CHAPTER 18

The Rhino Label Part Four

The Long Goodbye

Wishing You Joy and Peace At Christmas and Throughout the New Year

Roger Ames, Warner Music Group

It was a nondescript Christmas card featuring an illustration of a tree ornament on the front. It certainly wasn’t worth keeping for its visual appeal, but I kept mine. It was in the early days of January 2001, and knowing Ames, I thought his wish for a joyful year would ring hollow.

Ames was the fifth head of the Warner Music Group (WMG) in six years. Rhino’s joint-venture deal with Atlantic Records was made with Bob Morgado, when he was head of the WMG. He had been New York Governor Hugh Carey’s chief of staff. After he divested Warner of Atari, its troubled video game company, Warner CEO Steve Ross put Morgado in charge of the Music Group. His specialty was mergers and acquisitions, and his strengths were politics and organization. He wasn’t a music guy. When we first met with him in 1991, his excitement wasn’t about Rhino, but the deal he made to issue a series of CDs in conjunction with the 1992 Barcelona Olympics. He wasn’t evaluating the project based on the music. He played some tracks for Richard and me. I thought it was a bad idea. It lost a lot of money.

Because Morgado didn’t inherently understand the business, Warner Brothers Records head Mo Ostin had no respect for him, and caused consternation by refusing to report to him. Morgado thought he had a solution and created Warner Music U.S., selecting Doug Morris to preside.

We had reported to him when he was president of Atlantic Records, and we liked Doug. Unlike our experience at Capitol, where label head Joe Smith failed to notice that we had our best sales month when we met with him, Doug knew our numbers. Unlike a lot of company heads, he was good at recognizing executive talent, and giving them the freedom to be successful. He was warm, he smiled a lot; you could talk to him. We liked Doug’s CFO Mel Lewinter even more. He smoked a pipe and would have been perfect casting as the “understanding uncle” character. Doug was a music guy, having produced and written songs for Laurie Records in the 1960s. As much as that suited us—and he aided in freeing up some Elektra projects for us—he was totally out of his depth when we brought up nonmusic ventures such as merchandising, feature films (Fear and Loathing in Las Vegas), animation (the Monkees), and theme restaurants (Club Rhino). Morris lasted about a year in his new position before Danny Goldberg orchestrated a power play in June 1995 that got a group of them fired, at the direction of Time Warner’s chairman Gerald Levin. We were sorry to see Doug and Mel leave. That, coupled with alienating Ostin and other music executives, resulted in Morgado getting fired.

Because of our success, I was surprised Doug didn’t call us in for a meeting to see if he could lure us away after he became head of Universal Music. Instead, with Bruce Resnikoff at the helm, he decided to bolster Universal’s own reissue program. I liked Bruce. He started out selling bootlegged t-shirts in parking lots outside of concert venues, then got a law degree, and found himself in charge of licensing at Universal. He did a great job, and I thought about hiring him when we weren’t sure if we would be able to retain Bob Emmer as our head of business affairs.

Doug got it in his head to call their new reissue label Hip-O, with the logo of a hippopotamus, in the same ballpark as our name and logo—although ours was a hipper looking one than theirs. If you were going to start a reissue label, you would call it something like Vault or Archive or Legacy, not name it after an animal, unless you were trying to evoke Rhino. Remember, we named our label after our retail store. When we protested to Bruce, he said that he was unable to dissuade Doug. Richard made his appeal to Mel Lewinter, who joined Doug at Universal, but Doug wouldn’t budge. Assuming Bruce and Mel expressed our objection to Doug, I thought he was shortsighted in jeopardizing a good relationship over the name of a supplemental label.

After Doug left, we were told to meet with Michael Fuchs, who now assumed those duties. Because Fuchs had done such a good job building HBO, and because he wanted a new challenge, Levin gave him the Music Group to head as well, rather than risk losing him to another company. Richard and I were skeptical because he wasn’t a music guy. When we met with him in mid-July in his bungalow at the Beverly Hills Hotel, he seemed more interested in rattling off his accomplishments than asking us about our business, or our assessment of the WMG. He went into the next room to show us his recent award as an inductee in Broadcasting & Cable Magazine’s Hall of Fame.

