L.A. Comes to New York

A few weeks into his new job as president and CEO of Arista Records, L.A. Reid got mad. He was meeting with his two top executives to discuss the uncharacteristically meager sales of Whitney Houston’s The Greatest Hits, a glitzy retrospective of Arista’s franchise singer released seven weeks before he took office. In what one of the executives calls an “out-of-body experience,” Reid rose angrily from behind his desk and tossed over a chair.

“I realized that this thing was headed nowhere, and we were going to spend a fucking fortune,” Reid explains, his exasperation still fresh. The marketing plan for Houston, he continues, was poor: The record was released in mid-May, instead of later in the year when most superstar records appear, and key decisions about singles and videos were mishandled. “This whole project was just botched up, from the very beginning. This is what I walk into.” Reid, a sleek, personable 44-year-old, brakes himself. “Let me collect myself here.”

Last year, in the juiciest boardroom intrigue the music business has seen in years, Clive Davis was deposed from the presidency of Arista, the label he founded 25 years earlier, by Strauss Zelnick, president and CEO of BMG, and Michael Dornemann, the company’s chairman. In his place, they installed Reid, who took over July 1. Soon after, BMG went back into business with Davis, outbidding other labels by offering him a fund of more than $150 million to start a new label, J Records. Then, just as the situation seemed to settle down, Zelnick and Dornemann left BMG, reportedly ousted by their boss, Bertelsmann chairman Thomas Middelhoff, for their handling of several matters, including their treatment of Davis.

Reid brought to the job a sterling record as a songwriter, producer, and head of

R&B powerhouse LaFace Records. But that didn’t make it easy to replace Davis, the 67-year-old industry veteran who revived the career of Carlos Santana and guided the label to spectacular sales. “They hated me,” Reid says. “The first two weeks, I heard people say ‘Clive didn’t do it that way.’ ” He started keeping a list and eventually fired about 30 employees whose loyalties he said he doubted.

From the time Davis’s replacement was first rumored more than a year ago, he and Reid have issued press-release respect and praise for each other without hinting at the resentment between their camps. Reid still takes care to speak graciously of Davis – whom he refers to as “Mr. Davis” and “the master” over the course of several conversations. But he is also alternately amused, annoyed, and angry over the criticism and rancor that greeted his appointment.

“He has a wonderful rapport with artists,” says Toni Braxton. “He can hear a song and go, ‘Ahh, you’ve got to do that one.’”

“The press loves Clive,” Reid muses. “I’d read stories about myself coming to Arista, and there’d be a picture of Clive. I never saw a picture of me.” He still recalls a story that dismissively labeled him a “rap executive.” Then there was the gossip columnist who reported that Reid was spending afternoons shopping at Gucci while Davis was busy signing acts to his new label, including the boy band O-Town.

“I went to Orlando four months ago to see this band Clive signed. I thought it was bullshit then, I think it’s bullshit now. I wouldn’t have signed it,” Reid says heatedly.

The story, he adds, “was racist.” He pauses. “I don’t play the race card. I’m not that guy. I have an amazing life.” Reid is only the second African-American to run a major label (the other is Sylvia Rhone at Elektra), and he doubts that the columnist has reported on the shopping habits of white executives like Jimmy Iovine or Tommy Mottola.

Anyway, Reid adds with a smile, he doesn’t shop at Gucci. “I have all my clothes made.”

When Reid’s promotion was announced, some reporters speculated that BMG bosses had “groomed” him for the Arista presidency by sending him to Harvard to get an M.B.A. in 1998. “I groomed myself,” Reid counters. “I’ve wanted to run a major record company for many, many years.”

Indeed, with his largesse, his zeal, and his fearless string of quarrels with close friends, Reid has been a mogul-in-training for years. Along with Kenneth “Babyface” Edmonds, he produced some of the biggest pop and R&B hits of the eighties (Whitney Houston’s “I’m Your Baby Tonight,” Bobby Brown’s “Don’t Be Cruel”) and manufactured state-of-the-art pop stars with sleek music and distinct images based on class (Toni Braxton), sass (TLC), and ass (Usher). Unlike many of his peers, who know more about marketing than about music, Reid understands music thoroughly and gained renown for his prescience in spotting stars and choosing hits – a valuable forte shared by Clive Davis, who brought LaFace into Arista.

