It seemed like an answer to the industry’s prayers. Allan Gregg’s record label promised to combine the artistic integrity of an indie with the corporate clout of a major. But in the end, the clashing cultures at Song Corp. couldn’t make beautiful music together.
By David Hayes, ˆ February 2004
When Molly Johnson met Allan Gregg in the summer of 2000, she found him utterly charming. Gregg, the political pundit, market research expert and former Tory strategist, had just launched Song Corp., a record company that seemed to offer the same services as the Canadian subsidiaries of the big multinational majors, but with the personal touch and artistic integrity of an indie label. Johnson was looking for distribution for a jazz recording she’d made with her partner, Steve MacKinnon. Gregg, who can be ingenuously frank, admitted he knew next to nothing about jazz but was interested because others had raved about the record. “I thought, nobody admits that they don’t know something these days,” recalls Johnson. “I thought it was great that he was man enough to say that to me.” So Johnson enthusiastically suggested that Gregg listen to a few of her favorite jazz albums by the likes of Miles Davis and John Coltrane, and Gregg agreed to distribute her record.
Johnson had been waiting for her big moment ever since 1990, when she and her edgy funk-soul band The Infidels signed with New York-based I.R.S. Records, the label that had launched The Police. The record received a glowing review in Rolling Stone, but I.R.S. collapsed and Johnson was soon tied up in legal knots. In the mid-`90s she was ready to try a new approach. In collaboration with MacKinnon, a local producer and songwriter, she recorded a collection of jazz tunes, financed by MacKinnon and some partners. When MacKinnon shopped it around, the big multinational record companies politely rebuffed him. The pop labels thought the record was too jazzy and the jazz labels found it too poppy.
Song released the album, Molly Johnson, in the fall of 2000, and it sold nearly 10,000 units by Christmas, respectable for an independent record. With Song’s support, Johnson and MacKinnon figured on carrying the sales momentum into the summer jazz festival season, when Johnson would be performing for large audiences across the country. By February 2001, though, they were rattled. Rumours circulated wildly about Song. Its share price had plummeted and its most significant client had left. It had laid off staff. Sales and royalty statements – and cheques – had stopped coming.
In early May 2001, its shares trading at half a cent, Song filed for bankruptcy. Its debts – $8.2-million worth – reached into the heart of the Canadian music industry, hurting scores of artists, including The Tragically Hip, Murray McLauchlan, Grapes of Wrath, Jane Siberry, Tom Cochrane, Maestro, Shirley Eikhard, the Nylons, Lee Aaron and Amy Sky.
Johnson and MacKinnon were among the unsecured creditors; they were owed nearly $50,000. What had seemed like the nervy breakthrough Molly Johnson had been striving toward was turning into a nervous breakdown. She did her 2001 summer tour as planned, but her well-attended concerts had a twist. It may have been the first time an artist touring in support of a record pleaded with fans not to buy the record, since proceeds went straight to the bankruptcy trustee.
“When other kids were getting Davy Crockett hats,” Allan Gregg recalls of his Edmonton boyhood, “I wanted Fats Domino records. Music has always been the centerpiece of my passion. Song Corp. was a financial, but also a personal and very passionate, goal.”
It’s August 2001, three months after the bankruptcy, and Gregg is drinking espresso at a Timothy’s near St. Clair and Yonge, around the corner from his office at The Strategic Counsel, his public opinion research consultancy. A compact man of 52, with a trimmed beard, a ruddy complexion and dark eyes that occasionally flash with intensity, he’s wearing a navy shirt, black jeans and sandals. Asked about the vision behind Song Corp., he says: “My fuckin’ genius was going to be applied to that end. But I had no interest in running the day-to-day operations of a music business. None. Zero. I was persuaded that the guys we’d hired were perfect. They would run the company. I would think big thoughts, run a publicly traded company, which I would be good at because I’m a good talker, good at presenting, good at PR…”
He takes a Panter Mignon cigarillo from its black box. “I would work on artistic development, which I love with a passion. I was CEO simply to maintain the pretext that I was in charge because the people who were raising the money loved the story, but in no small measure believed in me. That’s who they were reaching into their pockets for.”
