rebounded, rounded up Bobby Pickett, and recorded a version that was virtually indistinguishable from the original. In order to afford the session, Richard agreed to write and produce a commercial for the Sears Halloween Shop, featuring Pickett. Despite the fact that Richard had never previously produced a commercial, it won second place in the national musical category of New York’s Big Apple Radio Awards.

The aggravation we experienced, Richard’s herculean effort, and the visually stunning bat-shaped record only mustered 5,000 copies sold. It was, unfortunately, not unusual for our inspired efforts to yield so little commercially. But there was a silver lining. Richard’s version was so good, I licensed the song to a few TV shows, such as The Simpsons, and compilation albums, thus making more money than we anticipated on the song, and karmically depriving PolyGram of licensing fees that they otherwise might have received had they been reasonable.

In October 1967 I was watching Upbeat, a syndicated TV show taped in Cleveland. The Ohio Express performed “Beg Borrow and Steal,” an infectious song with a chorded-rhythmic pattern similar to “Louie Louie” that I immediately liked. The group had a few subsequent hits, their most well-known being “Yummy Yummy Yummy.” They and the 1910 Fruit Gum Company were in the vanguard of a two-year fad of lightweight rock referred to as “bubblegum.” When I compiled two albums of the best from this genre, I experienced difficulty in licensing “Beg Borrow and Steal.” The record had been a hit for the Cameo Parkway label, which Allen Klein’s company bought out of bankruptcy. Even though he hadn’t released any of the Cameo Parkway records in the over ten years since he bought the catalog, Klein wouldn’t license us the track. As it turned out, the same record had been issued a year previously on Attack Records as performed by the Rare Breed. I licensed the record from the producer to complete my package, although I had to list the artist as the Rare Breed.

There weren’t reissue labels like Rhino. What existed in the early eighties were hits packages that were advertised on TV by companies such as K-tel. The strategy was to spend a lot on advertising with the goal of selling hundreds of thousands of albums. In contrast, we were deemed small potatoes by the labels. Because Rhino’s business was selling to retailers, in the early days we could only justify paying an advance based on 5,000 sales. The labels’ contracts were geared towards the mail order companies and contained clauses that didn’t apply to our business. The labels didn’t want to alter their contracts for us, and we were denied deductions for items such as free goods, because they didn’t apply to mail order companies.

We felt we were lucky just to have them return our calls. The major labels didn’t appreciate that we were a new source of business for them. Capitol turned us down, then licensed us a few titles like The Best of the Spencer Davis Group, then cooled on us again. PolyGram Records initially wouldn’t license to us at all. Sometimes CBS Records licensed to us, sometimes not. For the same bat-shaped record, Richard recorded an impressive, sound-a-like version of the theme song from The Blob, as by Little Stevie and the McQueens (actor Steve McQueen starred in the movie) because CBS wouldn’t license us the original version. As a result, we felt we couldn’t be aggressive in negotiating for a fairer contract.

In any negotiation one has to understand their position in relation to that of the other party. When we first approached other labels about licensing their masters, as the recordings were referred to, they weren’t motivated. Never was I approached with the attitude of “Let’s see how much business we can do together.” It was more like they couldn’t be bothered to deal with us. When it came to the other, more established record companies, regardless of how we were feeling, we had to make nice. We were dependent upon them to agree to license us their masters in much the same way the United States is reliant upon oil from the OPEC countries.

Never Before, an album of rarities by the 1960s group the Byrds, provides a good example. Bob Hyde was a record collector friend of Richard’s who headed up Random House’s record mail order division, Murray Hill Records. He was able to license the Byrds’ masters from CBS Special Products. Because we helped him with the package, he agreed—as did CBS’s head of marketing, Paul Smith—that we could issue the album to retail when mail order sales dried up. The album turned out exceptionally well, and sales were so good that Smith reneged, preferring to have CBS release it to retail. What could we do? We weren’t going to complain because that would have affected our ability to license from CBS in the future. Smith threw us a bone by agreeing to license us most of the tracks we needed for a Roy Orbison hits package. CBS had recently obtained ownership of Orbison’s masters from the country label Monument, which had filed for bankruptcy. Karma was in our favor as Orbison racked up sales of 475,000.

In our early days when we signed an artist like Barnes & Barnes, I provided a royalty of one dollar an album. As noted, the language in standard industry agreements often meant that the artist had no idea how much he was making on every record sold. I thought this would take some of the mystery out of the process by making it easy to understand and calculate. Using the Barnes & Barnes example, their 1980 album Voobaha sold 5,384, which meant that they would have received $5,384 in royalties.