As the label grew, Reid, who grew up borderline poor in Cincinnati, also earned a reputation for high style. Arnold Stiefel, who managed Toni Braxton, recalls that Reid traveled with “a valet who arrived ahead of him and brought two suits for every day, which were arranged in color-coordinated order in his hotel suite. I always felt underdressed and inappropriately casual when I met with him. He’s like a prince.”

Reid spread his 40th birthday party, a legendary 1996 bacchanal in Atlanta, over three days. To get in, he says with a lewd chuckle, “you had to either be on the guest list or be really fine.”

“That was one of the illest parties of all time,” marvels Sean “Puffy” Combs, a close friend. “So much to eat, so much to drink, so many beautiful women – it was like walking into heaven.”

Running a label requires a gift for hand-holding, scolding, and other baby-sitting skills, which Reid has in abundance. “I take care of artists. I give them love and attention,” he says. “He has a wonderful rapport with artists,” agrees singer Toni Braxton. “He can hear a song and go, ‘Ahh, you’ve got to do that one.’ “

“He really loves music,” says Combs, whose Bad Boy label is distributed by Arista. Reid is also godfather to Combs’s son, Justin. “He understands music. He was an artist, so he understands the artist’s point of view.”

“That’s not to say he’s soft,” Combs adds. “I mean, he’s gonna say no, he’s gonna fight if he has to fight, he’s gonna scream if he has to scream.”

On his way to running a major label, Reid has clashed with many of the important people in his life, including Babyface; his first wife, Pebbles; and Toni Braxton (who once sued him), as well as Davis, who gave Reid the biggest opportunity of his career.

After more than a decade of running LaFace, Reid was eager to sell the label to Arista so he and Babyface could cash out, and he’d be free to run a larger label. At LaFace, he and Babyface signed the artists, produced their music, and made the videos, while Arista distributed, marketed, promoted, and sold the records – and made most of the money.

Davis wouldn’t endorse Arista’s purchase of LaFace because, says a source close to the situation, he was worried about the label’s balance sheet, which included large advances to acts like TLC, Toni Braxton, and Usher, and wanted to wait until those payments were recouped. This “pissed off Reid,” says a source; other Arista and BMG executives had taken huge paydays, and Reid wanted to be rewarded for years of loyalty to BMG, including, he says, introducing Davis to Combs. Reid also thought Davis was claiming undue credit for the success of LaFace acts. “At this point,” says the source close to Reid, “L.A. realized that Clive was for himself, and L.A. needed to be for himself.” So Reid went around Davis and proposed a sale directly to top BMG executives.

Davis’s contract was set to expire on July 1, 2000, and Zelnick reportedly wanted Reid to join Arista as CEO and president and report to Davis, who would become chairman for life. But Davis wasn’t interested in the new title. As president of Arista, he had an arrangement with the company known as “phantom equity,” because Bertelsmann, based in Germany, is a privately held corporation. In the fiscal year 1999, Arista declared revenues of more than $500 million in the U.S., a company record. Davis, says a source, earned between $15 million and $20 million in the final year of his five-year contract as well as a onetime payout “considerably in excess of $100 million,” based on a percentage of the company’s earnings.

Davis says he wanted to maintain “significant equity” in whatever position he took, and the offer of chairman did not include any. When Zelnick and Dornemann proposed the new job over dinner at Lutèce in November 1999, Davis got up and left. At this point, says the source close to Reid, L.A. was worried about taking any job in which he would report to Davis: “L.A. was afraid Clive would cut his balls off.”

The night of the Lutèce debacle, Reid got a phone call at home asking him to run Arista. As part of the deal, BMG, which already owned half of LaFace, bought the remaining half for a reported $100 million.

Reid thought he was a rich man until he moved to New York. While living temporarily in the Four Seasons Hotel, he began to look for a three-bedroom apartment on the Upper East Side. “My God!” he exclaims, eyes wide with horror. “Anything with real square-footage, 3,000 square feet or something like that, it’s millions and millions of dollars! I just can’t stomach it.”

He also had to contend with relentless predictions that Arista’s top acts would desert the label for Davis’s new venture. Carlos Santana said he would follow Davis “wherever he goes,” while Aretha Franklin regally declared, “If Clive leaves, I leave.”

“I think all of those stories were planted by Mr. Davis’s camp,” says Reid.