Gregg and his younger brother grew up in a strongly Christian, middle class family. His father worked as a salesman at Eaton’s; his mother took in foster children and eventually adopted three of them. At the University of Alberta he bounced from anthropology to law to political science. It was the Woodstock era and Gregg played in garage bands, dreamed of being a rock star. He began promoting concerts but his career ended ignominiously when a band reported to be the reformed Yardbirds turned out to be a fraud. Having lost $35,000, the chastened 17-year-old left the music business to concentrate on graduate studies. In 1975, while working on a PhD in political science at Carleton in Ottawa, he began doing research and polling work for the federal Tories.
He’d found his métier. Four years later, at a time when affordable computer technology could provide highly accurate information for the right person to interpret, he started Decima Research. He made his name as Brian Mulroney’s pollster, got rich from corporate clients, but retained an anti-establishment swagger: he sported a rat’s tail, a diamond ear stud and a floor-length black leather long-rider’s coat.
He also dabbled in the music business, starting a small label, A.R.G. Records, and buying an interest in a heavy metal magazine. In 1987, he financially backed an aggressive young artist manager named Jake Gold, who modeled himself after Bruce Allen, the abrasive – and effective – Vancouver-based manager of Bryan Adams. Two years later, Gregg and Gold became partners in The Management Trust. Their principal act: an unknown band from Kingston called The Tragically Hip. The major record companies showed no interest, so Gregg and Gold invested in a low-budget recording and promoted it. Over the years, the Hip attracted a huge cult following and sold more than eight million records world-wide. Gregg and Gold rode the momentum adroitly, and in the 1990s signed two more acts – The Watchmen and Big Wreck – both of which had been passed over by the majors. They, too, went on to successful careers.
In 1993, Gregg’s father died; less than two years later, so did his wife, Marjorie. Grieving, Gregg raised his three young children and divided his working time between The Strategic Counsel (which had co-founded after selling Decima Research to a public relations conglomerate), a new interview show on TVO, and his part-time job as president of Viacom Canada Ltd., a subsidiary of the U.S. media giant that controls Paramount Pictures Canada, Famous Players and other cultural interests. By 1999, equilibrium somewhat restored, he asked himself: What do I want to do with the second half of my professional career? The answer came instantly: Make my passion my vocation.
Gregg saw opportunity in the $1.5-billion domestic music industry. The major record companies were growing larger by acquiring independent labels and consolidating within multinational corporate umbrellas. By 1998, six majors – Universal, Polygram, Warner, BMG, Sony and EMI – collectively controlled close to 90 per cent of the Canadian market. Then, Edgar Bronfman Jr.’s Seagram Co. bought record giant Polygram and merged it into Universal Music Group, creating the world’s largest music company (and reducing the number of majors to five). In the U.S., casualties included 3,000 employees and an estimated 200 artists. Many labels went down.
As the majors’ distribution systems grew replete with their own proprietary artists and labels, who would accommodate independent product? And what about the Canadian industry? “I saw that there was no strong indigenous Canadian music industry,” Gregg says. “Not to be dismissive, but there are a bunch of lifestyle businesses that go under the guise of music businesses.”
An archetypal figure in the music business is the quintessential “record guy” with “good ears” – a knack for identifying hit songs and tomorrow’s stars. Since Gregg hadn’t spent his career in the business, it was hard to know whether he had “good ears,” The Hip’s success notwithstanding. Still, a talent for dealmaking and a knowledge of such things as “recoupable items” and “cross-collatorization” had become equally important and Gregg imagined that by combining his talent as a visionary, his business background, his love of music and his experiences with The Management Trust, he just might conquer the industry.
Gregg dubbed his vision the “Song Difference.” As a “mini-major” – a Canadian independent positioned between the five majors and the independent sector – Song would combine the virtues of size with an independent’s flexibility and street credibility. It would be kinder and fairer to its artists, grooming them for long-term careers.
Song had the three-legged stool structure of a major; the label itself, which signed artists and produced and promoted records; the publishing leg, which dealt with the administration of a roster of songwriters and a broadly based catalogue of songs; and the distribution division, which packaged and warehoused the records as well as delivering product to retail outlets. The company’s viability would really depend on the third leg. For a start-up, the relatively quick turnaround of profits in distribution would provide essential operating income to cover – if not exceed – overheads for the first year or so. That meant exploiting existing business, yes, but Gregg suspected that further consolidation would result in a greater number of independents seeking alternative distribution.