Some artists had difficulty with that presentation. They preferred a percentage of list price as in most artist agreements. I thought a fair offer was the same rate that the major labels licensed to us, 10 percent of the list price with no deductions. This worked for a few deals, but then artists didn’t think this sounded as much as their friends who were getting higher percentages from other labels. Of course, those percentages were with deductions. So, I increased percentages and incorporated a packaging deduction, but I avoided paying on less than 100 percent of records sold.

I.R.S. Records (which stood for International Record Syndicate, rather than Internal Revenue Service) started around the same time as Rhino. They were one of the labels that we were in envy of because they were interested in the same cutting edge artists as we were, but because A&M Records funded and distributed them, they were ahead of us in the game. The rapid success of the Police, whom owner Miles Copeland managed and who had signed to A&M, also gave them legitimacy as a label that could break new wave acts.

I was an early fan of Oingo Bongo, having seen them when they played during the summer of 1975 at the Daisy in Beverly Hills. Then named the Mystic Knights of the Oingo Boingo, they styled themselves after a 1930s jungle orchestra. A few years later, with a new lineup of superb musicians who played complex rock arrangements, the name-shortened Oingo Boingo were among my favorite local bands. I kept in touch with the group’s lead singer and composer, Danny Elfman, and licensed “I’m Afraid,” an early track of theirs, for our 1979 local bands compilation album, L.A. In, and even put their picture on the cover. Danny wanted to sign with Rhino, but I could only budget $500 for them to record an EP whereas I.R.S. offered them five times that amount, so they signed with I.R.S.

The Go-Go’s were another band Richard and I wanted to sign, but who went with I.R.S. When English rock journalist John Ingham became their co-manager, he invited us to see them play in April 1980 at the Arena in Culver City. Early on their performances had been ragged, but at this point they had improved greatly. They were leaving the next day for a tour of England. By the time they had returned, Ingham was out, and so was our entre.

I also courted Stan Ridgway and his band Wall of Voodoo. In February 1980 we made an appointment for him to come in and discuss signing the band with Rhino. Days later he called to cancel because he said they had to prepare to play at a post-concert party for Pink Floyd, who were in town performing seven shows at the Sports Arena. I never heard from Stan again. I.R.S. signed Wall of Voodoo to record their first album. I.R.S.’s biggest success came with R.E.M., with whom they had one platinum and four gold records. But most of their artists didn’t sell well, and they folded in 1996.

I’m not saying that Rhino could have done a better job marketing these acts than I.R.S., but we couldn’t compete with them. This falls into being aware of what we could and couldn’t do. We signed new artists with large local followings—like the Pop, and Nu Kats—to record EPs for us. As with these groups, and in other cases, we were thought of as a last resort label. That didn’t mean that we squeezed them to make a bad deal. We wanted to be fair. It was just an awareness that we had leverage, and could use that position to negotiate for our benefit—unlike dealing with the majors where we had no leverage. For example, major labels sign artists to multi-album contracts. That’s because if an artist becomes successful, the label will benefit from healthy sales on subsequent albums. We could have signed our new artists with options for future albums, but we didn’t. I felt that we were offering so little in the way of an advance or recording budget—in order to lower our risk—I couldn’t justify tying up the artist for the future. This backfired on us with one of our few successful new artists.

Danny Perloff, our college rep in the San Diego area, was enthused about a new country rock band named the Beat Farmers. We signed them and gave them a recording budget of $6,000. We broke the act and sold an impressive 50,000 albums. Before we could even mention having them record a follow-up for us, their manager signed them to Curb Records without even giving us a courtesy phone call. If Curb had been able to make the Beat Farmers into a hit act, we would have benefitted with more record sales from new fans wanting to hear their first album, but Curb’s results were modest and we saw no upswing in sales.

We learned our lesson with our next signing, garage rock girl group the Pandoras. Even though we had options for more albums, after the release of their 1986 Bill Inglot-produced Rhino debut, Stop Pretending, they absconded to Elektra Records. I appealed to Peter Philbin, the label’s West Coast head of A&R whom I had befriended when he was at Columbia, but he failed to be honorable. Rather than seek damages in an expensive lawsuit and risk Elektra snubbing our future licensing requests, we acquiesced. Karma railed against the Pandoras; Elektra never released their album.