In fact, no superstar act has left Arista. “There was no way” BMG would countenance big acts leaving Arista for J, says a source, because of simple economics. BMG gave Davis 50 percent equity in J, which means the corporation makes more money per CD with Arista acts than with acts on J.

Instead, Zelnick brokered a deal that allowed Davis to take five burgeoning acts, including Next, Deborah Cox, and LFO, a boy band whose album had sold more than a million copies. Reid says he didn’t want to keep any of the five, though his general manager argued to retain LFO: “He said, ‘Are you crazy? Have you seen LFO’s sales?’ ” Reid shrugs dismissively. “I didn’t love them, so I didn’t fight.”

Beneath the public congeniality, Reid and Davis disagree on significant events. Most significantly, Reid says he brought Puff Daddy to Arista. “I don’t know why he claims that,” counters Davis, who says the meeting was set up by Puffy’s business manager, Bert Padell.

Puffy, whose deal with Arista made him a lucrative asset for BMG, confirms Reid’s version: “L.A. had a meeting with me about bringing me to LaFace, and after I spoke to him, he was like, ‘This is bigger than some production deal. I need you to sit and meet with Clive.’ And he brought me to Clive. It was gracious of him, and also smart.”

Reid says he and Davis have taken Christmas vacations together, though Davis says their two families were merely on St. Barts at the same time. When the offer came to replace Davis, Reid says, “my only concern was whether or not Clive would think I had betrayed him in any way.” When asked if Reid did betray him, Davis offers an exoneration: “No. I really have no problem with L.A. Reid whatsoever. I will root for him. I will root for Arista. I will do everything I can to help him.”

He means that literally: Davis and Reid are collaborating to pick songs for the singer Monica’s second album, and Davis will continue to help with Santana and Houston albums. To Reid and Davis, the conflicts between them, which might destroy some relationships, are less significant than the opportunity to make a few more hits.

When Antonio Reid was 9, before he’d earned the nickname L.A., he became fascinated with his uncle Albert’s drum kit. The third of four children, Reid saved $3 from tips he earned working in a barbershop, bought a pair of drumsticks, and banged on the floor to James Brown 45s. Brown often recorded at a Cincinnati studio, and Reid “would stand outside and hope to meet someone. Just the sense of being around the music got me excited.”

His mother, Emma, was a seamstress, and his father was gone. Reid never asked about his father, who didn’t keep in touch. “I think I’ve become a bit of an overachiever as a result of it to be quite honest,” he says. “The way it affected me was, ‘I’m gonna prove that I can be somebody, that I should be respected. And he should’ve been smarter.’ “

His mother remarried when Antonio was about 6, but Reid won’t offer his stepfather’s name: “He ain’t important enough.” Sensing that Antonio was prematurely responsible, she gave him more latitude than her other kids, and by the start of his teenage years, he was playing in bands; significantly, he played in both funk and rock groups. One day, he wore a T-shirt with the Los Angeles Dodgers logo and was anointed with his enduring nickname, even though he’d never been on an airplane, never mind visited L.A.

Reid and his band moved to Indianapolis, where, checking out the local competition one night, he spotted Kenneth “Babyface” Edmonds, a shy, left-handed guitarist whose group let him sing only one song a night. Impressed and typically aggressive, Reid invited Edmonds to join his group, the Deele, which had a few minor R&B hits.

Lots of local stars deploy their talents on no grander goal than free drinks and freer girls, but Reid bonded with Edmonds over their seriousness of purpose. “Neither of us were big party guys,” says Reid. “While the other guys in the band would go out and have fun, he and I would sit at home and write songs.” Rather than the fleeting glamour of being a musician, Reid wanted ownership and equity, with their greater rewards and permanence.

In 1990, Reid’s wife, Pebbles, located his father, who was living in Florida, and brought him to their house in Atlanta to meet his son for the first, and only, time. Had his father followed Reid’s career? Did he know his son was successful? “I don’t know how much he knew,” Reid says thoughtfully. Then he suddenly laughs. “When he came to my home, he realized I was successful.”

After several years of making hits, L.A. and Babyface “fell out,” says Edmonds. He wanted to focus on writing and producing, and Reid wanted to run a record company. “It drove us in two separate directions.” “I became a noodge,” admits Reid, who pushed Babyface to write with new LaFace singers. ” ‘What do you want me to work with Damian Dame for when I can work with Madonna?’ It was kind of a tug-of-war.” It’s rumored that the split turned bitter, with long silences between the two. “I never thought it got bad,” says Reid, who insists he doesn’t take conflict personally. “Maybe it did.”