Another bit of happy timing fed Gregg’s dream – the tremendous liquidity in Canada’s capital markets. In the late 1990s, dot-com fever was at its height and there seemed unlimited possibilities. The idea, the vision, seemed bulletproof, and the capital was out there.
Of course, Gregg wasn’t the only one in the business sensing opportunities at this time. Al Mair, founder and president of Attic Records, had become a Canadian music legend, founding his company in 1974 with $300,000 and releasing albums by, among others, Lee Aaron, Triumph, The Nylons, Haygood Hardy, Downchild Blues Band, The Irish Rovers and Maestro Fresh-Wes, Canada’s first rapper. In addition to signing artists and making records, Mair negotiated licensing arrangements with international artists and labels to represent them in Canada. Attic itself had always been distributed by one of the majors. Until recently, that had been Polygram, but since the merger Mair hadn’t been feeling satisfied with his new relationship with Universal.
While Gregg was working on Song, Mair was talking with Bill Ott, former president of Polygram’s distribution division, who’d lost his job after the merger. He told Mair the time was right for a Canadian distribution company that offered the services of a major but had the artist-sensitive culture of an independent, and wondered if it might become part of an expanded Attic. Then Gregg met with both men and proposed that Mair’s Attic Records and Ott’s planned new distribution company (which he’d named Oasis) become part of Song Corp.
With this deal falling into place, Gregg turned his attention to Song’s publishing component. The best bet was TMP (The Music Publisher), which had a catalogue of more than 3,600 titles, including works by Murray McLauchlan, Jane Siberry and Tom Cochrane. It also had the rights to songs by successful composers such as Dean McTaggart (who’s written hits for Amanda Marshall, Wynonna and Terri Clark), and John Capek (Rod Stewart, Cher, Anne Murray and Natalie Cole).
TMP was run by its founder, Frank Davies, a small, bright-eyed man who had worked for EMI and Liberty Records in his native England before coming to Toronto in 1970. He co-founded Daffodil Records, whose roster of artists included early Canadian rock legends Crowbar, King Biscuit Boy and A Foot in Coldwater. Later he ran the Canadian office of international publisher ATV Music Group, which was bought in 1985 by Michael Jackson. He formed TMP shortly thereafter, and in 1994 sold a majority interest to Alliance Communications, staying on to run the company.
By 1998, however, when Alliance merged with Atlantis Communications Inc., it was clear that TMP was outside the new corporation’s focus as a producer and distributor of film and TV. Davies, who fussed about his artists and their songs like a mother hen, knew Gregg a little and liked the idea of Song. Other companies were interested in TMP, but Davies advised Alliance Atlantis that Gregg’s proposal was the strongest.
Around this time, Gregg met Nelson Smith, head of investment banking at Yorkton Securities, the leading Canadian investment dealer in junior technology underwriting. Yorkton, some said, had practically created Canada’s publicly traded Internet sector. Smith also ran Yorkton’s media and entertainment division. Of Song Corp., he says: “It was entertainment, so that initially caught my attention. And obviously when Allan Gregg walks into your office you pay attention because of who he is and what he’s done.”
Gregg and Smith teamed up and took a dog and pony show to investors across Canada. Armed with statistics, Gregg pointed out that record sales consistently exceed global box office receipts for films. Even successful “small” movies, like The Crying Game or The Piano, require production budgets of at least US $8-10-million, and advertising and promotion budgets of that again.Recording budgets, however, rarely exceeded half a million dollars and promotion costs a fraction of what it does for film because radio and music video TV provide what amounts to free advertising. Not to mention that Song, as a Canadian-owned independent, could benefit from various government funding programs aimed at the domestic music industry.
Creating hit records and turning artists into stars is an expensive crap shoot with daunting odds. Yet the business is attractive, in part, because of the way artist deals are structured. The costs of a record’s production – plus half of the costs of video production, tour support, marketing and promotion – are recoupable out of the artist’s share, usually 10 to 15 per cent of record sales. Even when artist royalties have paid back these costs, companies hold 30 to 50 per cent of further royalties “in reserve,” doling them out over time. Other ancillary costs are also deducted from royalties. As Gregg wrote in the Song Corp. proposal: “Cash management and payment structures are decidedly in favour of the record company.” Or, as he put it more graphically at investor presentations: “We loan artists money to build their house, and when they’ve paid off the house we own it.”
