Capitol Records, Inc.

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Capitol Records, Inc.

1750 North Vine Street
Los Angeles, California 90028-5209
U.S.A.
Telephone: (323) 462-6252
Fax: (323) 467-5267
Web site: http://www.capitolrecords.com

Wholly Owned Subsidiary of EMI Music
Incorporated: 1942
Employees: 2,200 (est.)
Sales: $286 million (2007 est.)
NAIC: 334612 Prerecorded Compact Disc (Except Software), Tape, and Record Reproducing; 512220 Integrated Record Production/Distribution

Capitol Records, Inc., is a wholly owned subsidiary of EMI Music, the recorded music division of EMI Group, one of the world's leading recorders, publishers, and retailers of music. With a rich and revered history in the pop music industry, the Capitol record label was once home to such icons as Frank Sinatra and the Beatles. Today Capitol Records markets music in a wide range of popular genres, including pop, rock, alternative, rhythm and blues (R&B), and hip-hop. Based in Los Angeles, California, the company operates as part of EMI's Capitol Music Group, alongside the U.S. operations of Virgin Records.

WARTIME LAUNCH, POSTWAR GROWTH

Capitol Records was founded by Johnny Mercer, Buddy DeSylva, and Glenn Wallichs shortly after the United States entered World War II. Mercer was a songwriter from New York City who came to Hollywood in 1935 to write songs for RKO Studios. DeSylva was a successful songwriter and an executive producer at Paramount Pictures. Wallichs was the founder and owner of Music City, a popular record outlet located at Sunset and Vine in Hollywood, where customers could buy radios, records, and sheet music for their favorite songs, after sampling records in private listening booths. With $25,000 in start-up capital, provided by DeSylva, Mercer set about signing talent while Wallichs ran the business.

Envisioning a West Coast-based music recording studio, the three pooled their creative and business talents to make it happen. In June 1942 Capitol Records issued its first release: a 78-rpm shellac platter featuring Paul Whiteman's New Yorker Hotel Orchestra. Just three months later the fledgling record company had two records on Billboard's Top 10 chart: "Cow Cow Boogie" sung by Ella Mae Morse and "Strip Polka" written by Johnny Mercer. The company's offerings grew rapidly as did its fortunes. By 1946 the company had sold 42 million records and was firmly established as viable competition for the Manhattan-based Big Three of the record industry: Columbia, Decca, and RCA Victor. After the war, the company's 33⅓ rpm records made of vinyl rather than shellac, as well as the smaller 45s containing single songs, gained in popularity.

Among the artists to sign with Capitol Records during the 1940s were Nat King Cole, Bing Crosby, Peggy Lee, Stan Kenton, Billie Holiday, and Les Paul. Children's records were also introduced during the mid-1940s, with educational records such as Rusty in Orchestraville and Sparky's Magic Piano, which featured music and narrative meant to help children learn about musical instruments and appreciate the music of classical composers. To close out the decade for Capitol, a Canadian office and studio was established in 1949.

THE FIFTIES IN A BOOMING INDUSTRY

As the 1950s began, Capitol Records moved into new office and studio space adjacent to the Paramount Pictures lot. The company soon became the leading label for movie soundtrack recordings, with such favorites as Oklahoma!, Carousel, and The King and I among the early top sellers. During the 1950s the company established its prominence as a commercially and artistically successful pop music label. Artists signed during the decade included the Andrews Sisters, Judy Garland, Jackie Gleason, Andy Griffith, the Kingston Trio, Dean Martin, and Nancy Wilson. Les Paul was among the more popular Capitol artists. He advanced the technique of overdubbing using electric guitar to layer tracks of music on top of original recordings to enrich the sound. He and Mary Ford had several hits for Capitol, including "Vaya con Dios" and "Mockin' Bird Hill." Also during this time Tennessee Ernie Ford's gospel hymn albums became bestsellers.

Record sales more than tripled between 1954 and 1958, while the number of records released by the company quadrupled. Capitol was a charts-topper in 1955 and early 1956 with several number one hit records. Moreover, the company cultivated its image as the fresh, innovative force in the music recording industry. In a June 1992 Billboard magazine feature marking the 50th anniversary of Capitol, Al Coury, former senior vice-president of promotion, noted, "We were always in the foreground of developing new ways to expose our music and to work closer with the retailers. We were the young, aggressive company in those days."

In 1955 the British company EMI (Electric & Musical Industries, Ltd.) acquired Capitol for $8.5 million. The following year, EMI built the Capitol Tower, the world's first round office building, to house the offices and recording studios of Capitol Records. Designed to resemble a stack of vinyl LPs, the cylindrical building with the tall spire quickly became a Hollywood landmark. The 150-foot-high building was the tallest allowed in earthquake-prone Los Angeles. A red light atop the building has spelled out the word "Hollywood" in Morse code every few seconds since 1956, except for a period in 1992, when it was changed to blink "Capitol 50" during the company's anniversary celebration. It was reset to the original signal the next year.