Fuchs was smart, a quick study, and he zeroed in on what Rhino was all about. This came to a head on October 27 during a presentation in the Warner Brothers Records conference room when Fuchs had an argument with Warner president Russ Thyret over Russ’ refusal to grant Rhino access to the part of the catalogue he wasn’t exploiting. He told Russ that no one bought a record because it was on Warner Brothers, but people bought Rhino records because the name had meaning. (Brandweek magazine concurred: “Not since Motown has a music label forged a meaningful brand identity.”)

I was embarrassed to have witnessed the heated exchange. Considering that Fuchs was responsible for Thyret’s promotion, one would think there would have been more cooperation in the room. At the end of the meeting, even though I felt emotionally drained, I felt good that Fuchs had gone to bat for us. His style rubbed people the wrong way. Three weeks later, he was gone.

Bob Daly and Terry Semel had been successful running Warner Brothers Pictures for a long time. In negotiating to renew their deal with Levin, they wanted to add the Music Group to their responsibilities so they could justify getting paid more in the way of salaries and bonuses. They also made a case for the Music Group reporting to them as a means to end the executive turmoil. It made sense to Levin. They took over from Fuchs in November.

Semel and Daly were well regarded within the film community, but they weren’t music guys: they didn’t understand the music business, nor were they fans. Levin didn’t understand the music business, and neither did Richard Parsons, to whom the Music Group chairman later reported. Parsons was the president of Time Warner and his background was in banking. These guys may have been savvy enough to deal with (stock) investors and to understand balance sheets and profit/loss statements, but they had no inherent feel for music or the music business, so how could they make smart decisions about running the division?

It took a long time for Semel and Daly to get up to speed, and for us to get access to the Warner masters that we had been denied. They reasoned that the only way we should be given access to those masters was if we were fully owned by the WMG. It wasn’t a path we would have pursued, but we were driven by the prospect of being able to properly reissue the Warner and Elektra masters. It took two and a half years after Semel’s and Daly’s appointment to effect that change.

In March 1999 Richard, Bob, and I joined other Warner executives at the vice president level and above for a presentation by the corporate execs in the Steven Ross Theater on the Warner Brothers lot. We sat in the second row, and before the meeting started, we introduced ourselves to Ted Turner. He responded with “I guess I am a Rhino,” referring to his name being on our Turner Classic Movies soundtrack releases.

I bought into Gerald Levin’s vision of the benefits of Warner’s pending merger with AOL. In his talk, he encouraged synergy between the various companies, but I disagreed with his bottom-up strategy. He suggested that by talking about it, executives would apply it on their own. From the difficulty we experienced in trying to forge synergistic projects within Warner, we saw no motivation. I felt that it should be top-down. If executives failed to take advantage of mutual opportunities, then there would be repercussions.

Afterwards, I was surprised that Levin wasn’t mobbed by glad-handers. I said to Richard and Bob, “Let’s meet him.” Either they were too shy, or they weren’t interested. I introduced myself, and he welcomed me to walk with him to the lunch reception in a tented area nearby. I gave him my opinion on synergy, but didn’t press the point. Mostly in the few minutes I had with him, I gave him a quick overview on what Rhino was and what we were trying to do.

Ramon Lopez was head of WEA International. The division wasn’t doing well, and he was encouraged to step down. His handpicked successor was Roger Ames, who had been the president of the PolyGram Music Group and the owner of the (revived) London Records label. In one of my infrequent walks around our neighborhood with Zach Horowitz, president of the Universal Music Group, I asked him about Ames. He didn’t have good things to say and speculated that his London label had lost $8 million in the United States the previous year. He said Ames had difficulty making decisions and was a loner and a poor communicator.

From our management training with Stan Slap, we understood the value of a good manager and the qualities a good manager needs. When one is managing other employees or division heads, one must be accessible, have good people skills, and be a good motivator. Among the most important qualities an executive should have is the ability to evaluate candidates to hire. From my perspective, I think the senior Warner executives missed the mark.