Investors loved the proposal. Nelson Smith said of Gregg: “He looks like a rock star and he sounds like the chairman of the board.” Gregg and Smith secured a commitment of $33-million, though the business plan called for only half that. Wanting to leave funds to return to if necessary, they completed a $15-million private placement at $1.10 a share. To take Song Corp. public, they executed a reverse takeover of Tertiary Mines Ltd., a junior company on the Alberta Stock Exchange. After underwriting and related costs, Song was launched with $12.5-million. A kiss to build a dream on.
The first step was to create the label. Song acquired Attic Records by paying Al Mair $5-million, plus a deferral worth, depending upon Attic’s performance, another $2-million to $3-million. (Attic brought with it some $1.8-million in assets, making Mair’s upfront payout closer to $3.2-million.). Song then paid Alliance Atlantis $2.2-million for TMP, plus $3-million as an advance in exchange for the administration of Alliance Atlantis’ film and TV music catalogue over eight years. (Song would, according to Gregg’s calculations, earn back that $3-million in a couple of years.) All this was done even before a chief financial officer had been hired.
Gregg had one in mind, though. He’d met Bill Dawson in the mid-1980s when Dawson had been CFO of Public Affairs Resource Group, which by then owned Gregg’s Decima Research. Later, Dawson became chief operating officer of Alliance’s broadcast group, which was winding down after the Atlantis merger when Gregg approached him in 1999. He came aboard as COO and CFO, at a time when most of the work on the public offering had already been completed. Dawson didn’t know much about music but he knew something about entertainment. Besides, business is business, as he liked to say. “It doesn’t matter whether it’s a widget or a film or a piece of music. Regardless of what entertainment purists say about being there to service the artists, as a public company you’re there to build shareholder equity.”
How many euphoric investors, one wonders, bothered to read the pro forma in the prospectus? “The success of Song Corp. will depend in part on its ability to establish and maintain business relationships with music industry participants…” And more telling: “The music industry involves a substantial degree of risk. It is highly competitive and several competitors are significantly larger and have substantially greater financial, technical, personnel, marketing and other resources than Song Corp.”
“The choice was to build volume quickly or slowly,” explains Al Mair. “To build it quickly had the most appeal. No one has picked up on the fact that when Allan raised the money, he was offered $32-million. We expected to get the shares up to the three-or-four dollar range, at which point we’d go back to get the rest of the money. We looked upon that other $17-million as a given, so to speak.”
It’s an overcast summer day in 2001 and Mair is at an outdoor table at a restaurant in the middle of High Park, not far from his home. He’s widely viewed as a gruff, antisocial hardass, and a few other things as well – he harkens back to the entrepreneurial dealmakers who founded most of the post-Depression era record companies in the U.S. With his broad face, close-cropped gray beard and hair, yellow patterned shirt and green trousers, he looks like a retired Sears executive with a Florida time-share. “If we hadn’t felt that investment was guaranteed we wouldn’t have built the company the way we did,” he says, characteristically tense, avoiding eye contact. “We would have done it on a much smaller scale.”
Given Allan Gregg’s expertise – The Strategic Counsel, in addition to doing focus groups and undertaking other research, advises companies on branding – it seems odd that Song didn’t integrate its elements into one brand. Instead, Song Corp. consisted of the three subsidiaries: Attic Records, TMP and Oasis Distribution. (The rationale was that Attic and TMP were recognized entities in the music business. But after some confusion at a trade fair, the subsidiaries were belatedly branded Song Recordings Inc., Song Publishing Inc. and Song Entertainment Distribution Inc.)
A big challenge in starting any company – especially one that’s integrating existing businesses – is creating a cohesive culture. The Attic staff came from a smallish office run by the cost-conscious and paternal Mair who had his fingers in everything. Bill Ott, from Polygram, was accustomed to a major’s corporate air, generous budgets and door-opening roster of stars. His distribution staff at Song was built around a team of like-minded major label refugees.
It didn’t help that Song was housed in several locations. The record company operated from Attic’s 5,200-square-foot condo, which Mair owned, near King and Dufferin. Frank Davies ran TMP from space in the Alliance Atlantis head office on Bloor East near Jarvis, which Song leased. Oasis was housed in 15,000-square feet of leased warehouse space on Railside Road, near Lawrence and Victoria Park.