Quite often when we had off-site company meetings, Richard brought in a motivational speaker. Once he even brought in a fake, standup comedian Robert Aguayo posing as a spiritualist. Richard took notice of Scott Alexander because his Rhino Press had published motivational books such as Rhinoceros Success. At a company meeting we had in Marina del Rey, Alexander told a story of a man who had a bird feeder in his backyard: a bird house with seed, mounted on top of a pole. A squirrel kept getting at the food. The man tried different things, including greasing the pole, but still the squirrel was successful. The point he was making was that the man might spend five to ten minutes a day thinking about how to protect his birdhouse, but the squirrel probably spent most of its waking hours thinking about how to get the food.

Richard and I, and many of our employees were similarly focused. This wasn’t merely a business for us, but a passion. It was important to make the deal, to preserve the music, and to present it with quality so people could benefit from the power of the music. When I was negotiating with a lawyer, I was fortified by a need to make the deal happen. A lawyer would have been a dispassionate agent who was representing his client on the negotiation, as well as other clients with other deals with other companies. I was like the squirrel that was thinking long and hard about how to get the food. I definitely got a sense of this in some negotiations.

Albert Grossman, a high-powered manager who had previously guided Bob Dylan and Janis Joplin, started Bearsville Records in 1970. His label grew to signing over twenty artists, but only two were big sellers, Todd Rundgren and Foghat. The label had been distributed by Warner Brothers Records, but had ceased releasing new product by 1984. Grossman died two years later. As a Todd Rundgren fan, I had been having phone conversations with Bearsville for almost two years before I was able to make a deal to revive their catalogue.

We agreed on an advance of $300,000, which was by far the most we had ever paid anybody. Bearsville’s accountant, Steve Constant, the person I negotiated the main points with, refused to accept the standard 10 percent royalty, claiming that his artists were at a higher rate. He wanted 14 percent, which was much higher than I wanted to pay. I wasn’t privy to Bearsville’s artist’s contracts, their royalty rates, or how Bearsville intended to pay them. I had to accept Constant’s position and work with it.

My goal was to find ways to bring the deal more in line with our comfort zone. While I had intended to pay a 10 percent royalty with no deductions, when he asked for 14 percent, I put in the agreement the deductions on packaging and free goods, which brought it down to a more manageable rate, although still more than 10 percent. I also put in a clause to represent the masters for licensing to third parties: to other labels for compilation albums and to producers of films, TV shows, and commercials. In our agreement, I made the income a fifty-fifty split. Because Constant was primarily concerned with the advance and royalty rate, he gave less thought to our other points. Not only did the licensing income provide another profit area for Rhino—at no additional advance—it also helped us recoup the advance sooner.

Constant was canny, but also disingenuous. Rather than paying artists the “high” royalty rates that he mentioned, Bearsville paid them much lower by splitting the income they received from Rhino. This was legitimate. Bearsville was no longer active as a label with a distribution deal with Warner Brothers. They licensed their masters to us. Most contracts of the time split licensing income fifty-fifty with the artist.

Bearsville also benefitted from outstanding recoupable advances. As an artist becomes successful, he’s able to negotiate for a higher advance and recording budget on subsequent albums. When the artist loses popularity, quite often a label will end up unrecouped, meaning that the label advanced the artist more money than was paid back from royalties earned on more recent releases. This amount stays on the books and is slowly recouped—if at all—from catalogue sales and licensing. Foghat’s best-selling albums were Foghat Live (1977), which sold 2.2 million, and Fool for the City (1975), which sold 1.3 million. Todd’s best-selling album, Something/Anything (1972), sold 735,000. In the early 1980s, at the end of their term, Foghat was down to 37,000 and 15,000 on their last two albums, respectively, and Todd was averaging around 50,000.

Our first product was released in 1987. We did exceptionally well with Bearsville, and I renewed the deal for subsequent three-year periods at the same advance amount. Constant noticed the fifty-fifty split, and in renewing, renegotiated that down to where Rhino received 25 percent. Around the time I left the company, five of our Foghat albums had sold over 100,000 each. Todd Rundgren had four titles that averaged 150,000. I was disappointed that our Best of Foghat, which sold over 400,000, was still shy of gold record status. I would have liked to have given a gold record award to Foghat’s lead singer, Dave Peverett, who died in 2000. He was a nice guy who helped us on some of our blues packages.

Oddly, this mission we were on, and with Rhino being a last-resort sort of label, I didn’t feel intimidated when I negotiated contracts with some of the top lawyers in the business, for example for the Bearsville and unreleased Monkees contracts. If the owners felt they could get more money elsewhere, they wouldn’t have been at Rhino. Part of the process of dealing with these experienced lawyers was their scrutiny of minor points that I thought was unnecessary, such as a clause that diminished the royalty rate for product sold to the armed forces (a very small amount for us), a limit on the time period a licensor could audit, and the jurisdiction in which a suit could be filed, etc. Rather than representing their client’s best interests—and that includes being expedient rather than prolonging a negotiation to add billable hours—some lawyers become combative, aggressively going after points in order to satisfy a personal need to win.