In order to get Ames to be part of the Warner Music Group, Semel and Daly had to buy his London label and bring it to the Music Group. Ames couldn’t very well be at Warner if his own label was distributed by Universal (which had purchased PolyGram the previous year). Semel and Daly didn’t have the confidence or knowledge to have looked upon the hiring of Ames as too costly and to have considered somebody else. In order to affect his coming to Warner, in January 2000 the Warner Music Group paid $210 million for London with, I’m presuming, a majority of that money going to Ames. Given that the worldwide profits for the label were $1.5 million in 1998 and $10.5 million in 1999, it seemed like a horrendous deal. The purchase price couldn’t be justified by the profitability or the assets; $201 million was valued as “good will.”

Prior to all this, in April 1999, Ames was invited to attend the Warner Music Group meeting in Hong Kong. I introduced myself to him at the opening cocktail party. Rather than being warm, or even civil, he replied in gibberish that made me think of Noel Redding’s sped-up voice on “EXP,” the first track on the Jimi Hendrix Experience’s Axis: Bold as Love album. Peter Pasternak, our head of international, was right there with me, and couldn’t believe his odd response. How respectful of Semel and Daly could I be when they were so shortsighted as to hire a jerk like Ames? The next day for dinner at the Repulse Bay Hotel, we were seated at the same table, although not next to each other. I overheard Ames talking about fly-fishing, so I attempted to engage him by asking him if he had read Double Whammy, Carl Hiassen’s book that featured the sport. He responded that he had, and that he liked Hiassen’s writing, but I was unable to interest him further.

At Warner Brothers Pictures all was not well. Semel’s and Daly’s contracts were not renewed. During their four years as coheads of the Warner Music Group, profits had declined almost 25 percent. As a result, in August 1999 Semel and Daly chose Ames to succeed them as the Chairman/Chief Operating Officer of the Warner Music Group. Time Warner President Richard Parsons gave it his rubber stamp. Ames had been president of Warner Music International for a mere four months.

The ink on the press release was barely dry when Ames presided over the Warner Music International meetings in Dublin. Peter Pasternak and David McLees, a rising young star at the label, represented Rhino. David had started out as an unpaid intern and rose to the number two position in the A&R department. He was little prepared for Ames, who greeted his presentation by feigning boredom: he put his head in his hands as his head dropped to the table. When David finished, Ames raised himself up to announce, “Let’s get one thing straight. We don’t give a fuck about Rhino!” David and Peter were shocked. Was Ames acting out for effect, attempting to ingratiate himself to his beleaguered European cronies? Or was he really expressing how he felt about Rhino and hinting at his game plan? Read on.

My interactions with Ames were minimal, mostly in the context of budget meetings. His style was to put everyone on the defensive. At the meetings, he smoked cigarettes—he was the only one to do so—in nonsmoking buildings. He didn’t have the courtesy to ask for the permission of those in attendance. His overall manner was to intimidate, and the result was that others tried to say as little as possible.

When we negotiated our joint-venture agreement with the Warner Music Group, I had language inserted that stipulated that we could run our company in the same manner as we had previously. For the past few years, we had done so, with minimal interference by the Warner Music Group, or Atlantic Records.

The first breach came when Dave Mount, who succeeded Henry Droz as head of WEA, said that our sales staff could no longer be Rhino employees and instead had to work for the newly formed WEA Strategic Catalogue Marketing Group. He placated us by promising us that not only would our former sales people still be selling Rhino, but so would WEA salesmen. It sounded good, and though we were skeptical, we had to comply. Even though Rhino’s sales continued to be strong, we felt the change adversely affected us. As Rhino employees, our sales people were responsive to our direction. As WEA employees, they took their orders from someone else.

Richard had an idea to sell albums from our catalogue that were so limited in potential sales, we couldn’t justify releasing them on Rhino through our regular distribution. He created an imprint, Handmade, and had interested Amazon in taking the line to sell exclusively. The idea was that these unique albums sold by Amazon would draw additional customers to the website. The plan was for Amazon to bring in thirty titles and guarantee that they would buy at least four thousand of each. We proceeded in conceiving the series and designating the titles. Then Amazon decided that they didn’t want to make the deal. Richard tried to interest other companies, but none wanted the line. He decided we should do it ourselves, selling it through our own mail order division, Rhino Direct. From a financial consideration, I was skeptical after the guaranteed sales from Amazon fell through. On the other hand, I was all for making music available to those who wanted to hear these specialized titles.

