Motown: What’s going on?

George Jackson, a Harvard-educated film producer from Harlem, has just been named the new president and CEO of legendary Motown Records. But rather than shout it from the roof of corporate headquarters in midtown Manhattan, Jackson is mum. Can you really blame him?

It’s not just that Jackson is moving into a high-profile management position and is inclined to tread lightly. He is entering a real quagmire–assuming the leadership of the most recognizable brand in the music business at a time when the company is still reeling from years of disappointing results, poor management, public controversy, and intrigue.

In late October, Jackson signed a contract that industry insiders say will pay him between $7 million and $10 million over the next six years, including incentives. From day one, Jackson’s actions will be measured against those of his immediate predecessor, Andre Harrell, the flamboyant hip-hop impresario whose wrenching 22-month tenure at Motown began with an ill-timed $200,000 promotional campaign touting his arrival and ended in August when Harrell resigned rather than agree to run the label under a restructuring plan that would have left him with a diminished role. “George is going to come in with the benefit of being able to view some of Andre’s critical mistakes,” says Lyor Cohen, president of Def Jam Recordings. “Andre was an exceptional executive, but turning around a company takes a long time.”

Record labels come and go, and rarely do we mourn the loss. Tastes change. Artists fade. Spice Girls happen.

Motown is different. The name alone conjures images of astounding success–the pinnacle of black achievement in the music business. Motown’s glittering portfolio of artists was once the envy of the entire industry, and its accomplishments still inspire a new generation of black producers and executives. Founder Berry Gordy started the company in Detroit with an $800 loan and a conviction that black music and high style could be forged into a sound that would be popular with whites. He was right, of course. Motown produced 51 No. 1 hits between 1964 (“My Guy,” by Mary Wells) and 1985 (Lionel Richie’s “Say You, Say Me”), a run of success unmatched in popular music. “Berry had the vision and the genius to take black music, music from the slums of Detroit, and polish it to a high-gloss finish that would be palatable to whites–but kept it ‘real’ enough for blacks,” Clarence Avant, the reclusive Motown chairman emeritus who worked alongside Gordy during Motown’s heyday, told FORTUNE. “He helped invent pop music as we know it today.”

Success faded abruptly, though. Emerging technologies, deep-pocketed competitors, and the changing dynamics of the music business made it almost impossible for Motown to stay afloat. In June 1988, after more than two years of soul-searching and desperate efforts to remain competitive, Gordy finally stopped trying: He sold Motown to MCA and Boston Ventures for $61 million.

Polygram bought the label five years later for $301 million, placing a huge value on the catalogue and brand name. But when it came to producing new hits, Motown never regained its touch.

Company executives seemed to assume that its artists would be as popular with the next generation as with their parents, and before long the label was little more than a dusty jukebox of faded hits and nostalgic memories from a time when we weren’t ashamed to say, “Baby, I Need Your Loving” or “How Sweet It Is (to Be Loved by You).” After ’85, Motown produced only three No. 1 songs, all from the immensely popular group Boyz II Men, whose recent album, Evolution, and single, “4 Seasons of Loneliness,” reached the top of the charts shortly after their release. Not that Jackson needed yet another reason to lie low, but in the long run, music history will judge the 38-year-old executive on whether he was able to make Motown matter again. Whether he transformed the label–which hasn’t turned a profit during the ’90s–into an industry powerhouse again. Whether he made it sing again. “I look forward to the challenge,” Jackson said in a statement issued on the day his hiring was announced. “I have always been inspired by the entrepreneurial brilliance of Berry Gordy, the legacy of Motown, and the classic foundation it was built upon.”

The alternative isn’t pretty. The label’s demise would be more than just another loss in an industry known for gobbling its young. It would be a sad passing for anyone whose journey into adulthood was serenaded by Stevie Wonder, Marvin Gaye, Mary Wells, or other Motown voices–and all but tragic for African Americans who watched over the years as several prominent black-owned businesses failed to survive more than a single generation. “White people can afford to lose Pan Am, Montgomery Ward, or Woolworth’s,” says Avant. “There are a million other white-run institutions. Blacks cannot afford to lose even one.”