LaFace had other problems, most notably the bankruptcies of its two biggest acts, TLC and Toni Braxton. Both Reid and Edmonds shift responsibility to Arista, whose contracts the artists signed. “We weren’t in the position of power,” says Edmonds.

TLC was the more troubling case, because the trio was managed by Reid’s first wife, Pebbles. The group had the standard low royalty rate new artists start with, and its contract with Pebbles’ company, Pebbitone, gave her a substantial share of profits, too. “TLC wanted Pebbitone out of their lives,” says Reid, “and the only way they could get out was to file bankruptcy.” In turn, Pebbitone sued LaFace – by then, Reid and Pebbles, who have two children, had separated, and Reid calls the dispute “one of the breaking points in my marriage.” In the music business, lawsuits are often just negotiations by other means, and once TLC settled with Pebbitone, it signed another contract with LaFace.

“L.A. brought me to Clive,” says Sean “Puffy” Combs. “It was gracious of him and also smart.”

Soon after, Toni Braxton filed for bankruptcy in the midst of a contract renegotiation. It looked bad for LaFace, because Braxton had sold more than 16 million records. When Braxton went on The Oprah Winfrey Show to discuss the bankruptcy, a source adds, Oprah called LaFace “and said, ‘Toni’s on my show today; she intends to make you guys look really bad. But I think it’s bullshit, so watch the show.’ ” Indeed, Winfrey scolded Braxton for excessive spending, saying, “I didn’t know Gucci made silverware.”

Braxton withdrew the bankruptcy claim when she got a new deal with Arista. She and Reid had been “so close, almost like relatives,” she says, but during the dispute, they communicated only through lawyers. “For a long period of time, I was angry,” Braxton adds. But now she coos lovingly about Reid; after all, she says, laughing, LaFace and Arista “gave me a really nice pay raise.”

On a November night, L.A. Reid is hosting a raucous private party upstairs at Moomba to celebrate a new release by the brilliant Atlanta hip-hop duo OutKast, whose album had debuted at No. 2 on the charts. Reid arrives late, wearing sunglasses and a flashy four-button suit, and offers brief, proud praise of OutKast, predicting to the assembled staff and friends that album sales will top 6 million. Across the room, OutKast rapper Big Boi, outfitted in a camouflage jumpsuit, orders another Hennesy and raves about the wisdom and opportunities Reid has given OutKast since the duo auditioned in Reid’s office eight years earlier: “It’s like working with your uncle.”

Reid merits credit for guiding OutKast’s commercial and critical success, and the party marks one of the high points of his first six months at Arista. During that time, the label has also had success with two new singers, Pink, whom Reid signed, and Dido. Reid has also signed exclusive deals with producers including Kevin “She’kspere” Briggs and Janet Jackson’s production team of Jimmy Jam and Terry Lewis and has also moved to mend Arista’s weakness in rock.

This fall, he won a costly bidding war for Edema, a tough outfit led by the younger brother of Korn singer Jonathan Davis, though one competing A&R honcho says Arista overpaid for a mediocre band. Reid flew to Los Angeles to meet Edema and sell it on Arista: “I told them, ‘Look, I haven’t had success in your genre of music. But I won’t lose. If you want to be on a team with a winner, you should be on a team with me. Because I just won’t fucking quit.’ “

There are signs 2001 might be a tougher year. Puffy Combs’s Bad Boy label has stumbled, and there is no new album coming soon from Santana or Whitney Houston, who was nearly arrested with half an ounce of marijuana in a Hawaii airport and is persistently rumored to have a drug addiction. “Are you okay?” Reid asked Houston tactfully when he assumed the presidency of Arista. “Is there anything I can do to help you?” “Yes, I’m okay,” she replied. “Just make sure my record’s a hit.”

“I see what people write and what people say about Whitney,” Reid observes. “But then I look in her eyes, and I don’t see it. She’s the same girl I’ve always known.”

Among his challenges, Reid has to adapt to new relationships with old friends. Combs, for one, bristles when it’s suggested that Reid is now his boss: “Get the fuck outta here. I’m my own boss. He’s my partner.”