In the January 2000 meeting at Warner Brothers in Burbank, Ames wanted to know about this new imprint, Handmade. I took it upon myself to explain/defend our reasons for the label. The example I gave was our recently released Stooges Fun House box set. In most recordings, the instrumental backing track is recorded first, with vocals added later to the best—of many—takes. Here, Iggy sang with the band on nine run-throughs of the album. The performances were of a high level, and the sonic quality was dynamic. We were selling them in an edition limited to three thousand box sets at $100 each, which meant that we made a profit of over $200,000 if the box sold out, which it soon did. Maybe this was chump change to Ames. He wasn’t impressed, and he said he didn’t know who Iggy and the Stooges were.

In October we joined other executives in a budget meeting for the upcoming year at Warner’s New York offices in the Time Life building. Originally Ames had scheduled the meeting on Tuesday the tenth, giving no consideration to Jews who would have had to travel on the previous day, which was Yom Kippur. By 2000, many of the Jews who had the top positions when we joined the WMG in 1992—Atlantic (Doug Morris), Warner Bros. (Mo Ostin), Elektra (Bob Krasnow), WEA (Henry Droz), Warner Special Products (Micky Kapp), WMG General Counsel (Fred Wistow)—had been replaced by gentiles (Val Azzoli, Russ Thyret, Sylvia Rhone, Dave Mount, Tony Pepitone, and Dave Johnson, respectively).

Ames was, again, smoking in a nonsmoking conference room, and didn’t ask the rest of us—all nonsmoking—if we would mind. Sitting next to him, I scooted my chair away when he lit up, and then scooted back. He didn’t react to the hint. Then he lit into us, Rhino and Warner Special Products, on our number of employees: “What do they do all day?” As Roger had never been to Rhino, I invited him to tour our offices so he could see for himself what everybody did. He replied in the negative, saying, “I don’t want to see everybody standing around.”

As it was clear, and despite our high profitability and standing in the music business community, Ames had no respect for Rhino. I don’t know if he was jealous because Rhino was more profitable than London had been, or if his idea of a successful reissue label was one that racked up big sales from TV-advertised collections as was the case in Britain where he lived. In America, TV advertising was much more expensive, which made these projects risky compared to Rhino’s more assured business model.

In November Richard came into my office and asked if we should negotiate an extension of our employment agreements, which were due to expire at the end of the following year. I said that we should see how we liked working under Ames. I had concerns, and I didn’t want to be saddled with an extension if we disliked working for him. Plus, we had a year to find out.

Richard expressed his trepidation over the AOL-Time Warner merger, with their strategy to cut costs using purchase price allocation (sometimes called purchase price accounting), or PPA. The salaries of terminated employees who had time on their contracts would ordinarily be an expense that would lower the earnings of the company. In a merger year, it’s considered an acquisition cost and not one affecting the company’s profitability or earnings per share of stock. It baffled me that the US government had a law that encouraged a company to fire its employees. Let me provide an example. If I were terminated with ten months left on my contract, the expense wouldn’t lower the company’s earnings—even insignificantly—by that amount. The company would not benefit from my services if I were no longer working, even though it was required to pay me.

Sometimes in corporate America decisions are made not for the long-term health of the company, but to address short-term goals like improving stock price. Time Warner was no exception. Price cutting—firing employees—to improve profitability could be effective, but at the expense of future profitability and growth.

In 2001, on the morning of January 23, I was in good spirits. At the beginning of the year my family and I had an enjoyable vacation on a Disney Cruise. The previous week I attended festivities leading up to the marriage of my good friend, long-time bachelor Paul Almond. The previous night Stephanie’s cousin Maurice Summerfield was in town and hosted a lively dinner attended by Jon Kellerman and Andy Summers. And that day was my daughter’s sixth birthday.

Richard came into my office. He looked ill. He reluctantly told me that I was to be terminated early under the PPA provision. Richard had expressed to Dave Mount that he was uncomfortable telling me, that he thought Dave should do it, but Dave insisted that Richard give me the bad news. He drafted a letter as though Richard had written it and faxed it to him. Richard showed me. I was shocked. I hadn’t thought much about it. If anything, I thought I would have left at the end of the year when my contract specified.

