Former Head of Elektra/Asylum : Smith Returning to Pilot Troubled Capitol Records

It was four years ago this week that Joe Smith--long considered one of the record industry’s most capable and best-liked executives--announced that he was resigning as chairman of Elektra/Asylum Records and quitting the business after 30 years.

When Smith left, the industry was in the midst of a severe three-year slump and Elektra/Asylum was going through an executive shake-up, widespread staff layoffs and the relocation of its headquarters to New York from Los Angeles. In short, it was a good time to get out. Now, the 57-year-old Smith is returning as vice chairman and chief executive of the record operations of Capitol Industries-EMI Inc.

Some would say that’s not exactly an ideal launching pad for a comeback. For although there has been an across-the-board recovery in the record business over the last several years, Capitol-EMI remains troubled.

Guaranteed Big Sellers

Despite an artist roster that includes such guaranteed big sellers as Tina Turner, David Bowie, Bob Seger and Duran Duran and a catalogue of older material that includes such perennial hits as the Beatles, the Beach Boys and Frank Sinatra, the company has been unable to halt its steadily declining market share among the so-called “Big Six” U.S. record distributors (the others are CBS, Warner Communications, RCA/Ariola, Polygram and MCA). Only five of the 100 most successful pop albums last year, as tracked by Billboard magazine, were released by Capitol-EMI.

In recent months, there have been constant rumors in the industry that the company’s parent, Thorn-EMI of England, was going to sell off the U.S record operations.

U.S. Market Considered Vital

“That’s one of the first things I asked when (Capital Industries-EMI Chairman) Bhaskar Menon approached me about the job,” Smith said in an interview last week at his Beverly Hills home. “I said, ‘It sounds fine, but in three months will I be reporting to MCA or Disney studios or David Geffen?’ ” Before accepting the job, Smith flew to London and put the question directly to members of the Thorn-EMI board.

“They indicated to me that they consider America as vital to the overall success of Thorn-EMI worldwide,” he said. “They are a very big company that likes being in the music business because they think its a good business. They own a lot of retail stores in England, and EMI has always been one of the music industry’s powerhouses internationally. The weak link has been the performance of the U.S. company.” Asked what steps he intends to take to turn the U.S. operation around, Smith exhibited the quick, biting sense of humor that established him as the industry’s favorite banquet speaker.

“I’ve got this great idea,” he said. “We’ll put the Beatles on compact disc. We’ll make a fortune, and I’ll be a hero.”

He was acknowledging--albeit lightheartedly--what is widely seen in the industry as a perfect example of Capitol-EMI’s ineptitude. Two years into the compact disc boom--with $322 million worth sold in the first six months of 1986--the company has yet to issue its most popular recording group in the new digitally encoded, laser-read format. Among CD retailers, the Beatles recordings are considered to be perhaps the most potentially profitable of all.

“If they ever come out, the Beatles CDs should sell right up there with Springsteen, maybe better,” one retailer told The Times. Capitol released 28 Beatles albums in the United States.

Smith thinks that with the opening of its own manufacturing plant this year, Capitol-EMI will soon solve its CD problems.

“Although I heard they recently had some kind of disaster--some of the equipment for the plant fell off a truck or something and they had to send it back to Japan to be fixed.” Smith doesn’t officially take over his new job until Feb. 2.

“I’m just starting to get information now,” he said. “I don’t even know how many people work for the company. But they have to face the reality that almost every entertainment entity in the last few years has undergone some restructuring--the TV networks and every record company, even CBS, as successful as it’s been. I don’t know if Capitol has gone through that.”

May Consolidate Labels

Capitol-EMI has two classical labels, Angel and Seraphim, and three pop music labels, Capitol, EMI-America and New York-based Manhattan. Smith hinted that the latter two labels may eventually be folded into Capitol.

“I certainly don’t think the current structure is set in stone,” he said. “For one thing, it has to be proven to me that we need these three pop labels. I don’t know if it makes sense.

“My first priority is to energize the company, to shake it up and make it a player in this town, which it hasn’t been. Perception is a great deal of this business. If people are saying you’re a hot company, then you are hot. This is a a small community of artists, lawyers and managers. You have to be out there socializing, being visible.

“It’s no accident that the successful companies are successful most of the time. A&M; has always been successful, so have Warner and CBS. You never hear anyone say ‘We’re RCA and we’re going to kick ass.’ They’ve changed ownership and management several times in recent years. But there’s a consistency of management in the CBS and Warner group--in the ranks, in regional and sales levels.”

Having spent most of his career in the Warner organization--starting as a promotion man in 1960 and rising to president of the Warner Bros. label before being named chairman of Warner-owned Elektra/Asylum in 1975--Smith sometimes sounds like he’s still working there. He’s bringing an old Warner colleague with him to Capitol. David Berman, vice president of business affairs at Warner Bros. Records, will report to Smith as president of Capitol Industries-EMI.

“Getting Berman to come aboard wasn’t easy, because people just don’t leave Warner,” Smith said. “It’s such a pleasant atmosphere; it’s a creative-oriented company as opposed to a legal, business affairs or even marketing-oriented company. They make it seductive in terms of compensation, they create a comfort zone, so people don’t leave.

‘Less Bureaucratic’

“For example, they let everyone vote at Christmas whether to have a big Christmas party or close the company for the holidays. The vote was 289 to 1 for closing. They’re trying to find that one schmuck who voted for the party.

“I want to put Capitol in that league,” he said. “I’d like the company to be less bureaucratic than it probably is.

“I’m there to make sure that someone doesn’t bet the company on some rock group from San Diego. But on the other hand, if that group is good and we can make the deal, then we are going to do it. We’re not going to have lawyers listening to records or marketing people deciding who will be signed to a record contract.”