So what’s a film producer doing at the helm of one of the icons of the music industry? Actually, Jackson’s no stranger to the business. One of his first movies, Krush Groove (1985), took hip-hop, a.k.a. New Jack Swing (Note to the unhip: A New Jack is an urban Young Gun) out of the underground nightclubs where it was nurtured during the ’80s. (One of the movie’s stars was a young rapper who was one-half of a duo known as Dr. Jekyll and Mr. Hyde. His name was Andre Harrell.) Jackson’s subsequent film projects, produced with business partner and director Doug McHenry, chronicled the sagas of modern urban youth. None of the movies were artistic gems, but most were modestly profitable and each boasted a soundtrack that was also successful. New Jack City grossed $44.1 million at the box office in 1991, and its soundtrack sold 56,000 copies. It was followed by House Party 2 ($19.4 million in 1992, 232,000 units sold); Jason’s Lyric ($20.3 million in 1994, 1 million units); and Thin Line Between Love and Hate ($34.8 million in 1996, 455,000 units).

“George comes at the business from a different side than Andre,” says Jocelyn Cooper-Gilstrap, senior vice president of the Universal Music Group. “Andre is more of a purely creative executive, and George knows how to balance the business and the creative.”

Danny Goldberg runs Polygram’s Mercury Music Group, which now includes Motown and 8 other labels. He’s known Jackson for several years. Worked on projects with him. Invited Jackson to his home. Avant knows Jackson, too, having included him among the many black en-tertainment executives he has quietly counseled over the years. When Avant informed Goldberg that Jackson was interested in leaving his company, Elephant Walk Entertainment, for Motown, Jackson “went right to the top of the list,” says Goldberg.

“He understands the internalized discipline of running a business, and that’s one of the elements that we absolutely needed to have,” Goldberg adds. “He’s also used to working with creative talent. He knows a lot of our artists, and his personal relationships will give him entre into the musical community. The fact that we know each other, that he knows Clarence, yes, that was an x factor in his favor.”

Harrell recalls meeting Jackson during the production of Krush Groove, a film that is to hip-hop what Saturday Night Fever is to disco. It featured one of the first rap groups to gain wide appeal, Run DMC, as well as pioneer rapper Kurtis Blow and LL Cool J, who remains one of rap’s most multitalented and popular artists. “The film was the most credible depiction of hip-hop at the time,” says Harrell. “It was exciting to see a black man pushing to do it.”

Jackson’s projects allowed him to develop many solid relationships with the black entertainment elite. Already he’s sat down with Motown rapper Queen Latifah, who promised to release an album in 1998, her first in five years. Such relationships give Jackson a quiet credibility with the people he’ll need most, but it’s only a start. As Nelson George, author of several books about the music industry, puts it: “His success as a record man will depend upon his being open to young A&R [artists and repertoire] people and trusting their talent. Hire a few young heads and give them room.”

To succeed, a record executive today must be able to do two things: first, understand the complicated and usually risky economics of an industry where fewer than two of every ten acts signed will likely become profitable; and second, hang with the often quirky and nocturnal artists and producers who are essential to any label’s success. By that measure, George Jackson is the perfect elixir for ailing Motown. But isn’t that what the Polygram folks said about Harrell?

Andre Harrell wasn’t looking to start a trend that would help define a musical genre; he was just trying to dress for both of his jobs. In the mid-1980s he frequently performed all night as half of Jekyll & Hyde–and by day he was an account executive at radio station WWRL in New York City. So to make the station’s daily 8 a.m. meetings, he started wearing natty suits on stage rather than the sporty threads worn by most rap artists. The look became a hallmark of hip-hop, rap’s more glamorous cousin.

Even then Harrell was already a success story, having ascended from the projects of the Bronx to a fast-track sales career in communications. Yet he couldn’t shake the pull of his musical world, so he abandoned the safe route to success to pursue his passion–to make music that “for that moment, makes you feel like you’ve got the right haircut, got the right shoes, got the right suit, that you’re in the right place at the right time with the right girl–music that makes it all good.”

Sounds a bit like Gordy’s dream, doesn’t it? No accident there. Harrell was drawn to music by the first young stars of his childhood, the Jackson 5–Gordy’s last superstars. Like Gordy, Harrell’s gifts were an eye for talent and a notion that black music should be packaged to appeal to a broad audience. Sure, rap had its fans, but if the music were given a double-time beat, glamour, and sex appeal, Harrell thought, it could be huge. “I wanted the music to be fabulous,” Harrell says with a smile, “ghetto fabulous.”

