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L.A. Reid out as Arista Records chief

Mounting losses cited as reason for president's ouster
/ Source: Hollywood Reporter

In a forced exit, Arista Records president and CEO Antonio “L.A.” Reid has stepped down from his post at the BMG-owned label, effective immediately, BMG chairman and CEO Rolf Schmidt-Holtz said Tuesday.

His departure comes on the heels of a hits streak with such artists as Outkast, Dido, Avril Lavigne, Sarah McLachlan and Pink. All are nominated for Grammy Awards, led by hip-hop duo Outkast, which scored a leading six noms. But despite the label selling millions of records, sources indicted Arista has suffered operating loses for the past two years, which is among the reasons for Reid’s exit.

“’L.A.’ is one of the music industry’s top record men. His passion for working with and developing some of the world’s best artists is unparalleled,” Schmidt-Holtz said in a statement. “I sincerely wish him the best of luck in all future endeavors.”

Arista’s executive management will now report to BMG chief operating officer Michael Smellie. Arista executive vp and general manager Larry Mestel will continue to oversee day-to-day operations, sources said. The label’s future, however, remains unclear.

Reid, who had about 17 months left on his contract, could not be reached for comment at press time.

His ascension to the Arista throne in May 2000 was mired in controversy. Reid, a former drummer and Grammy-winning producer, founded the successful Atlanta-based LaFace Records with partner Kenneth “Babyface” Edmonds in 1989 with a distribution deal with Arista. LaFace spawned such noteworthy acts as TLC, Toni Braxton, Usher, Outkast and Pink as well as ventures with Sean “P. Diddy” Combs for Bad Boy Records and Dallas Austin for Rowdy Records.

Reid was tapped by then-BMG president and CEO Strauss Zelnick to replace Arista’s legendary leader and founder, Clive Davis. BMG was so keen on Reid’s appointment that in 1999, they sent him to a 12-week executive management program at the Harvard School of Business. What ensued was a highly publicized power struggle that ended with Reid at Arista and Davis securing his own label, J Records, in a joint-venture deal with BMG reportedly worth $150 million. Reid faced an uphill climb when taking the reins of a demonized Arista in 2000. But after a rocky first year, he landed success by signing Canadian rocker Lavigne and allowing Pink to transition from R&B to rock.

Industry insiders speculate that the changes at Arista are part of BMG’s downsizing preparations in anticipation of regulatory approval for the Sony-BMG merger, though one BMG executive insisted that the changes at Arista were unrelated. Bertelsmann AG and Sony Corp. on Tuesday formally notified the European Commission of a binding deal to merge their music businesses in a 50-50 joint venture. The commission is likely to decide by early next month whether to give a routine clearance to the planned merger of BMG and Sony Music or launch an in-depth four-month investigation. It is possible that Arista will eventually be folded into RCA and J Records under Davis, who is now RCA Music Group chairman. While no official merger moves can be made before approval, both Sony and BMG are likely to continue to trim their operations.

During his time at Arista, Reid also parted ways with Bad Boy Records, signed an exclusive long-term agreement with Whitney Houston worth $100 million and inked a label deal with producer duo the Neptunes. Reid already has been in talks to take a role at Universal Music Group, sources said.

Regarding the proposed Sony-BMG merger, Philippe Kern, head of the music lobby group Impala, submitted a formal objection to the European Commission on Tuesday. He said the commission’s assessment of the market in 2000 -- that it was an oligopoly -- is still valid. “The market shares are still the same, and the ability to control the market has not changed,” he said in the complaint. “If anything, things have gotten worse since the market has become more concentrated.”