When we made our joint venture with Atlantic, in the agreement there was a provision that we would meet on occasion for board meetings, which specified Richard and me, and the two head guys at Atlantic, Doug Morris and Mel Lewinter. We hadn’t had a board meeting since they left Atlantic in 1995. Late in 1999, we were directed to report to Dave Mount. The only meetings I attended with Mount were in the context of being in a larger group. Richard and I, as the coheads of Rhino, had no reporting meeting with him, and I hadn’t had a one-on-one meeting, either.

Two days after Richard showed me Mount’s fax, I gave a lunchtime lecture at UCLA’s Anderson School of Management for those in the MBA program. At a point during my talk on being an entrepreneur and distilling the Rhino story, I had to fight to contain the emotion I felt because of my situation.

Over the subsequent days my discussion with Richard was how I should respond to this directive. Should I appeal to Ames, to Mount? He didn’t think it was a good idea. I wanted to stay as long as I could, in part to finish up the deals I was working on and to organize my files, and as a personal obligation to come as close as I could to fulfilling my contract. There were larger issues. Although I was no longer an owner, I cared about the company. It seemed like I was the only one who considered that, if I left sooner, there would be a negative effect on the morale of the company. I was a constant in the employees’ professional lives. I was there from the beginning.

Stan Slap encouraged us to manage by walking around so we could interact with all of our employees. It was a manner developed by David Packard, cofounder of Hewlett-Packard. The intent was to avoid an ivory tower affect, whereby senior executives of a company isolate themselves from most of their employees, feeling more comfortable with executives on their own level. I saw this in Hong Kong, where Semel and Daly only sat with other senior executives during meals, rather than with others, as Richard and I would have done.

On February 1, we had a company retreat at the Ojai Valley Inn that included the employees of Warner Special Products, as the two divisions were slated to merge. During the presentations I gave a short speech. It was tough maintaining my composure.

How would the drop in morale affect the company’s profitability? The longer I stayed, the more stable the company would be as other employees lost their jobs under Mount and Ames’ direction. The more profitable the company, the larger my bonus would be when it was paid the following year. In addition, Richard had planned to take a month-long vacation in July (on a yacht cruising the Amalfi Coast). If I were gone, there would be no leadership in place. Nobody was considering that, either.

Richard thought, presciently as it turned out, that there were so many people being released, if I wanted to stay longer, I should do nothing—just be low-key—and that I would be lost in the volume of WMG employees being processed. And that’s what I did. When I got the form contract from the WMG legal department —which didn’t even apply to my position as cohead of Rhino—I did nothing.

Because of the way it was handled, and because of my decision to prolong my departure, I experienced the worst year of my life. My visibility and participation at Rhino was unchanged, and very few employees knew of my future. I withdrew from any WMG meetings, but I was like a stowaway, but on my own ship, anxious about being discovered. Richard was right, I had been forgotten about by WMG’s lawyers. This subterfuge, as well as the prospect of leaving the company I had started with Richard, resulted in a low-grade depression that stayed with me most of the year.

I made time to organize, which few of us like to do. I went through my files, which consisted mostly of older contracts I had negotiated. For the benefit of the subsequent regime, I removed the extraneous material and forwarded the files to the legal department. My secretary departed at the beginning of the year, so I did the same for her files. I held a “garage sale,” which meant that I was freely giving to those employees who wanted them the excess items from my storage cabinet that were mostly samples of Monkees licensed items. I sidestepped a couple of employees who asked me if this meant I was leaving the company.

In a few cases I sold masters back to the artists for low but reasonable fees. It was highly unlikely that Rhino was going to issue the four albums by Barnes & Barnes on CD, so I sold them back the two albums they didn’t own. In this way they could either make a licensing deal with another company or issue them themselves.

I knew the EP we released on Bebe Buell was special to her, and Rhino was never going to issue it on CD. As she didn’t appear to have disposable money, I gave her back the masters for no compensation. I should have done it more, but I didn’t have the focus to track down those artists from the early Rhino days with whom I was no longer in contact.

