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Labels Looking East For Room To Grow

Carefully stepping over the remains of the Iron Curtain, the major record labels are beginning to explore opportunities for expansion into Eastern Europe.

Economic uncertainty worldwide in general and fluctuating political and economic situations in the newly liberated nations specifically have the majors moving into such territories as Hungary, Poland and Czechoslovakia with trepidation; no one is rushing in to establish a beach-head.

“The main thing is for these nations to amend their legislation,” remarks Beatrice Silva-Tarouca, v.p., European business affairs, for Warner Music Intl. “For instance, producers have no rights at all in Poland right now. That must be changed.”

Like most of the majors, Warner is active through licensees in most Eastern European countries – except Romania, the Soviet Union and Bulgaria – though Silva-Tarouca says Warner may establish a licensee relationship in Bulgaria soon.

“There is still a lot of change going on in all the territories,” she continues. “The states ran the record companies as monopolies. They are slowly becoming privatized, but [the state’s presence] is still there.”

Learning that lesson the hard way was EMI, which was nearing completion of a $14 million joint venture deal with the Hungarian government-run Hungaraton label when Jenos Bors, head of Hungaraton and EMI’s point man in the deal, was dismissed by the government during an executive realignment.

Dutch-owned Polygram has been involved in various Eastern European projects for 25 years. “We will continue to work there as we have in the past, with one difference,” says Amanda Whitwell, head of corporate communications for Polygram Intl., “that being free enterprise, which affords us more clients than in the past.”

BMG, which operates the RCA and Arista labels and is distributing MCA in most European territories, is handling all Eastern European regions through its Munich office, per Rudi Gassner, prez/CEO, BMG Intl. Small offices that report to Munich have opened in Budapest and Prague.

Contacts are being maintained in Poland and the USSR, he said, “but from a business point of view it will be many, many more years down the road” before serious trade will be done there.

While BMG has made some licensing deals for a few albums with various Eastern European labels, they have refrained from outright licensing of catalogs.

“We’re more interested in working with new entrepreneurs to help them get started,” Gassner says.

Sony Music (formerly CBS Records) and MCA are just starting to sniff around the Eastern bloc. MCA is confident that its international distribution pact with BMG will aid it immeasurably in reaching into the Eastern bloc, said a spokesman.

MCA still plans to establish an office in Germany; thanks to years of trade with what was then West Germany, the reunified nation is by far the biggest Eastern Europe consumer of Western music.

Also, a partnership called Art & Electronics has been forged between MCA, Mobile Fidelity Sound Lab and three Soviet agencies (consumer electronics and retail chain Electronica, domestic concert bureau Soyuzconcert and the USSR Composers Union) to record Soviet classical musicians and distribute the product in North America, as well as developing recording studios in the USSR. Art & Electronics is the only free-enterprise label in the Soviet Union.

On the retail side, both Tower and HMV are looking to open superstores. Tower, which recently had a possible deal to open in Moscow fall apart, apparently is closing in on a Berlin deal and may open a store in Budapest.

Of all Western-based music concerns, though, MTV has by far been the most successful. The cabler is seen in 4.5 million households in Germany; 266,000 in Hungary; and about 212,000 total in Bulgaria, Czechoslovakia, Poland, Romania and Yugoslavia.

Since October, the service also has been seen once a week during primetime in the Soviet Union in 88 million households.

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