The Atlantic Group

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The Atlantic Group

1290 Sixth Avenue
New York, New York 10104
U.S.A.
(212) 707-2000
Web site: http://www.atlantic-records.com

Wholly Owned Subsidiary of Time-Warner Inc.
Incorporated: 1947 as Atlantic Records
Employees: 400
Sales: $750 million (1997)
SICs: 7812 Services-Motion Picture & Video Tape Production; 3652 Phonograph Records & Prerecorded Audio Tapes & Disks; 7389 Services-Business Services, Not Elsewhere Classified

The Atlantic Group consistently ranks among the most successful recording companies in the United States. Atlantic has helped shape popular culture for more than 50 years and has recorded hundreds of legendary popular songs. Although its size and profits have grown and ebbed over the years, it belongs in a rare category of music industry survivors. After several years of expansion, Atlantic has shifted its emphasis to working harder to promote a smaller number of releases.

Jazz and Blues in the 1940s

As the child of a Turkish diplomat, Ahmet Ertegun, born in 1923, was raised in some of the world’s most cosmopolitan cities. Part of his education included experiencing the birth of jazz at the hands of some of the great swing orchestras as they toured the world. Ertegun made his first homemade record at the age of 11. By this time the family had been transferred to Washington, DC, and when a visiting friend offered to take him to New York, he took this chance to visit his unlikely mecca: Harlem. After staying out all night, he was promptly escorted back to Washington.

Ahmet Ertegun continued to love jazz and the blues. He and his older brother Nesuhi eventually collected thousands of records, landing them a mention in a 1938 Esquire article while Ahmet was still a schoolboy. In spite of their youthful enthusiasm, the brothers were deeply dismayed by Washington’s segregation. The two defiantly staged decidedly desegregated, mixed race concerts.

After Ertegun’s father died in 1944, Nesuhi moved to Los Angeles while Ahmet remained in Washington, ostensibly to study philosophy at Georgetown University. His extracurricular observations of record distributors, who seemed totally ignorant of the music they were moving, convinced him that he could do better.

Ertegun also convinced his family’s dentist, Dr. Vahdi Sabit, who invested $10,000 in the fledgling enterprise. Ertegun offered a partnership to the debonair jazz lover from New York City, Herb Abramson, also a dentist by training, who invested $2,500. Abramson had been a talent scout for National Records, the growth of which had not matched his ambitions. Like Ertegun, he believed there was a large vein of black music that merited greater exposure.

Atlantic Records was conceived in October 1947. Abramson was president and Ertegun was vice-president. Although initially housed in Manhattan’s Ritz Hotel, limited finances forced the pair to a cramped room in the Hotel Jefferson, which was later condemned. Ertegun and Abramson had their attention focused outside the office, however, hunting for talent across the country. There was also a desperate need for new material, which led to hasty compositions by Ertegun (transcribed by hired musicians) under the pen name “A. Nugetre.”

Raw, southern blues performed by sophisticated jazz players became the label’s trademark, although Abramson pushed the company to record a variety of more literary offerings. Atlantic’s strenuous efforts produced little income until they recorded “Drinking Wine, Spo-Dee-O-Dee” with Stick McGhee in 1949. This eventually sold 400,000 copies.

Rockin’ ‘n’ Rollin’ in the 1950s

In the 1950s the rock music industry had little respectability and performers were accorded none of the rights of other creative artists. The American Society of Composers, Authors, and Publishers (ASCAP), which for years had collected songwriter royalties for other types of popular music, would not even license rock and roll songs, a situation that did not change until the creation of Broadcast Music International. The stewards of the blues were particularly mistreated. Many, such as Muddy Waters and Little Richard, profited little from their creations, even after their songs were embraced by mainstream audiences.

Atlantic paid artists royalties, then an unprecedented practice. It took care of its artists in other ways, and Ertegun became known for his generosity—as well as a fair measure of self-indulgence. Acts such as Ruth Brown and the Drifters began to top the rhythm-and-blues (R&B) charts (which simply were not tracked in other charts, however great their sales). The Drifters caused a sensation in the south, where their records were banned because of their lascivious overtones.

The U.S. Army drafted Abramson in 1953 and he served two years as a dentist in Germany. Ertegun brought Jerry Wexler, a music journalist and fellow jazz lover, into the operation (the two can be heard singing backup on Big Joe Turner’s version of “Shake, Rattle and Roll”). Tom Dowd had been with the team as an engineer and was elevated to “producer.” Together the team began producing covers of the label’s black material by white artists for the “pop” market. The hits began to add up, as disc jockeys began to play more R&B music.

