In August, after 10 years as the head of Mercury Nashville and a year-and-a-half helping invent a new business model at Lost Highway Records, Luke Lewis took over MCA Nashville, the blockbuster record label that recently merged with Mercury and Lost Highway. With the retirement of MCA CEO Bruce Hinton, Lewis—the man who helped make Shania Twain a global superstar and the O Brother soundtrack an out-of-left-field phenomenon—now also oversees an elite group of MCA acts that includes George Strait, Reba McEntire and Vince Gill. The Universal Music Group (UMG), a division of the struggling French conglomerate Vivendi Universal, owns all three Nashville imprints.
With the merger, MCA Nashville and Mercury Nashville—two giant Music Row labels that have traditionally operated more or less independently from one another—are being consolidated under Lewis. Vital services including A&R departments, promotion teams and publicity staffs are being merged for the first time, resulting in shakeups of top-level personnel as Lewis builds his new management team. It’s a high-stakes gamble by UMG chief Doug Morris in New York. Adding to the uncertainty is the fact that UMG itself is said to be for sale because Vivendi Universal is desperate to reduce its $18 billion debt load.
UMG is by far the world’s largest record company; with marquis pop acts like Eminem, U2 and Ludacris, it grabbed a 28 percent share of the American album market during the first six months of this year—almost 12 points more than runner-up BMG, the German parent company of RCA. Mergers of giant media companies, however, don’t always portend greater profits. Since Vivendi teamed up with Universal, the price of the company’s shares has dropped 75 percent. (In another famous case of a media merger not living up to its money-making potential, Ted Turner has reportedly lost $7 billion personally since the merger of AOL and Time Warner in early 2000.)
For many insiders on Music Row—as well as the suits at UMG in New York—the question is whether Lewis, a freewheeling record exec who puts more faith in hunches than focus groups, can successfully fuse Mercury and MCA, companies that have been run very differently in the past. If Lewis wants a guide for the proper way to make Row mergers like this work, he need look no farther than a few blocks away, where the RCA Label Group’s Joe Galante has had stunning success with Arista Nashville, which was folded into RLG a few summers ago after operating for years as a separate label. A perfect example of the wrong way to merge companies is Lewis’ own parent company. Vivendi Universal is a mismanaged hodgepodge—a French water-treatment company whose 2001 revenues were still mainly in environmental services, but whose forays into American show business have been disastrous for its shareholders.
“I think Luke will do great,” says Tony Brown, the former president of MCA Nashville and co-founder of another small new label, Universal South. “He is that maverick. He has a lot of blind faith that right now you need in this business, because if you play by the rules you’re boring.”
The 53-year-old Lewis is not without his critics. Outspoken singer Toby Keith was dropped by Mercury in 1999 but went on to become a sensation at DreamWorks Nashville; he likes Lewis personally, but questions his ears. “Luke is not a music man,” Keith says. “We didn’t have any problems, but he comes from the business side. Luke is not like the Tony Browns or James Strouds [producers who run other labels]. Luke is a great seller of units.”
With sensations like Twain and the O Brother soundtrack to his credit, Lewis earned a reputation at Mercury as a guy who every few years hit a grand slam, but who rarely batted for a high average with the label’s other acts. “Except for Shania Twain, I wouldn’t have signed a single artist on Mercury’s roster,” one Music Row veteran says. MCA, on the other hand, is loaded with perennial hit-makers like Strait, McEntire and Trisha Yearwood. Ten years in a row, Billboard named MCA Nashville its country label of the year.
Turnover has also been high at Mercury, but not at MCA—another difference between the corporate cultures of the two labels, particularly between the mentoring style Hinton favored at MCA and Lewis’ shotgun approach. “Honestly, I don’t think there will be a 'corporate culture’ at Mercury, MCA or, for that matter, Lost Highway,” says Lewis. “The people who are here are here because they love what they do and have a genuine passion for the music and the artists we have. I’m not exactly a corporate kind of person. I want everyone at these labels to take creative risks and feel like their opinions matter. I’m not a believer [in] severe structure.”
One structure that has worked well for Lewis has been Lost Highway, the label he started in 2001 with Frank Callari, a savvy New Yorker who has managed acts ranging from Lucinda Williams to Marilyn Manson. Under their watch, the O Brother soundtrack has sold more than 6 million copies with almost no radio airplay. That runaway success in an otherwise down year for the industry helped validate a new business model not just for Lost Highway, but also for Universal South and the new DMZ imprint co-run by O Brother producer T Bone Burnett.
“I hope it’s a new business model,” says John Grady, the former O Brother marketing guru and Burnett’s partner in DMZ, a joint venture with Columbia Records in New York. (The label has already released an album by bluegrass patriarch Ralph Stanley and the soundtrack to the movie Divine Secrets of the Ya-Ya Sisterhood.) “From what I can tell, the old model doesn’t seem to be working particularly well,” Grady adds. “The attraction of a small label is to be light enough on your feet to move where the music’s going.”
“At a new label with brand-new artists, the deals are much smaller, so it’s just easier to make money quicker because the records don’t cost so much [to make],” says Tony Brown, whose new Universal South just scored a No. 1 single with “The Impossible,” the debut release of Arkansas honky-tonker Joe Nichols. (Brown shares 50 percent of the ownership of the label with co-founder Tim DuBois, who used to run Arista Nashville.) “Trust me, as the label grows and the star gets bigger,” Brown continues, “the budget gets bigger.”
Lewis has his work cut out for him as he figures out how to guide MCA, Mercury and Lost Highway in economically uncertain times. “The [profit] margins aren’t what they were and continue to be under attack,” Hinton says. “Every Nashville label is looking for cost efficiencies wherever they can find them. Luke sees a very evolving, highly changing marketplace. There are going to have to be new business models for country music for any of the labels to be significantly profitable.”
At Mercury, Lewis gambled and lost when he hired Alan Jackson producer Keith Stegall as his head of A&R—an unconventional selection. Stegall’s replacement in Lewis’ new organization is also an unusual pick: veteran publisher David Conrad of Almo/Irving Music. It is vital to Lewis’ success that Conrad strengthen Mercury’s thin roster over the next few years. Moreover, Lewis will need to be a better ambassador and build bridges with many inside the old MCA organization who are worried about their uncertain futures. At the very least, though, he can look to Lost Highway as one template for success.
When Luke Lewis was growing up in Florida, one of his friends was Gram Parsons, the country-rock pioneer who envisioned a synthesis of country, rock, gospel and soul he called “Cosmic American Music.” Parsons’ doomed genius still inspires Lewis, who perhaps sees some of the same artistic guts in a Lost Highway roster that includes volatile young rocker Ryan Adams and 69-year-old Willie Nelson.
“Lost Highway was created to afford artists the opportunity to make the type of records they wanted to,” Lewis says. “The roster is unique in that these acts have already come to the table with a touring base or some kind of word-of-mouth, which allows us to build on these elements. We’re blessed with incredibly talented artists, and a handful of executives who would lie down for this label.”