I was under the impression that lawyers had to adhere to ethical standards in the same way that doctors take the Hippocratic Oath. There are guidelines, but nothing as strong. Still, as a professional, one would expect a lawyer to be ethical, but that isn’t always the case. In 1977 Jeff Samuels, the nicest guy in the record business, was signing acts for United Artists Records. He liked a couple of songs I had written and allocated $500 for me to go into the studio to record demos. Before I got the money, I had to sign a one-page agreement prepared by UA’s legal department. It had three clauses, the third of which granted UA the right to publish my songs for the rest of my career. For a measly $500—none of which was going into my pocket—I thought this was outrageous. Jeff told me to cross it out. He explained that it was included so UA could use it as leverage in case they, or any other label, wanted to sign the act in the future. They could, for example, give back the publishing in exchange for a lower royalty percentage or a longer-term contract. So, UA’s lawyers knew they were being unfair, and perhaps, unethical, but they did it anyway to take advantage of naïve artists.

The best thing I can say about Michael Bishop is that he’s a true rock music fan, from when he was a teenager playing in bands on the Sunset Strip in the sixties. On occasion he pitched me ideas for projects. He was making a living as a composer for low-budget movies when he came up with an idea while watching late night TV: a compilation album of original movie music as played by rock bands. I didn’t think the idea would sell, but one listing interested me. Sonic Youth had recorded the soundtrack to a 1987 film, Made in U.S.A. The movie fared poorly at the box office, and the soundtrack had never been released to consumers.

I made a deal with the film’s producer to issue the soundtrack and with Bishop to mix the tapes for release on CD. Sonic Youth didn’t like the film and didn’t want our soundtrack released. Their lawyer was, of course, paid to represent their position. What was missing from this contentious exchange was a respect for the law and Sonic Youth honoring a contract that they had signed. Apparently this lawyer hadn’t heard Abraham Lincoln’s advice: “If you cannot be an honest lawyer, choose some other occupation.” He said that if we released Bishop’s mix, Sonic Youth would badmouth the album and tell their fans not to buy it.

In an attempt to ameliorate the situation, Gary Stewart stepped in and thought it would be best to have the band mix the album—at our expense. This made the soundtrack more costly and delayed its release, by which time Sonic Youth’s popularity had slipped. I preferred Bishop’s mixes. During this period Bishop, understandably, was very upset, and also in need of money. Having problems with his alcohol consumption, my assistant, Julie D’Angelo, and I had to endure numerous abusive phone calls from him. He suggested I buy him out of the project. Even though his mixes weren’t used, I intended to honor our contract whereby he received a producer’s royalty. We agreed on a buyout and were done with him. In his state, he didn’t realize that his behavior had burned his bridges at Rhino on any future projects. A few years later he contacted me to be interviewed for a documentary he was producing, titled Rage: 20 Years of Punk Rock West Coast Style. I felt good that when I last saw him it was on a positive note.

One area we didn’t do particularly well in was soundtracks. Even with the surprise success of Valley Girl, a soundtrack we put together and issued eleven years after the movie was released, which sold 230,000, we probably only approached breaking even. A relatively low budget film, No Holds Barred, was a breakout for wrestling star Hulk Hogan, grossing $16 million at the box office. Everybody had higher hopes for Hogan’s next film, the bigger-budgeted Suburban Commando, including us, as we released the soundtrack album. It flopped, only managing $6 million in film rentals, which meant that too few people saw the film who wanted to buy our soundtrack. A song I wrote and produced was used as the second song over the end credits. A look at the accounting for our album showed a loss. But through the years the publishing income on the song brought the project close to breaking even. It’s an example of an additional income source that helped to hedge the album’s possible losses.

I was thinking long-term. I tried to make negotiations reasonable and congenial. I realized the importance of paying royalties fairly and regularly and being available for any questions an artist or licensor had. Because of my experience interviewing rock musicians in my twenties, I was comfortable interacting with them rather than being intimidated by being in the presence of a star. I made a deal with Howard Kaylan and Mark Volman for a five-song Turtles picture disc in 1978, our first year. We were still releasing product by them in my last year, 2001. I made a deal with producer Bob Keane in 1981 to release Richie Valens and Bobby Fuller Four masters. We were still doing business with him when I left.