The attitude of major labels is that they never sell their masters. The main reason is that they’re too caught up in trying to make a profit to put time into evaluating older product that would be less profitable. What never gets discussed is the cost of storage through the years. An album that the label will never again derive any income from might take up several feet of storage space because of the two-inch multitrack tapes from the recording sessions. What would be the cost of storing three feet of tape for thirty years, times a thousand albums? Labels don’t do that type of analysis.

One of the few bright spots was Rhino’s release schedule for the year, which may have been our best ever. It was a tribute to the company that, twenty-four years in, we had not run out of ideas and were still capable of putting out great product. Titles that got me excited included box sets on the Monkees, the Yardbirds, Buffalo Springfield, Dead Can Dance, Richard Pryor, urban folk music, and 1960s British psychedelia with Nuggets II; an expanded Love’s Forever Changes and a best of Alice Cooper; Bride of Firesign, a new album by Firesign Theatre; more Mystery Science Theater and Get a Life DVDs, and the Rutles on DVD. The Yardbirds’ Ultimate! was particularly gratifying. It was as though I had come full circle, from a passionate UCLA sophomore who had proposed a Yardbirds compilation to CBS Records thirty-one years previously, to holding in my hand the superb career-overview bearing my company’s logo.

As the year progressed, Richard let me know that he wanted to form a new company. He did not suggest we start one together, nor did he lessen the blow of excluding me. He could have put it into a context like, “I thought of asking you but then thought I’d rather do it on my own.” I asked him then, as well as a few months later, why he wanted to form a new label. My point was that it was highly unlikely he was going to approach what we had accomplished at Rhino, especially in this economic climate—and without me! He nervously chuckled and said, “When I figure out why, I’ll let you know.” He never did. Part of his motivation was that Bob Emmer and Garson wanted him to start a new company so they could be equity participants (owners) this time.

Why not choose another business? I was focused on producing for film and TV. I think Richard was fearful of what he would be doing after Rhino. Now that he didn’t have to worry about making a living, I would have expected him to reimmerse himself in the social work he was so passionate about when I first met him. What it came down to was that Richard still liked the business, and felt challenged to help build another company. He had discussions with Ames about having a custom label at the WMG, but it appeared that he was being placated.

Richard’s vacation ran into turbulent waters because of Ames. He had it booked, after which Ames scheduled a WMG meeting. Richard’s travel agent was able to reschedule, but forfeited a number of days that he had already paid for. Then Ames cancelled the meeting. When Richard was away, I was in place. Members of INXS came by the office to meet our staff, and to have a photo taken for the trades to announce the release of their new Rhino anthology Shine Like It Does. Since Richard wasn’t in the office, I was asked to pose with the band. I borrowed an employee’s eyeglasses to wear as my inside joke at a disguise, since a couple of members of the band also wore glasses.

Richard, Bob, and I had a good relationship with Fred Wistow, the Warner Music Group’s general counsel. He was smart, had a dry sense of humor, and was a true eccentric: after retiring from Warner, he spent a month in a monastery. The search for a senior executive with a marketing background to head Rhino was proving difficult. Wistow’s replacement, Dave Johnson, had worked with Scott Pascucci at Sony and recommended him for the job. With some desperation, Mount responded to Johnson’s suggestion and hired him.

Pascucci had been senior VP of business affairs at Sony Music. Based on the West Coast, Pascucci lived in Malibu and loved the California lifestyle, but accepted a position at Arista in New York. He soon realized his mistake and saw the Rhino job as a means of getting back to Malibu. It wasn’t that he was a fan of the label. In fact, he seemed to know little about us.

Amiable and, despite his paunch, good-looking enough to pass as a Baldwin brother, Pascucci wasn’t close to being a Richard or a Harold. Richard met Scott for breakfast in late August. He said that Pascucci had complimentary things to say about Rhino, not based on his knowledge or awareness, but from what he had been told when he asked his previous staff members. Pascucci responded to Richard’s inquiry by revealing that, in the hiring process, he hadn’t been informed of any mandate, or any problems or issues at Rhino.

The following week Richard met with Mount, and one topic that came up was where Pascucci’s office would be. Mount suggested my office, that unbeknownst to him, I was still using. Richard didn’t respond. The next day he told me of their discussion, and that he thought it would be disingenuous to not be honest with Mount. He called him and told him that “my deal” still hadn’t been worked out. Mount was surprised. I was able to work out a timetable, with Mount’s approval, to leave on October 12. I still had not communicated with Mount directly.