Another development of the mid-1950s was the emergence of rock and roll. Capitol enjoyed commercial success in this new genre with Gene Vincent's "Be-Bop-A-Lula" in 1956, but overall the label was relatively slow to adapt to this shift in the popular culture. It was most adept at blending pop and jazz in such popular artists as Frank Sinatra, whose Capitol career included 19 albums released between 1954 and 1962. It was not until the mid-1960s that Capitol really began promoting rock and roll, but when they did it was with the cream of the crop.

COMPANY PERSPECTIVES

Capitol Records is one of the leading recording labels in the U.S., sporting a talent roster that includes such artists as Lily Allen, the Beach Boys, the Beatles, Beastie Boys, Coldplay, the Decemberists, Faith Evans, Interpol, Shelby Lynne, Corinne Bailey Rae, Bonnie Raitt, and the Shout Out Louds. The label also distributes R&B and hip-hop albums through its Priority Records imprint, which boasts such top sellers as Ice Cube, Nelly, and Snoop Dogg, as well as newer artists such as Chingy, Houston, and Slum Village. The label is part of U.K.-based music giant EMI Group. It operates as part of EMI's Capitol Music Group, alongside the U.S. operations of sister label Virgin Records.

TRIUMPH AND TURBULENCE IN THE SIXTIES AND SEVENTIES

In 1962, Capitol released the Beatles' first U.S. single, "Love Me Do." The Beatles were already under contract with Capitol's parent company EMI in the United Kingdom, and Capitol was able to obtain the U.S. distribution rights. Another major score during this time was the Beach Boys' first album, Surfin' Safari. By the end of the 1960s, the two groups together had released 26 gold albums. All other Capitol artists combined could not match that success. Coinciding with the company's 25th anniversary in 1967, sales for the year exceeded $100 million for the first time. Sixteen Grammy awards, or one-third of all awarded for the year, went to Capitol Records artists. By the end of the 1960s, Bob Seger and the Steve Miller Band had signed with Capitol Records. Other notable artists on the label during the decade were Bobby Darin and country singers Glen Campbell and Bobbie Gentry.

The 1970s began for Capitol with the Beatles' Abbey Road at number one on the charts. After 13 top albums in the 1960s, the future seemed bright for both the Beatles and their record label. On April 17, 1970, however, that era came to a sudden end when the Beatles announced they would go their separate ways. Since the early 1960s, Capitol had counted on releasing at least one hit Beatles album every year. The label lost more than $8 million in the fiscal year 1970–71, following the Beatles' breakup. In April 1971, company cofounder Glenn Wallichs, retired for many years and terminally ill with cancer, stepped in to help turn the financial picture around. He persuaded EMI management to appoint as president Bhaskar Menon, a 37-year-old music industry veteran who had risen through the ranks at EMI to become CEO of that company's Indian subsidiary and then of international operations in London. Under Menon, the company was by the following year profitable again.

In 1973 Capitol/EMI released Pink Floyd's Dark Side of the Moon, while other Capitol artists, including the Steve Miller Band and Grand Funk Railroad, enjoyed chart-topping success with albums and hit singles. The Beatles' compilation albums Red and Blue were also doing well. The former Beatles each had Top 10 albums of their own, as well. It was also a good year for female vocalists on the label: Helen Reddy was the top female solo artist for the year, and Anne Murray scored a Top 10 hit with "Danny's Song." The year 1975 brought gold albums for the Beach Boys, Glen Campbell, Natalie Cole, George Harrison, Paul McCartney & Wings, Helen Reddy, and Linda Ronstadt. Other successful Capitol artists of the 1970s included David Bowie, Rosanne Cash, Bonnie Raitt, Diana Ross, and Bob Seger.

DECADE OF INNOVATION IN THE EIGHTIES

In the early 1980s, the digital audio compact disc (CD) was introduced by electronics giants Philips and Sony. EMI, and thus Capitol Records, did not immediately embrace the new format. Recalling the short life cycle of 8-track cartridge tapes, for example, EMI was wary of investing capital expenditures in another technology that might soon become obsolete. However, it became almost immediately apparent that EMI would have to adopt the format, and before long the company found that CDs allowed increased efficiencies in manufacturing and distribution worldwide. In a joint effort with Toshiba, EMI released its first CDs in Japan in 1982, and in 1983 Capitol Records joined the revolution as EMI launched CD sales in Britain, Europe, and the United States. By 1988 more CDs than LPs were sold worldwide. Less than a decade after its introduction, the CD had virtually replaced the vinyl LP as the dominant recording format.