The most important factor in preparing for a negotiation is evaluating what something is worth. Small deals were not as crucial. As we built our business and were perceived as being successful, people we negotiated with wanted more money. Selling businesses—or in this case music catalogues—relied on financial guys determining that the accounting made sense and was reliable, and then a standard factor was implemented. For example, if a catalogue—or business—averaged $500,000 in profits a year the previous three years, at a factor of six, the purchase price would be $3 million. If a factor of eight, it would be $4 million.

Richard, with input from our finance and sales departments, usually provided evaluations based on what albums we would release and what licensing income we could expect. He did an excellent job. Other labels didn’t do this. They were so big that any purchased catalogue just got absorbed. They never evaluated whether a deal was good or not. Quite often the person who made the deal would be gone from the company and it wouldn’t be of concern to his replacement. Because we were self-financed in the early days, it was important that we made good deals. If we even made one high-priced deal that bombed, we could very easily go out of business. I estimate that of all the deals we made and of all the albums we released, 75 percent were profitable, 15 percent broke even, and 10 percent resulted in a loss—and rarely a significant one.

We had made a licensing deal with Brunswick Records for masters by Jackie Wilson, the Chi-Lites, and Tyrone Davis. We were interested when the owner expressed a desire to sell the catalogue. Richard excelled at thinking outside of the box and put together a promising plan in order to finance the deal. A better-funded and larger company, like a major label, would want to own all of the rights and wouldn’t even have considered the proposal that Richard conceived. Rhino’s primary interest was to issue best of albums by the more prominent artists and to be able to use individual tracks on our compilation albums. He had deals in principle: with one company to take the foreign territories, one to take the synchronization rights (film/TV/commercials), and another to put out the albums that we felt wouldn’t sell sufficiently for us to release. Ultimately the owner decided not to sell.

Mike Ross, the cofounder of Delicious Vinyl, came to see us about distributing his catalogue. Soon after it formed, the label scored three top ten hits in 1989: “Wild Thing” and “Funky Cold Medina” by Tone Loc, and “Bust a Move” by Young MC. Ross wanted cash to promote new artists. He would have sold his label, but wanted much more money than we felt it was worth. Richard came up with a novel, workable idea. We paid him much less than he wanted, $2 million, but made it a loan collateralized against the catalogue. This way we got the masters to sell and license, and Ross got money to reinvigorate the label. The loan would be paid back from his portion of the earnings from the joint venture. Of course if the loan wasn’t repaid, we would end up with ownership of the masters.

Sometimes Richard would miss the boat. He had been negotiating with Rolling Stone magazine about issuing a box set to commemorate their twenty-fifth anniversary. It’s a deal we should have made, but he was lax in returning publisher Jann Wenner’s phone calls. Wenner became impatient and contracted with Time/Life for a seven-disc box set that proved successful in the marketplace.

One deal Richard made proved to be problematic. In contracts, sometimes a clause states the licensor will have approval of the product at various stages before it comes out. For example, they might have approval of the sound of the mastering, the album graphics, the booklet or liner notes, and sometimes the advertising elements. If I ever faced that clause I made sure I added the phrase, “not to be unreasonably withheld.” Richard made a deal with Phil Spector’s attorney, Martin Machat, to rerelease Spector’s catalogue, including a box set. But he didn’t add the “not to be unreasonably withheld” clause.

Phil Spector wasn’t a singer or an instrumental artist, but a producer-songwriter who forged a unique style. The dense sound of his early 1960s recordings with the Ronettes, the Crystals, and other artists became known as the Wall of Sound. Although the contract was signed in January 1987, the deal stalled and we were only able to release one album that year, 1963’s A Christmas Gift for You. Spector wouldn’t approve anything else. Bill Inglot oversaw the mastering of the discs for the box set. Spector’s long-time engineer, Eddie Levine, thought they sounded great. We had suggestions for the packaging, which Spector would approve, then quickly change his mind. He then wanted the box to look like a bible, complete with gothic lettering. The music he produced was so joyful, I thought that design would be a mistake.

Although Richard had made the deal, throughout all this time he had still not engaged Phil Spector. That was to change on Sunday night, December 13, when Richard met Art Fein at the Music Machine club in West LA to take in a performance by Bo Diddley. Art was a music writer from Chicago who moved to LA in the fall of 1972. He worked for a time at Capitol Records where he befriended John Lennon and Yoko Ono. Subsequently, he rolled his interest into side projects like music supervision, management (the Blasters), and promoting rockabilly at local clubs. Art hosted a music discussion show, Li’l Art’s Poker Party—that had nothing to do with card games—on local access cable. Spector was a fan of the show, and in an odd twist on video dating, chose guests for Art to invite up to his house for social evenings.