Pascucci’s contract stipulated a salary much higher than either of ours. On his first day in the office, I welcomed him. I told him to let me know if he had any questions, and I asked him out for lunch. We never had lunch, nor did he ask me any question about Rhino’s business.

My October 2 e-mail to Rhino’s staff:

I want to let each of you know that I will be leaving Rhino as of October 15th. Although my contract is through the end of this year, I am required to leave earlier so that AOL Warner may benefit from the provisions of the merger, which allows it to write off part of my salary.

I think what we’ve created through the years has been truly remarkable. I only wish the best for all of you, and hope that you’re given an opportunity to help Rhino to accomplish even more in the future. I will be readily available to you through October 12th, at which point I relinquish my duties as Managing Director.

My October 12 e-mail to Rhino’s staff:

On the occasion of my last “official” day at Rhino, I want to summarize what I find are the most gratifying accomplishments of the company I cofounded with Richard nearly 24 years ago.

(1) We created jobs for 167 people, at our peak. For Richard and myself, we didn’t take over a Company, or inherit a company from relatives, but Rhino was created from literally nothing. I’m most gratified in knowing that 167 people not only earned a living by working at Rhino, but because of the product we produced and the environment we created, most of those people actually looked forward to coming to work every day.

(2) We changed the industry as we dedicated ourselves to quality. The primary success of Rhino is derived from the following reason. The music that we grew up with was important to us, and Rhino reissues should show our appreciation to the artists and music fans by giving back to them a quality product. Not only did this provide the backbone of Rhino’s success, but as the company sold more and more albums, the other labels established their own mini versions of Rhino, emphasizing quality much more than they had previously. Although there was more competition for us, our success was the catalyst that changed the industry, benefiting music fans everywhere.

(3) Community Service

I’m happy that our company has introduced the concept of community service to many Rhinos, and has provided a program to encourage employees to participate.

(4) Our imagination has not limited us to being only a record company.

The prevailing attitude in our business is that record companies are only record companies. If they did anything other than music, it was releasing a minimal number of videos generated by their artists. With Rhino, we’ve been able to do much more. Rhino Video’s scope is much broader than that of any other label. With Kid Rhino, we’ve succeeded in the children’s market. Rhino Films has produced three feature films and two TV movies. We’ve produced a handful of documentaries and PBS live concerts. Rhino has even published 14 books. And our packaging is the most imaginative in the business. I find it all remarkable.

The outpouring of appreciation from employees was touching. But I also received phone calls from managers, like Eric Gardner, and artists, like Tommy James and Dave Clark.

Richard’s lawyer, Alan Lenard, advised him that he would have more appeal if he were still gainfully employed, which is one reason why he stayed beyond the term of his contract when Pascucci asked him to. As a consequence, we didn’t leave around the same time—me in October, him two months later. We started it together; if he didn’t want to stay on by accepting Pascucci’s new offer, then I felt we should have gone out together. It would have reflected the good partnership we had, and what we had accomplished. To use a familiar phrase from a TV show then airing, I felt as though multiple fingers were pointing at me, accusing, “You are the weakest link!”

Richard felt the Warner Music Group was playing games with him in his quest for his own label deal. “They are incredibly incompetent, or stupid, or a little of both,” he said. When Dave Johnson refused to return the calls from Lenard, Richard set his sights elsewhere. He later admitted that we should have left together. He departed the company in March 2002, shortly after we—he invited me to join him—accepted a label of the year award from NARM at their yearly convention, in San Francisco. Paul Vidich told me that, over the previous ten years, the Warner Music Group’s purchase of Rhino was the best deal the division made.

Even without me, I couldn’t understand why Richard was having such difficulty getting a distribution deal, as he was the president of a very successful label. Nobody in the industry, let alone Atlantic Records or the Warner Music Group, ever did an evaluation of what Richard and I did, or an assessment of our strengths and weaknesses. If Richard and I, along with a number of Rhino’s senior executives who were available, aligned ourselves in a new company, it would have made for a more attractive package. It took Richard until the end of the year to make a distribution deal, with Sony.