When Abramson returned in 1955, Ertegun and Wexler were caught up in the momentum of their success (although they could not raise the $45,000 needed to sign Elvis Presley to their label). Soon Ertegun convinced his brother to join the partnership. As Abramson’s wife was also a partner and worked in the office, and he had returned from Germany with a pregnant girlfriend, tensions were high. Abramson ran the newly created Ateo subsidiary for a few months before selling out his share of the company in frustration. After a fallow year, 1957, Atlantic went on to score several top 10 hits by the end of the decade. Bobby Darin earned two Grammy awards for one of these songs, “Mack the Knife.”

The New Sounds of the 1960s

Unfortunately, both Darin and blues singer Ray Charles soon left the label. But in 1959 the label’s salvation arrived on their doorstep in the form of Phil Spector, an aspiring Los Angeles songwriter who would become known for his distinctive “wall of sound” productions. He apprenticed with the songwriting and production team of Jerry Leiber and Mike Stoller, the talents behind many of Atlantic’s early successes, and supplanted them when they left Atlantic in 1961 after a disagreement over a royalty audit. In the same year Ertegun married his second wife, an aristocratic Romanian model named Mica Banu. Their subsequent social life distanced Ertegun from his business associates such as Wexler and Spector, who quit Atlantic on Ertegun’s wedding day.

After leaving Atlantic Leiber and Stoller spawned a string of hits recorded by girl groups on their newly formed Red Bird label. A proposed merger with Atlantic in 1964 failed. With the Beatles arriving for the first time in America that February, it was a dismal year for most competing record companies. The black R&B artists in whom Atlantic specialized would never again have the same hold on the masses. Ateo did manage a number one single in 1965, the folky ballad “I Got You Babe” recorded by Sonny and Cher. Atlantic also distributed the music of Stax Records, a small label in Memphis, or “Soulsville, USA,” and teamed with Fame Studios of Muscle Shoals, Alabama to produce Aretha Franklin’s first hits. The sound of Atlantic’s future, however, was not R&B, or folk, or pop, but the amalgamation of all types of American music that became known as simply “rock.” The group Buffalo Springfield, as well as its successor Crosby, Stills, and Nash, heralded the beginning of this new sound in the late 1960s. Atlantic also caught the British wave with the signing of Eric Clapton’s band, Cream, followed by the Bee Gees, Yes, and Led Zeppelin.

Wexler was anxious about losing the financial ground the company had made and persuaded the rest of the partners to sell the company in October 1967. Ahmet was particularly reticent about selling and, in hindsight, the price of $17.5 million seemed ridiculously low to observers, given the company’s 1968 sales of $45 million. Wexler and Ertegun were subsequently unable to buy the company back from the new owners.

Warner Seven-Arts was formed when a small film distributor bought the remains of the declining Warner Brothers film and music empire. Unlike Atlantic’s founders, Warner Seven-Arts management was interested more in profits and share value than in its artists. Nevertheless, Ertegun was able to leverage a better deal by threatening to quit. Seven-Arts CEO Elliot Hyman resigned first, however, before 1968 was over.

Warner Seven-Arts was itself bought by a diversified New York company known as the Kinney Corporation. The firm was originally built from family businesses and had acquired interests in real estate, parking lot, publishing, and office cleaning. Kinney’s CEO, Steve Ross, was able to persuade a reluctant Ertegun to remain at Atlantic Records.

Company Perspectives:

Initially conceived as a rhythm & blues and jazz label, the Atlantic label has been home to such groundbreaking artists as Ray Charles, John Coltrane, Aretha Franklin and Led Zeppelin. By the mid-1950s, Atlantic had become the premier R&B label, with artists like Ruth Brown, LaVern Baker, Charles Mingus and The Modern Jazz Quartet. In the ’60s Atlantic moved into the pop marketplace with top sellers by Bobby Darin and soul singers Otis Redding and Wilson Pickett. In the late ’60s and early ’70s, Atlantic tapped the British talent pool Atlantic had the leading label market share for the first six months of 1997. Also, Atlantic’s soundtrack to the Warner Bros, hit film Space Jam was the top-selling album for the first half of the year. Atlantic’s Rhino Records label signed an agreement with Ray Charles for exclusive North American rights to Charles’s ABC-Paramount, Tangerine and Crossover label master records from 1959 to the present. LeeAnn Rimes (Curb label) won two 1997 Grammy Awards—New Artist and Female Country Vocal Performance—and Riverdance on Celtic Heartbeat/ Atlantic was best Musical Show Album.