When Art mentioned that Phil Spector might join them, Richard became anxious, not only because of the impasse in our deal, but because of Spector’s reputation for bad behavior. Spector showed, and when Art introduced them, Richard felt Spector knew who he was, but then Spector said, “Richard, you’re Art’s butler, aren’t you?” Richard thought it was easier to avoid a confrontation and agree. Richard recounted the evening, during which Spector behaved like “he was drunk on his ass.” When Spector made a visit to the men’s room, accompanied by Art, he snatched a lit cigarette from a seated patron and smoked it as though it were his own. Still, after the club closed, Richard joined him and Art in Spector’s limousine: Art and the chauffeur in the front, Richard and Phil in the back.

Spector was acting completely insane, and was calling Ike Turner on the phone to invite him to join them. Spector mercilessly cut Turner up after he arrived with his son. Turner’s response sounded like unintelligible grunts to Richard. Around 4 a.m. Art abruptly opened the front door, said, “Bye,” and abandoned Richard. With Spector’s bodyguard/chauffeur present, and the back door locked, Richard felt like he was a prisoner. Richard had heard about the parties Spector used to throw, when he made it difficult for guests to leave before he wanted them to—doors and gate locked, guard dogs patrolling the perimeter—which meant for extremely late nights. It was an inconvenience for guests to be in the presence of a legend, but most put up with it.

At 5:30 a.m. Spector, who had been irrational the whole time, changed gears. “In ten seconds he goes from falllng-down, slobering drunk,” said Richard, “to the sharpest mind I’ve ever met in my life.” He accused Richard of stealing from him. He rattled off specific language in the Rhino contract and gave his opinion why he didn’t have to adhere to the clauses. Richard felt more uncomfortable. Finally, at 6 a.m. he saw an opening when they exited the vehicle to relieve themselves against the wall of the club, after which he scooted away.

Compounding the instability of the Spector deal was Martin Machat’s poor health and subsequent death in April 1988. We had lost a voice who could reason with Spector. Martin’s attorney son, Steven, attempted to fill that void, but it didn’t work. We couldn’t proceed because Spector wouldn’t approve anything we did. Richard reasoned that because Spector didn’t have much to do—he wasn’t actively producing new artists—by prolonging the process, it filled his time.

Spector ultimately made a deal with Allen Klein for ABKCO to release the catalogue. Although we had a legally binding agreement, to have attempted to proceed would have meant being in a costly and time-consuming lawsuit, further engaging Spector’s time and combative nature. Klein quickly reimbursed us for our expenses. But the disappointment among the fans of Spector’s music at the company couldn’t be reimbursed, nor the many man-hours expended on the project. When they made their deal, Klein and Spector joked that the two most hated men in the music business had joined forces.

The ABKCO box set came out in 1991 and unfortunately wasn’t up to Rhino standards. Klein spent a lot of money on marketing, and ABKCO’s distributor, PolyGram, shipped enough copies to earn a gold record. Rather than qualifying with sales of 500,000, as a box set with four CDs it needed only 125,000. Thousands of unsold boxes were returned by retailers. ABKCO warehoused them for many years hoping to sell them at their regular price, but further sales were a trickle. In the mid-2000s they were sold at cutout prices, at a discount of around 75 percent of list price to consumers. In November 2006 I ordered a couple from Amazon for thirteen dollars a box to give as holiday gifts. Art Fein bought his at Costco for around the same price.

We were passionate about our work and committed to putting out a superior product, and I was disappointed that it didn’t seem to be much of a factor in making deals. The major labels didn’t seem to care. Nor did Allen Klein, who never licensed to us, thinking that he would make more money if consumers only purchased ABKCO product. I thought artists would appreciate what we did, and they would be motivated to have great looking and sounding albums and the benefit of our effective marketing and sales departments. There was also our commitment to community service and giving back. I couldn’t see how anybody could make a deal with another label. If our offer of an advance wasn’t the highest, surely our reputation for paying royalties regularly would be a factor. If we put out the best product, showing the artist in the most favorable light, and if we were able to sell more product than any other company over the long run, then why wouldn’t someone make a deal with Rhino? The reality was that it was down to what company paid the largest advance.

Sometimes deals weren’t made due to other factors. In the early 1980s when I met with people at companies in London, their first response to a proposal was to come up with reasons why they couldn’t make a deal. I couldn’t understand this attitude. If a deal is made, everybody makes money, but if no deal is made, nobody does. After attending MIDEM in February 1982, I met with the BBC. I wanted access to the recordings they made with various artists that captured them live in the studio for broadcast on radio. They were flummoxed by my request. I had to get permission from the band members to even have them make me a cassette copy to listen to. It took three years until Rhino released The Zombies Live on the BBC. I was also interested in issuing similar albums by the Yardbirds and the Move, but the Zombies was the only one I was able to realize.