Allan Gregg and Bill Dawson, meanwhile, worked out of Gregg’s former Viacom offices, in a row house backing onto the courtyard at Hazelton Lanes. Every Thursday, the management team met in the boardroom to discuss Song’s progress, and every Thursday everyone agreed that the scattered physical locations were a problem.
By winter Dawson found a suitable home: a 14,000-square-foot building on Liberty Street, not far from Attic, in the trendy tech enclave near King and Dufferin. Renovations, budgeted at close to a million dollars, began in February, 2000. By June, Song had bought its way out of its various leasing arrangements, sold the Attic condo and moved in, retaining the Railside warehouse for distribution.
Most independents start very small, keeping overheads low as they carve out their credibility, growing incrementally. The scale of Song’s enterprise was grand. Liberty Street, with its huge mezzanine, hardwood floors, spiral staircase and boardroom equipped with a two-way mirror (to conduct focus groups, a Gregg touch) made the Toronto offices of, say, Zomba Records, the world’s largest independent music company (Britney Spears, ‘N Sync and Backstreet Boys), look tatty by comparison. Song’s senior management team – Gregg, Mair, Ott and Dawson – pulled down salaries of $250,000 each, plus performance bonuses, while Davies, who had by his own choice negotiated a more limited consultant’s role, earned around $100,000. Song even provided artists with dental plans and company shares, something no major has ever done. Artist-friendly, sure, but the optics spoke to sheer extravagance.
Gregg felt that to attract large-scale international clients looking for a portal into the Canadian market, Song needed to have a critical mass, a reassuring air of solidity. Certainly few independent start-ups would have spent $100,000 to hold a conference for the entire national staff at the Crown Plaza in downtown Toronto, as Song did in November. By then, the company had five offices across Canada and 80 staff, including a team to explore e-commerce strategies.
To put that in perspective, TVT Records, a leading U.S. independent label with annual sales exceeding US$40-million and a roster that includes Nine Inch Nails, Black Crowes, Jimmy Page and rapper Snoop Dogg, has fewer than 50 employees. The Canadian subsidiary of Koch International, the world’s fifth-largest independent music company, only 32. I asked Dominique Zgarka, president of Koch Canada, what he’d thought of Song’s startup. “They’ve got to be nuts,” he replied. “You grow it organically. You need a sales force but you start with about 20 people, and everyone has to realize they’re not going to make the pay cheques they made at Polygram or wherever. There has to be a relationship between anticipated volume and overheads. You build it from there.”
By May 2000, the roster of artists signed to the label included acts inherited from Attic (rapper Maestro, R&B singer Jazmin), a reunited Grapes of Wrath (a leading Canadian band in the early 1990s), and two young acts signed by Gregg: Victoria-based The Special Guests and Toronto-based funk-jazz group, Pocket Dwellers. In a shrewd move, Gregg had also acquired a funky, Toronto-based indie label called Teenage USA, founded and run by Mark DiPietro and Phil Klygo, a pair of bar-crawling music lovers, Teenage USA had discovered artists such as Len, Scratching Post and Peaches, all of whom had gone to international careers.
Di Pietro and Klygo, who received from Gregg the title “Directors of Artist Development,” set up shop on Liberty Street. Their modus operandi was to seek out edgy, alternative acts that could sell several thousand copies in small, specialized record shops, called “mom and pops.” Di Pietro is a cocksure little bantam rooster whose style is the antithesis of all things corporate. He remembers his first meeting with Gregg. “Allan said, ‘We’ll help develop artists, it’ll be great.’ I thought, what’s the worst that could happen? We could lose the company, but we could do it again.”
Once he and Klygo began working at Song, though, they grew disillusioned. “Their sales force didn’t understand the uniqueness of the independent music scene,” says Di Pietro. “Most of them came from a major label structure where it’s like, get radio, get video, get sales. That’s thinking inside the box. Most people at Song thought our label was a joke.”
Al Mair says of Teenage USA: “They’re great at getting press in Now and eye, but their records didn’t sell beans, unfortunately. For them to say their input was rejected isn’t wrong, but artist development [for the company overall] was never part of their job.”
