Motown embarks on new era

A page of music industry history was written Tuesday as Dutch-owned Polygram Records confirmed the acquisition of Motown Records for $ 301 million plus assumption of an additional $ 24 million in liabilities.

Polygram also reported a 19% increase in net profits during the first six months of 1993 to $ 107 million in U.S. dollars, or 63 cents per share, compared with net income of $ 90 million or 53 cents per share in the same 1992 period. Its net sales were up 6% to $ 1.7 million while income from operations was up 18 % to $ 168 million.

Polygram’s $ 325 million tab includes all of the recorded music business of Motown, including its 30-artist roster, its 30,000 master album recordings, its MoJAZZ label, Motown’s television, film and video production interests, its merchandising arm, and, perhaps most important, rights to the Motown trademark.

Motown was already distributed in the U.S. by Polygram, which also was the exclusive international licensee for the label. Polygram Filmed Entertainment, Motown and Suzanne de Passe Productions had also joined forces to produce the miniseries “The Jacksons: An American Dream.”

The companies first came together in fall 1991 when Polygram picked up Motown’s distribution rights during a legal battle with its former owner, MCA Inc.

End of an era

While all parties to the pact were upbeat, the deal marks the end of a black ownership stake in what was the leading U.S. black entertainment company. Motown founder Berry Gordy Jr. had insisted that some black ownership be retained when he sold Motown in 1988 to Massachusetts-based investment firm Boston Ventures and MCA Inc.

The result was a 12% stake for Motown president/CEO Jheryl Busby and such Motown stars as Diana Ross. That stake held up even as Boston Ventures bought out MCA’s stake earlier this year.

Future hopes

Gordy issued a statement through Polygram acknowledging the rapid changes in the entertainment world, expressed pride about the company’s heritage and “what is to come.” He was named chairman emeritus of Motown.

Polygram expects to repay borrowings used to fund the purchase partly with the proceeds of a 10 million-share equity offering announced Tuesday. The offering is expected to take place this fall.

Following the expected issue of up to 10 million new shares, approximately 25 % of Polygram’s stock will be available to independent investors, while 75% of parent company Philips Electronics NV will be available. Philips does not plan to participate in the issue.

Busby said that Polygram would look to exploit Motown’s worldwide trademark recognition, which has been cited in a Harvard study as among the top three marks recognized globally as issuing from America, along with Disney and Playboy.

Name recognition

Busby said a plan was being developed to license the Motown name, to develop TV and film projects, with projects such as Motown Cafes also being considered.

As part of the new strategy, Polygram has designated industry veteran Clarence Avant as chairman of a management board that will guide Motown. Avant, who owns Avant Garde Music Publishing and is the chairman of Tabu Records, will also be appointed to the board of Polygram Holding Inc., the oversight for the entertainment divisions of Polygram.

Avant will retain his duties at Tabu, an A&M Records affiliate. Rumors that the urban music divisions of Polygram would be aligned under Avant were scotched by Alain Levy, Polygram president/CEO, who added that Motown will retain full autonomy.

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