On May 3, 1985, I attended a party for Jerry Leiber and Mike Stoller at Le Dome restaurant in Hollywood. Jeff Beck was there with his model-looking girlfriend. I had been told that Jeff, who had been one of the rotating star guitarists in the Yardbirds, was keeping the project from going forward. I gingerly approached him, introduced myself, and expressed our enthusiasm for wanting to issue the BBC recordings. I had heard that Jeff was shy, but he barely looked at me, directing his gaze at the floor. His social discomfort made me feel uncomfortable, and I didn’t probe him on how he felt about our request.

Pye Records had a rich catalogue from the 1960s, including the Kinks and the Searchers, which I wanted to license for the United States. After making two separate visits to London in 1987, I was frustrated that I couldn’t close the deal with the current owners. It took Bob Emmer to finish it up for us. None of us had an ego of needing to be the proprietor of a deal. What was most important was that a deal was made. It was similar to when Richard constructed the offer for Delicious Vinyl and I completed the negotiations with their lawyer.

The Beatles’ label, Apple Records, was one of my influences in starting Rhino. Apple’s catalogue, primarily Badfinger, Mary Hopkin, and James Taylor (his first album), still hadn’t been released on CD. In early 1990 I wrote a letter to Apple Records’ head Neil Aspinall in which I offered $500,000 for the rights to the non-Beatles Apple masters for the United States. I thought it was a significant offer, but it didn’t even merit a courtesy response.

I tried for years to license the Dave Clark Five and Slade catalogues for the United States, but I was unsuccessful. Both Dave and Colin Newman, the English accountant who represented Slade, held out for the exorbitant advances they wanted. They eventually got them from other companies who didn’t fare well. By keeping their catalogues out of the marketplace for so long, they lost sales in the years CDs were initially available. Their inaction further devalued them, as the hits weren’t being promoted to oldies radio or for use in film and TV.

Hits used in commercials can bring in lucrative amounts. Sometimes publishers weren’t always reasonable. I tried to determine the music budget before I gave a quote on using one of our masters. The fair practice would be for the master rights holder and the publisher to be on equal footing, even though the publisher might receive more from performance play. If I didn’t make a deal, I felt that it was money coming out of my pocket, regardless if I owned a percentage of Rhino or not. Employees at large publishing companies didn’t feel that way. They wanted to keep their quotes high, but it didn’t seem to bother them if they didn’t make a deal. The two most difficult publishers that I dealt with, EMI and Warner/Chappell, were also the largest. They would want to maintain their quote, rather than considering the commercial’s music budget or what would be fair for the record company to receive. This occurred a few times on hits by the Monkees when, in an effort to make the deal, I took less than the publisher.

The most egregious example affected Curtis Mayfield. Mayfield was a highly respected singer and songwriter who was a two-time inductee in the Rock and Roll Hall of Fame as a member of the Impressions and as a solo artist. In 1990, when lighting equipment fell on him during a performance, he was left paralyzed from the neck down. We had made a deal to reissue his solo recordings. In 1998 I was contacted by an advertising agency that wanted to use the introduction of Mayfield’s hit “Superfly” in a commercial for the Visa credit card. The agency had only $150,000 for the music budget, which was on the low side for a national campaign, but the TV commercial was to be directed at a smaller, urban (black) audience. I was fine with making the deal for $75,000. Jack Rosner at Warner/Chappell wanted significantly more than that, claiming that the song was requested all the time. We checked with Curtis, who could have used the money as he had high expenses from being paralyzed. Assuming he would have received half—as the songwriter and recording artist—his share would have been $75,000. Even though Curtis expressed in a letter to Warner/Chappell that he wanted the deal to happen, Rosner refused to budge. I appealed to the company’s chairman, Les Bider, a former accountant, but he was unmoved. In declining to accede to a sister company, Rosner and Bider even ignored Time Warner head Gerald Levin’s pep talk encouraging synergy. I spoke to Rosner about it later. He clarified that while Warner/Chappell had received a few requests in the past, they had never actually licensed the song to a commercial. Rosner, perhaps feeling guilty, said that he probably should have agreed to the offer. This is the mentality I had to navigate.