KEY DATES

1942:: Capitol Records is founded by Johnny Mercer, Glenn Wallichs, and Buddy DeSylva.
1946:: The company has sold over 40 million records.
1950:: A recording studio on Melrose Avenue in Hollywood is opened.
1955:: Capitol Records is acquired by EMI.
1956:: The record-shaped landmark Capitol Tower is built on Vine Street near Hollywood Boulevard.
1962:: The Beatles' first single, "Love Me Do," and the Beach Boys' first album, Surfin' Safari, launch a decade of rapid growth for the company.
1967:: Capitol Records celebrates 25 years, recording annual sales of more than $100 million and 16 Grammy awards.
1975:: The Beach Boys, Glen Campbell, Natalie Cole, Linda Ronstadt and others achieve gold album status for Capitol.
1991:: Billboard magazine ranks Capitol Records as the No. 2 label for pop album activity.
1997:: Capitol Records begins selling downloadable singles.
2006:: Parent company EMI Group announces the sale of the Capitol Records Tower in Hollywood.
2007:: EMI North America merges Capitol Records and Virgin Records into the Capitol Music Group, headquartered in New York.

In 1987 newly appointed Capitol/EMI CEO Joe Smith determined that the Capitol labels had become staid and unprofitable, its focus diluted by too many different priorities. Quoted in Billboard magazine in June 1992, Smith recalled: "We knew we had to do something to stop the blood from flowing—that was the first step. We had to get out of businesses and close down labels and restructure." Another priority was to refocus on developing talent rather than simply chasing hit songs. Hale Milgrim, Capitol Records president from 1989 to 1993, told Billboard in 1992: "I don't think Capitol was developing as many artists for the long-term as a number of other labels in the business were. They were looking more for that quick pop/urban hit. And they were having success with a number of acts that gave them that, which was fueling that attitude."

Capitol's artists of the 1980s included the Beastie Boys, Billy Idol, Duran Duran, Iron Maiden, Megadeth, Queen, Red Hot Chili Peppers, Brian Setzer, the Smithereens, and Tina Turner. Artists were signed in a wide range of genres, including pop, punk/hard rock, rap, jazz, and soul. The last three years of the decade set the stage for the company's financial recovery and return to prominence in its industry.

MINING THE PAST AND BUILDING THE FUTURE

The 1990s began on a high note for Capitol Records. One album, MC Hammer's Please Hammer Don't Hurt 'Em put the label back in the Top 10 on the singles chart, three times over, and sold more than 10 million copies in 1990. Under the leadership of Capitol/EMI CEO Smith, Capitol had returned to profitability within three years. In December 1991 Billboard 's "The Year in Music" ranked Capitol second among U.S. commercial record labels for pop album activity. That same year the company announced a catalog-revitalization effort designed to mine the best of an archive that featured works by such luminaries as Nat King Cole, Judy Garland, Frank Sinatra, the Beatles, and the Beach Boys. The successful 1990 release of a Sinatra boxed set led to November 1991 releases of Les Paul and Judy Garland boxed sets.

While celebrating the company's 50th anniversary in 1992, Capitol's leadership was looking to the future as well as the past. The company signed production deals with five imprints to expand Capitol's A&R (artist and repertoire) development efforts in genres such as alternative rock and heavy metal. Art Jaeger, executive vice-president of Capitol Records, explained in Billboard magazine in February 1992 that the companies would receive marketing, promotion, and sales support from Capitol, noting: "It's fair to say that [Capitol is] financing these labels … [but] I want 90% of my money going into the A&R, and only 10% going into the overhead."

The following year saw a sudden leadership change at the top of the organization: both Jaeger and company president Hale Milgrim resigned and Gary Gersh, formerly an A&R executive with Geffen Records, was appointed president and CEO of Capitol Records in June 1993. According to Billboard magazine, parent company EMI would pay at least $7 million to buy out the ousted executives' outstanding contracts. Gersh told Billboard that his threefold mission was to create stability and focus in terms of company direction; restore Capitol's reputation as a creative place where people in the industry want to work; and nurture a "familial" environment within the company.

The 1990s saw the dawn of the Internet and the World Wide Web as a cultural and business phenomenon. In 1994 Capitol Records made its first big online splash with an interactive web site "town" called Megadeth, Arizona, created to promote an upcoming release from the metal band Megadeth. At the web site, users could listen to audio clips; some full cuts, others 30-second samples. Video clips, a chat room, band tour news, and a "souvenir shop" were all features of the web site. Explained the site's designer, Robin Bechtel, in Billboard magazine: "We wanted it to be more interesting than other music-type on-line areas—more than just bios and lyrics—so that it will be a destination for anyone traveling on the Net." Downloadable features included electronic postcards and screensaver. In March 1995 the Entertainment Marketing Letter reported that the web site was so popular, with more than 70,000 hits per day, that its online presence would be extended indefinitely. The company's online marketing efforts expanded to include digital postcards promoting a Beatles project and an online tie-in to retail sales of a Duran Duran album in April 1995.