Gregg, who’d seen Teenage USA as a conduit into the indie sub-culture, says: “We’d go out and see their bands and everyone would say, Holy Jeezus, this is terrible! Anything the Song A&R [artists & repertoire] guys liked, Mark and Phil hated. It was clear that the prospect of all of them working together was slim.”
If a company’s health can be devined from its internal dynamics, Song was already ailing. With Frank Davies playing a consultant’s role, uninterested in the administrative side of publishing, Gregg badly needed someone to run publishing who could also function as a senior A&R figure for the entire company. (Artists & Repertoire executives are responsible for finding and signing talent, as well as helping artists fine-tune, or find, songs and select producers.)
After negotiations with a leading publishing figure collapsed, Gregg appointed Mark Quail, formerly Song’s v-p, business affairs, to run the publishing division. A lawyer and former DJ in his mid-30s with a passion for electronica, Quail had worked with Davies at TMP. His appointment caused friction. Davies frankly didn’t believe Quail had the qualifications or instincts of a creative publishing head, and openly opposed the appointment; after the hire he felt that Quail was politicking behind his back. Dawson, meanwhile, had trimmed TMP’s roster (a write-down of more than $800,000), cutting loose many artists Davies had discovered and nurtured. Then Quail fired Davies’ long-time assistant, unforgivable to a man for whom personal loyalty is bedrock.
In the pissing match that ensued, an angry Davies argued that Song’s executives simply didn’t understand the creative aspects of the business, especially the publishing side, which didn’t necessarily conform to bottom line principles. Others characterize Davies as adept at massaging artistic egos but weak on financial matters. Bitter and ostracized, Davies left the company.
Dawson shrugs off Davies as an hysteric and Gregg lumps him in with most of the creative people he’s met in the industry: “They don’t know nothin’ about business. I guarantee you that none of these guys can read a balance sheet. Frank Davies certainly can’t. Not a fuckin’ clue.”
I ask Gregg about Song’s split personality, the full-service monolith and the flexible little indie, the public corporation with a private heart. “We made a lot of mistakes,” he says. “It was a studied decision to have all those offices, all those marketing and promotion people in major markets, working radio. But when you have Headfuck Records, which we did, by the way, what radio promotion does it need? It’s not going in Music World at Yorkdale mall. It’s going to be in the grungy heavy-metal store on Kingston Road. But we never serviced those moms and pops. I talked about ‘the Song Difference,’ the independent mentality, but no matter how much I stamped my hoof in my hankie, I had a hard time getting people’s heads around it.”
The golden rule of the record business (and just about every business that sells creative work) is that the bigger your infrastructure, the more desperately you need hits. Since hits probably weren’t going to come from Song’s own small roster of artists (several of them “baby acts” requiring patient development), the company’s survival depended on acquiring hits for distribution. And the master of acquisitions, the record guy whose international relationships were critically important, was Al Mair.
Mair had developed Canadian talent at Attic but his real gift was for landing Canadian distribution rights to hit-producing foreign labels and artists. These “rental agreements” made Attic a success. By acquiring finished product, you avoid the production costs of the recordings. Mair paid royalties to the foreign label and collected proceeds from Canadian sales of the record, which bore the Attic label in Canada. Among his many successes was Famous Blue Raincoat, Jennifer Warnes’ smash 1986 album of Leonard Cohen songs and Weird Al Yankovic’s novelty interpretations of pop music, to which he got distribution rights via a deal with an American label, Scotti Bros. Records.
At Song, Mair licensed the Canadian rights to The Baha Men’s Who Let the Dogs Out, the hit anthem familiar to anyone who watches car commercials or football games (musical merit has never been a pre-condition for sales success). But when Scotti Bros. and Mammoth Records, another American independent, were sold, Song lost those accounts. Mair’s talent for landing licensing deals became all the more important.
But Mair seemed to be running out of gas. Perhaps, as the quintessential solo act, he had trouble fitting into Song’s corporate ethos. Perhaps any man in his 60s loses his hunger once he’s sold his company for millions. Gregg says he tried repeatedly to motivate Mair. “He said one time, `I feel like I’ve been put on a shelf.’ Maybe that was part of the problem, having gone from being a boss to a guy with one narrow area of importance, no matter how important that was. We always gave him kudos, told him no one in the world’s better at this than you are, no one knows the community better than Al Mair.”