Sometimes artists can seem to be unreasonable in turning down a deal. The Sweet were a 1970s English band best known for the hits “Ballroom Blitz,” “Little Willy,” and “Love Is Like Oxygen.” We wanted to combine their hits which were on two different labels. Because the group had a bone to pick with Capitol Records, they withheld approval of our proposed album.

In the last few months I was at Rhino, Richard asked me if I could close a deal with the Doors for the use of “Break On Through” in a Cadillac Escalade commercial. Danny Sugerman managed the nonactive band’s catalogue and merchandising. He was one of my oldest friends. I also had good relationships with the surviving members who had been involved with some of our early projects. Drummer John Densmore—lauded for Riders On the Storm, his book on the group—credits me with giving him his first writing assignment, the liner notes for a recording he did with guitarist Robby Krieger. We had recently made a deal with Danny to issue Doors concert recordings via mail order through our Handmade collectors division.

The use of the Doors song in the commercial was not something that would have benefitted Rhino. Tony Peppitone, the head of Warner Special Products, asked Richard to help as the income would be significant for the Warner Music Group, but he was having difficulty getting the group to approve. Organist Ray Manzarek was in favor. I felt Robbie would agree to it if I could persuade John. There is the issue of art being used for commerce. If songs are heartfelt expressions, using them in commercials can, in effect, debase them. I didn’t feel that way. In addition, on rare occasions—more in England than in the United States—a song used in a commercial can sell significant records from the exposure.

Densmore’s position was based on imagining what Jim Morrison’s opinion would have been had he been living in 2001. In 1969 General Motors wanted to use the Doors’ “Light My Fire” to advertise the Buick Opel. Manzarek, Krieger, and Densmore approved the hefty $80,000 fee—of which $60,000 was to go to the Doors. Morrison couldn’t be contacted, but his lawyer approved the deal. When Morrison heard about the airing of the commercial, he became incensed, and the Doors never approved the use of their songs in another commercial. But who knows what Morrison would have thought in 2001? It was an extremely lucrative deal, especially for a song that was never a hit. “Break On Through” was the Doors’ first single and only managed to chart at 126 on Billboard. The contract would have been for $8 million, from which the Doors—presumably—would have received $1 million apiece. I could not persuade Densmore. The producers replaced it with Led Zeppelin’s “Rock and Roll,” for less money. It was an extremely successful campaign and, uncommonly, General Motors used the song for three years.

Much to my disappointment, Frank Zappa had made a deal with Rykodisc for his masters. Rykodisc started out in 1983 as a well-intentioned CD-only high quality label of mostly folk and acoustic performers. Their artsy name was from the Japanese word that meant sound from a flash of light, which related to the laser beam in a CD player. They weren’t doing that well when they shifted gears and tried to ape Rhino with rock reissues. After the success with Zappa’s catalogue, they were emboldened to outbid Rhino on David Bowie’s catalog. Bowie had been with RCA, but his recordings had reverted to him and his manager. I was able to get sales figures on his RCA CDs. This was prior to the more accessible sales information provided by SoundScan, which started in 1991. I was surprised to discover that Bowie’s sales weren’t that good. As the CD format had been in the marketplace for a number of years, I couldn’t expect much of an upside—most music fans had already replaced their vinyl with CDs—and didn’t think it was worth the $2 million they wanted. Unbeknownst to me—and my calculations—Bowie was planning a major greatest hits tour, which invigorated the catalog to Rykodisc’s benefit. They also scooped us on Elvis Costello’s masters.

Frank and Gail Zappa came to see us because they were not happy with Rykodisc. Richard was the point person. I wasn’t involved. Frank knew he was dying, and wanted to make a deal with us for newer product as the older catalogue was with Rykodisc. We put out a few titles before Frank died in December 1993. Frank wanted Gail to sell the catalogue, preferably to Rhino, and not be involved in the business. She did otherwise, and was now in charge of Zappa Records. I was happy to not be involved, as Gail had a reputation for being difficult.

Gail wanted to sell Frank’s masters for $20 million, which I thought was outrageous. Among all of Frank’s albums that major labels had issued and promoted, Frank only had one that broke into Billboard ’s top twenty. He didn’t sell enough to merit $20 million. Richard thought we should offer $12 million, which seemed too much to me as well. He made his offer based in part on Gail’s asking price, even though it was 40 percent less. Rykodisc was a natural suitor and they, obviously, had no idea of our offer. They came in at $22 million.

The result was that by trying to be Rhino, they made a horrendous deal that, in effect, bankrupted the company. They could no longer afford to operate, and the company was sold in 1998 to Island Records’ founder Chris Blackwell. So, one bad deal ruined a good record company.