In 1995 a restructured international department led to new global marketing success for Capitol Records. By March 1996 Bob Seger's Greatest Hits album had gold record standing in the United Kingdom, platinum rating in Australia, double platinum in New Zealand, and triple platinum in Canada. Other Capitol artists to enjoy new international success through this initiative were the Beastie Boys, the Foo Fighters, Megadeth, and Richard Marx. Also in March, Capitol Records announced that its urban music unit would merge with EMI Records to allow Capitol to refocus on rock, alternative, and pop artists. The following year, Capitol Records announced a three-year joint venture agreement with Miramax/Dimension Films to cofinance film soundtrack albums. Also in 1997, Capitol made its first downloadable single (Duran Duran's "Electric Barbarella") available for sale via the Internet. The technology used offered built-in copyright protection and royalty payment accounting features.

Successful Capitol artists of the 1990s included Coldplay, Everclear, Ice Cube, Jane's Addiction, Kotton-mouth Kings, MC Hammer, Liz Phair, Lisa Marie Presley, Radiohead, Selena, and Richard Thompson. Sales of two Garth Brooks albums reached $7 million (1997) and $6 million (1998). In 1999 parent company EMI began negotiating a deal with Time Warner in pursuit of a joint venture to merge the Warner Music Group and EMI's music concerns. Although an agreement was struck in early 2000, the European Commission regulatory body blocked the merger that would have made Capitol Records a North American label in the second largest music company in the world.

NEW MILLENNIAL DIRECTIONS

In March 2001, Andy Slater was named president and CEO of Capitol Records, reporting to Ken Berry, president and CEO of EMI Recorded Music. Although he had never run a record label, Slater's extensive artist management and production experience was prized by Capitol's parent company, EMI. As reported in Business Wire on March 27, 2001, Berry said of Slater, "His impressive track record in discovering exciting new talent will prove invaluable" to EMI. Over the next several years, Slater successfully increased Capitol's revenues with artists such as Chingy, Corinne Bailey Rae, and Liz Phair, and with British groups Coldplay and Radiohead. For the company's 60th anniversary in 2002, Capitol released a six-CD boxed set, one per decade, accompanied by photos and essays.

In a restructuring move in January 2007, EMI merged the company's U.S.-based Capitol and Virgin labels to form the Capitol Music Group. Slater was out, and Jason Flom—then chairman and CEO of Virgin Records—moved to the dual position at the head of the new group. The new company would be headquartered in New York City, while a less robust West Coast presence would remain in Hollywood. The merger was part of a companywide realignment intended to yield savings of $217 million for the EMI Group.

In September 2006, in a move that may have foreshadowed the 2007 restructuring, parent company EMI announced that the iconic Capitol Tower—the landmark building that had stood at the corner of Hollywood and Vine in Los Angeles for 50 years—would be sold to Argent Ventures, a development company based in New York. The Capitol Music Group planned to maintain its West Coast presence there, while Argent planned to build additional office space alongside the famed tower.

While the Capitol Music Group was being configured in early 2007, the American music industry was experiencing a downturn. With widespread availability of downloadable MP3 music files, the sale of CDs in 2006 fell 4.9 percent from the previous year's numbers. In January 2007, only 34.1 million CDs were sold, representing a 40 percent decline in monthly sales since 1997. Not all of the year's early news was bad for Capitol. In March 2007, the top chart spots on the Billboard Hot 100 and Hot Country songs were both held by Capitol artists: rapper Mims and country singer Trace Adkins. This was the first such double-header for Capitol since November 1976, when the Steve Miller Band and Merle Haggard had the same simultaneous chart success.

In 2007 the Capitol Music Group began digital delivery of promotional materials for upcoming album releases. Instead of mailing out specially marked advance promo CDs, the company sent its media contacts links to streaming audio and security tagged MP3 files. Potential cost savings were thought to be significant: If a company released 50 major albums every year, switching to digital audio and video promotion from physical press packages could save as much as $500,000 in annual marketing costs.

In another move to make the most of Internet technology, Capitol created "The Tower," an online nightclub at There.com, a popular virtual world where members created animated online "bodies" for themselves, called avatars, and then engaged in social interaction with other members. During scheduled artist appearances, fans would be able to chat with band members online. The first virtual nightclub's concert was held July 10, 2007, featuring Mims, with Yellow-card, Korn, the Beastie Boys, and Lily Allen slated to follow.

Pamela Willwerth Aue