When I put this to Mair, he says: “Candidly I was getting frustrated because a lot of labels I’d thought were coming to us weren’t.” As to the supposed difficulty of making the transition from independent entrepreneur to Song, he says simply: “It was a change, no question it was a change”
If Song’s future could be said to rest on any single piece of business, it was Mair’s contract with the Amsterdam-based independent Roadrunner Records, which rose to prominence in the 1980s by licensing U.S. heavy metal artists such as Metallica, Slayer and Megadeath. Roadrunner’s unlikely chairman, Cees Wessels, who’s also in his 60s, has said, “I don’t profess I understand, but it’s important to be close to what kids want.”
In 2000, kids wanted a gothic nine-piece outfit called Slipknot, whose ghoulish stage personae and death-metal sound represent the latest in the long history of artists out to please disaffected teenager boys by alienating adults. The resourceful Mair had signed a Canadian distribution deal with Roadrunner in the late1980s, and he and Wessels had an excellent rapport. Slipknot’s self-titled debut had Canadian sales of $2.5-million. It was Song’s most lucrative single property.
First quarters are not kind in the music business. The drop in retail sales after Christmas combined with unsold returns makes for a scary three months that sometimes accounts for only 15-20 per cent of annual revenues. Song’s 2000 first quarter was feeble, but predictably so; by fall, however, when Song issued its second quarter report, Gregg acknowledged that “the length of time necessary to close new deals and capitalize on an under-served independent production sector has taken longer than anticipated. Consequently, revenue for the six month period continues to fall behind forecasts… The Company is not currently in compliance with certain of the financial covenants outlined in its credit facilities agreement…” If the argot muted the message, the next paragraph made Song’s plight clear. The five senior executives were taking a 40 per cent salary cut.
If anything, Gregg had understated the problems. He’d projected gross revenues of $28-million by the end of 2000, but Song would be lucky to hit $12-million. Expenses exceeded that by $3-million and counting, burning off the last of the capitalization. Ott’s distribution division, the anticipated cash cow, had lost more than half a million dollars when two clients – a large retailer and a rack jobber (a firm that leases space from department stores or supermarkets and oversees the racks of CDs, cassettes and videotapes) – went bankrupt. Without hits, Song’s distribution team in the field was having little luck with retailers.
“It was difficult for [Song’s salespeople] to do their jobs when a lot of their material wasn’t overly radio-friendly,” explains Tim Baker, head buyer for Sunrise Record Distributors, which has 31 stores across southern Ontario. “I wouldn’t go so far as to call it fringe, but it was certainly not A-list. Every two weeks my Song rep would be in here and I’d be going through a book 60 pages thick and there wasn’t really anything I needed to buy. In order to stay in business, you have to have some hit records.”
Roger Whiteman, head of purchasing at HMV during Song’s life, points out that the retail ground shifted even as Song was launched. “The balance of catalog material to hits changed,” he recalls. “In general, retail cut back on catalog because it was no longer selling. And catalog was almost all Song had.”
Mair and Ott tried to land new business, but one distribution deal after another fell through. “You have to understand,” Gregg says. “We’d have our quarterly forecasts. Here’s the schedule, what have we got, how much are we going to sell? And we’d miss the forecast. So Bill Dawson would sit them all down and re-forecast. They’d miss the forecast again. We thought, well, we missed these quarter numbers, but we’ll make next quarter. We never came close, not even close, to achieving any forecast, ever.”
Murphy’s Law wasn’t finished with Song. Just as circumstances had been propitious at the time of the founding, they now seemed to conspire in Song’s demise. In April, the NASDAQ dot-bomb wiped out the only remaining hope for Song: access to the $17-million Gregg had left behind in the capital markets. As Yorkton’s Nelson Smith explains, “To say that Song was lumped in with the dot-coms would be going too far, but to say that it suffered collateral damage? Absolutely. When the market tanks and investors are up to their ears in problems, it’s hard to get them to pay attention to a re-financing.”
Within Song itself, morale plummeted when the staff began reading the Stockhouse Media Corporation’s online BullBoards. Along with gossip, the Song thread gleefully charted the company’s plummeting share price, unsettling those who had bought stock. On VelvetRope, an online music industry forum, anonymous posts slagged everyone involved. (Sample: “They were a fraud and now its obvious. JUST incompetent assholes playing with our intellectual property and our good names…. IDIOTS!!!!!”)