Wexler, somewhat perplexed by his loss of control under the new corporate umbrella and despondent over the displacement of his beloved R&B acts by the new wave of “rockoids,” moved to Florida in an to attempt to enjoy the spoils of the sale he had urged. With Wexler out of sight, Ertegun took over the day-to-day administration of the company.

Rolling through the 1970s and 1980s

In 1971 Ertegun signed the Rolling Stones, billed as “the greatest rock and roll band in the world.” As part of the terms of their deal a new subsidiary, Rolling Stones Records, was created for the group.

David Geffen, a manager at Atlantic’s corporate sibling the Ashley-Famous talent agency, founded Asylum Records in 1970 with financing from Ertegun. This label recorded a new generation of legendary west coast songwriters such as Jackson Browne and the Eagles. The hugely successful Asylum became a subsidiary of Atlantic in 1973. Eventually Elektra Records, which Warner had bought in 1970, was merged with Asylum in the hope that the wunderkind Geffen would improve its fortunes. He slashed Elektra’s roster and subsequently turned it into the world’s most profitable label.

Ertegun and Geffen had planned to merge Elektra/Asylum with Atlantic Records itself in 1974, becoming co-chairmen while at the same time demoting Wexler to vice-president. After the plan was canceled, Geffen took a position on the board of Warner Brothers Pictures, which he resigned after a year. After leading a relatively low-profile existence for five years, he formed the highly successful Geffen Records, also in cooperation with Warner, in 1980.

Wexler had returned to New York upon separating from his wife in 1973; his influence, however, had diminished in his five-year absence. He perceived a lack of support for his efforts to promote country music, such as the signing of Willie Nelson for his unsuccessful first album. Wexler parted company with Atlantic in 1975. He continued his career producing and consulting.

Atlantic signed Foreigner, one of the most commercially successful acts of the decade, in 1977. Genesis, Yes, and Pete Towns-end of The Who also sold their share of records for Atlantic.

A global recession fostered an atmosphere of caution at the beginning of the 1980s, but 1981 proved to be one of Atlantic’s best years. Although Atlantic released Peter Gabriel, former lead singer for Genesis, just before he reached international solo success, it scored more than its share of success with his old band and its new singer, Phil Collins, who would also become an international superstar on his own. Another of the decade’s great acts, the Australian rock band INXS, also recorded on Atlantic. It lost the Rolling Stones, however, to CBS Records, which agreed to pay the stellar fee of $24 million for the next four Stones albums. At the end of the decade Atlantic began to languish. Further misfortune arrived when Ahmet Ertegun’s brother, Nesuhi, died in 1989.

A Rising Tide in the 1990s and Beyond

Doug Morris, a veteran songwriter turned executive, began sharing the position of chairman with Ertegun in 1990, when revenues were $400 million. Like his predecessor, his closeness to music lent him credibility with artists. Before he left Atlantic and joined the Universal Music Group, Morris increased sales by creating or acquiring smaller record companies and encouraging their staff to take risks in signing new talent. The female R&B group En Vogue, the grunge band Stone Temple Pilots, rapper Snoop Doggy Dogg, and the confessional songwriter Tori Amos reestablished Atlantic’s position as market leader in the mid-1990s, in spite of its losses in 1992. One of the decade’s biggest sales sensations, the suburban rock band Hootie and the Blowfish, sold a staggering 14 million copies of its major label debut album. The subsequent launch of Jewel proved Atlantic had a reliable formula for creating superstars.

In spite of his track record, Morris was dismissed in 1995, prompting suits and countersuits. Val Azzoli, former manager for the Canadian rock band Rush, became co-chair and CEO of the Atlantic Group (with Ertegun) in January 1996.

Industrywide sales lagged in the mid-1990s, however, and even Atlantic was not immune. As a result, the Atlantic Group began to eliminate or consolidate several of its imprints in 1997 as well as trim its roster and staff. The debt assumed with Time Warner’s merger with Turner Broadcasting Inc. applied further pressure to cut costs. The number of new songs it released was scaled back by nearly two-thirds. Its market share hovered around eight percent, making it the leading label for most of the year.

Under the command of Azzoli and Ertegun, Atlantic continued to redefine itself. Unlike in its earlier days, when it had a relatively narrow focus, the 50-year-old company embraced a variety of styles of music and discovered a new appreciation for country performers such as LeeAnn Rimes. With its aggressive determination in breaking new artists, Atlantic seemed likely to keep making waves.

Principal Labels

Atlantic Records; Lava Records; Rhino Records; Curb Records; Atlantic Classics (Erato, Finlandia, Nonesuch, Teldec); Atlantic Jazz; Atlantic Nashville; Atlantic Theatre; Big Beat; Background; Breaking Records; Igloo; Mesa/Bluemoon; Modern.