With so many problematical areas, Ames could have offered to extend our contracts and focus his energies on the areas most in need. Sales in the music industry peaked in 1999. They declined less than 2 percent in 2000, but over 4 percent in 2001. In contrast to the industry trend, not only did Rhino’s sales increase in 2001, but profits were up significantly. In relation to our expenses, Rhino was the most profitable of all the Warner labels.

When we departed, there was no farewell party held for us. It’s not as if I had a need to attend such a party, but it would have been nice to have gone out with a celebration of the company Richard and I had created. When Semel and Daly left, Warner had a big party for them. When Bob Emmer left, we threw one for him, as we did for many of our valued employees. Maybe Pascucci felt that he couldn’t justify the expense from Rhino’s $32 million in profits for 2001.

My biggest mistake was being so caught up in my situation—and as it related to the company—that I gave scant attention to the large number of options I had of AOL Time Warner stock. My logic was that I didn’t need the money presently, and if I exercised my options—and sold the stock—I would be subject to income tax. As it was such a large company, I reasoned that, even with the price of the stock sliding precipitously, it would go back up. If I had responded to my early departure with an attitude of “I want nothing more to do with this corporation,” I would have sold all my stock. With the price declining continuously, to a low close to 10 percent of what it had once been worth, I was never able to exercise my options, leaving millions on the table. Richard and Bob were astute enough to have exercised a portion of theirs. Years ago I would have beaten myself up over such negligence. In my maturity, I had the perspective that, given my lifestyle, it was money that I didn’t need.

For the first time, Richard and I weren’t paid our bonuses—for Rhino’s performance in 2001—in a timely manner. Ames held up the payments until May 2002. We did receive a modest amount of interest added, but we felt disappointment for our now former employees, for whom we allocated over 20 percent of our share.

I haven’t seen Ames since that time, and I am no longer on his Christmas card list. If I saw him in a small, social setting, I would ask him why he got rid of us. The obvious answer is that he wanted his own guy in there, one beholden to him, rather than two independent-thinking, self-made men. Within the year or so after we left, Emmer ran into him and asked him. Ames said he felt that, as we no longer owned part of the company, we wouldn’t be motivated to make it more profitable.

This, like many of Ames’ assumptions, was off the mark. The last three years we were at the company were the most profitable, and that’s after the Warner Music Group took full ownership. Whether I owned 50 percent of the company, or 25 percent, or no percent at all, I always made decisions as if I were an owner. For Richard and me, our salaries were modest, as were our expenses. We were most interested in doing what was best for our company rather than our personal enrichment. A few months later, Emmer was chatting with Bob Daly who admitted that hiring Ames had been a mistake.

In the immediate years after leaving Rhino, it was clear to me that it was no longer Rhino, or the Rhino that Richard and I had created and developed. Sure, most of the employees were the same, and the product was up to our standards, but the other elements were lacking, the ones that came from our character and personalities: sense of humor, passion, humanity, integrity, vision, and so much more. In those years I read a biography on MGM studio boss Louis B. Mayer, and saw the documentary on how the Warner Brothers forged their film company. It made me realize, in a way I never had before, how companies are more than names or logos. The company name can remain, but the essence of the company can change. This was never truer than with MGM, which was formed from three companies—Metro, Goldwyn, and Louis B. Mayer. There were good reasons why an out of touch Mayer should not have continued to head the company, but MGM was never the same after he left, and declined.

Unlike MGM and Warner when they were sold, we were having our best years. To use a lofty example, would someone buy Apple and then get rid of Steve Jobs or buy Oracle and get rid of Larry Ellison? How about Amazon without Jeff Bezos? In addition, it seemed that our successors didn’t value the history of the label that embodied the histories of all the other labels or attempt to understand the roots of our success. If you don’t value history, you can’t repeat it.

Richard was asked to come up with a way to combine Rhino with Warner Special Products. His plan was so well thought-out that it was adopted. Richard and I handed over the company, and no major problems or discrepancies were experienced. The company continued to do well, owing to some degree, to the deals we had put in place. Not long after Richard left, the company name was changed from Rhino Entertainment to Warner Strategic Marketing, and there was no further effort to brand the Rhino name. All mention of Richard and me, including our bios, disappeared from the Rhino website.