The telling blow came in December as Song’s contract with Roadrunner was winding down and Cees Wessels came to Toronto. The conventional wisdom is that Universal Music wooed Wessels away with an offer so much richer than Song’s – and so in excess of reasonable valuation – that Wessels had no choice but to take it, even though he was happy with Song.
Wessels, who rarely grants interviews, calls me from New York to set the record straight. “I’d had a background with Al Mair for many years,” he explains. “The only reason my stuff was with Song was because of Al Mair. When it came time for extending our agreement, they invited us to Toronto. I was impressed, but in a different way than I assume they believed I would be. I couldn’t figure out how people who obviously didn’t have an enormous amount of business going on could survive with that kind of expenditure. That scared the hell out of me. It made me decide, that’s it, I’m out.”
Had he been unhappy with Song’s performance? “It was a secondary reason,” he says. “The main reason was, I was scared [of the opulence]. I recognize that shit because I’ve gone through the same process myself. They had delusions of grandeur.”
In February 2001, in a last-ditch effort to raise enough funds to keep Song afloat, the staff, reduced by half, moved out of Liberty Street and squeezed into the Railside warehouse while Gregg brokered deal by which Sony’s publishing arm acquired the right to administer Song’s publishing catalogue for an advance of $1.5-million against royalties. Less than three months later, on May 4, Song declared bankruptcy.
“I don’t know if it was ahead of its time,” Allan Gregg said after the collapse, “or if a confluence of trends and influences in the Canadian marketplace mitigated against us.” But most industry observers believed it was neither. Brian Robertson, president of the Canadian Recording Industry Association, said: “This was a grand scheme that probably wasn’t based on reality.” Larry LeBlanc, Canadian correspondent for the music industry bible, Billboard, told Shelagh Rogers on CBC Radio: “It was like watching The Three Stooges trying to run a record company, run a distribution company, run a publishing company… Allan Gregg was out of his element, and the people he brought in were out of their element as well.”
In the beginning, virtually everyone in the Canadian music industry wanted Song to work, despite management’s uncanny gift for alienating them. (When Gregg pronounced that there was no independent Canadian music sector, one annoyed proprietor of an independent asked: “What does Gregg think I am, chopped liver?”) And Bill Ott called Song “the sixth major,” suggesting that it would instantly compete with the majors on an equal footing.
Did the bravado hurt? One senior figure at a Canadian major says: “The record business took a fuck-you approach because Allan, Al and Bill were saying to the press when they were two weeks old and had 81 staff that they were gonna give all the majors a lesson in how it should be done. It certainly didn’t inspire us to give up on the labels we had and hand them over. It’s the ultimate lesson in humility. The power of ego transcends the power of intellect.”
Gregg acknowledges his central role. “I think hubris partly sowed the seeds of this failure. I’d been successful in so many other things that I didn’t anticipate failure in this. Having been involved in the periphery of the music business for a number of years, I knew the basic economics, the basic structures. I thought that was enough.”
Larry LeBlanc points out that “the worst person to get involved in the music industry is a fan. Did you know that Billboard was originally the trade magazine for the carnival world? The music business is rooted in the carnival. As politically adept and bright as Allan Gregg may be, he can fall victim to the carny world as easily as the next person.”
Long after Song is gone, wounds linger. Although Molly Johnson is upbeat telling me about the negotiations with two majors that she and MacKinnon are involved in, which would give her record new life, the hurt and anger is evident when she talks about Gregg. “Allan needs to make some calls, speak to some of us,” she says. “”I’ve heard nothing from him. For me, losing the money was hellish, but that’s the business. I could eat that. What I couldn’t eat was the unbelievable lack of respect and compassion for us, the artists.” With a heavy sigh, Johnson, who is a mother of two young children, says: “Frankly, Allan needs to be spanked.”
It was Gregg who told me a parable about attending a CBC Christmas party at which the actor Paul Gross, who’d become a TV star playing the Mountie in Due South, was performing with his rock band. “They were awful,” he says. “Really, really awful. And I thought, what a fool, he’s good at one thing and he thinks he’s good at everything. Now I think, oh, oh, I know someone else who suffers from the same delusion.”