Reid has already shown he can navigate management obstacles. In November, a staff member leaked a new song by Usher to radio without the consent of Reid, who says, “I think people were trying to force my hand, and it pissed me off.” The leak, he says, “cost a couple of people jobs. We’ll never have that problem again.” While Reid was struggling through an admittedly “tough” few weeks, J Records’ first release, the debut single by O-Town – the boy band L.A. Reid disdained – was the top-selling single in the country in its first week in stores.

There’s also a chance Reid hasn’t seen the last of BMG’s corporate intrigue. Though Zelnick turned BMG from a disaster into a success, he also “made one massive blunder after another,” says a BMG source, including clashing with Davis, and, most notably, feuding with Jive Records CEO Clive Calder, described by the manager of one platinum act as “a bomb-thrower.” Last year, when ‘N Sync resolved to leave the BMG-owned RCA for the BMG-distributed Jive, home to the Backstreet Boys and Britney Spears, Zelnick retaliated by suing ‘N Sync, Jive, and – most provocatively – Calder himself. “How do you sue your partner?” scoffs a BMG source, who estimates the company could lose as much as $100 million because of ‘N Sync’s defection. If Jive exercises its contractual right to end the distribution deal on six months’ notice, it could lose even more.

BMG moved to settle the chaos by naming a new president of BMG Entertainment: Rudi Gassner, a BMG chieftain who only months earlier pocketed a $7 million severance payment from the company, says a source, when he quit because of disagreements with Zelnick. Over the Christmas holiday, a week before he began the job, Gassner, a former professional soccer player, died of a heart attack while jogging. A successor, Rolf Schmidt-Holtz, was named the day after Gassner’s funeral in Greenwich, Connecticut. If BMG concludes a simmering merger with EMI – the two combined would create the world’s largest music company – Reid could have a fourth boss within his first year.

Reid hasn’t taken the quick-fix route of signing boy bands: “I don’t believe in chasing trends,” he says loftily. To his credit, he would rather build credible career artists. But sales at Arista are down from last year’s record high: One executive tracking the label’s numbers says, “Right now, I doubt Arista will do $250 million this year.” (“It’ll be much higher than that,” counters Reid, who contends that Arista wouldn’t have grossed that much this year under Davis either.) Add the revenues lost when ‘N Sync jumped to Jive; the $150 million the company may lay out for J Records, which may not turn a profit for several years; approximately $100 million to buy LaFace; and the severance packages for Zelnick (reportedly $20 million to $50 million) and Dornemann, and BMG’s bottom line is stained with red.

Whitney Houston returns Reid’s call, and he snaps into action, dispatching an assistant to retrieve a tape: “Right now, hurry up!” But when Reid picks up, his tone nearly melts the receiver. “Whitney!” He listens and chuckles warmly. “I am, honey. You know I am.”

After a few minutes of talk about family, Reid explains that he’s found an unreleased song he and Babyface produced for Houston ten years ago. He turns up the speakers in his office and plays it to her over the phone, bouncing in his chair. “Isn’t that hot?” he asks excitedly.

A month before he took over Arista, Reid threw one more lavish party, his three-day wedding to schoolteacher Erica Holton in Capri, Italy. Guests arrived to find wine, bowls of iced cherries, and scented candles in their rooms – “like Hollywood stars did back in the day,” says Combs. The couple are expecting a child in April. (In addition to Ashley, 17, and Aaron, 10, his kids with ex-wife Pebbles, Reid has a son, Antonio Jr., 22, from an earlier relationship.) Guests – including Usher, Mariah Carey, Veronica Webb, and Zelnick and Dornemann – were required to wear white linen.

Though Reid has a lionish string of fights with close friends, he also evidently knows how to make peace afterward: Clive Davis didn’t attend the wedding, though he sent a gift, flowers, and a card. And one of the two best men was Babyface, who is also currently working on his first album for Arista, to be released in the spring.

The singer has been consulting closely with Reid, who he says is “always pushing” artists to record stronger material, to load albums with extra hit singles. Babyface, who’s usually known for his gentle demeanor, is prepared to return the pressure. “If the label isn’t doing everything it should, then I gotta call him and say, ‘Hey, you suck,’ ” he chuckles. “But he doesn’t want to hear me call and say that to him.”

L.A. Comes to New York