Harrell had developed his sartorial flair in an unusual manner: by studying the mostly white commuters who passed through the Bronx each day from their homes in affluent Westchester County and Connecticut en route to Manhattan. Honest. For Harrell and his young peers, these travelers provided images of achievement, close enough to see, touch, and experience. “We borrowed from their fashions, borrowed some of their attitudes, so that we could make it happen for ourselves,” he recalls, “so that we could someday get the same level of service and respect they were receiving.”

When the new look met the new sound, hip-hop took off. Harrell and rap czar Russell Simmons, who once shared an apartment in Lefrak City, Queens, were two of the pioneers. They were briefly business partners, but their visions diverged. Simmons, the son of a suburban middle-class family, wanted to make the music more “real.” Harrell, the kid from the projects, wanted something more. “I wanted music to be star-studded, like the movie business when the studios had all the stars,” he says. “I wanted to make those kinds of records that made champagne popular. Let the good times roll. Let girls meet guys, guys meet girls. I always saw the big picture like that; [Russell] always saw it raw.”

Al Pereira—Michael Ochs Archive/Getty Images

They were both right. Simmons’ company, Rush Communications, generated $37 million last year with television and movie projects, Def Jam Recordings, and a new line of clothing called Phat Farm. In 1986, Harrell founded Uptown Records, a partnership with MCA that was a precursor to the handful of successful “boutique” joint ventures that drive black music today. Uptown produced several platinum and gold artists, led by Heavy D., the self-proclaimed “Overweight Lover”; Jodeci; and singers Al B. Sure! and Mary J. Blige. At its peak in ’95, the company generated $60 million in revenue.

Today you can’t turn on the radio, watch television, or walk the streets without being struck by the hip hop beat or touched by the rap of a new wave of entrepreneurs like Sean “Puffy” Combs, president and CEO of Bad Boy Records, or the LaFace Records tandem of singer/composer/producer Kenneth “Babyface” Edmonds and producer L.A. Reid. If the Motown sound accompanied the turbulent ’60s, then hip-hop and rap provide the anthems of the 1990s. They’ve made black music one of the few bright spots in the somnambulistic $12 billion music industry. It will account for about $3 billion in sales this year, much of it from white music buyers. “One of the very few places where blacks and whites have any common ground is music,” says Avant. “Motown started the trend of black music that appealed to the masses of whites, not just white sophisticates. But for Motown, there would most likely be no Bad Boy, no LaFace, no Deathrow [Records], all of which are black-run companies that have sold millions of records to blacks and whites alike.”

But if Motown was the progenitor, it was clearly out of it when these exciting new sounds found their groove. “They were not a competitor,” says a rap label president. “Not even a blip.” Adds Harrell: “When you’re in it, when you’re on the pulse of what’s hot today and what may be hot tomorrow, you’re living it, and everybody else who’s living it is around you because you all need to be there. All you had to do was look around to be able to say, ‘[Motown] ain’t in it.'”

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What happened between Harrell and Motown was the result of a marriage that probably never should have occurred: Entrepreneur meets rich corporation. Falls in love. Gets married. Feels stifled. Hates all the questions. Regrets loss of freedom. Soon, bingo: divorce.

In 1995, though, Harrell, with his ear for hits, was attractive to the executives at Polygram. Motown had found no hot acts besides Boyz II Men and was under severe financial strain. No wonder Polygram CEO Alain Levy got off the dime (millions of them, actually) and made Harrell a stunning offer: a five-year contract worth about $35 million.

The timing of Harrell’s arrival wasn’t good. The next Boyz II Men release, a guaranteed cash machine, wasn’t scheduled until 1997. Queen Latifah’s last album had mediocre sales. Even the label’s storied catalogue was leveling off with the industrywide decline in CD sales–to about $40 million annually, not nearly enough to service Motown’s bloated 130-employee payroll and overhead.

The problems created an atmosphere of urgency at Polygram, which the Motown rank and file felt as distracting pressure. Part of Harrell’s job, of course, was to shield his staff and artists from the heat, but not having had a boss since his days at the radio station, he was not prepared for the task. “I couldn’t get into the artists’ heads,” Harrell recalls. “I was responsible for trying to create a marriage with the company while also shielding the artists from the negativity. I had to be their spirit. The company was blind to all this.”

Says a former Motown executive: “I always felt we were rushing [acts], that we didn’t take our time, because there was an incredible amount of pressure. It was like, ‘All right, you’ve got the job, now deliver.'”

Let’s face it: The music business hasn’t exactly been known for its fiscal discipline. Lavish spending is the norm–from the executive suites to the artists’ limousines, wardrobes, and almost any quirky indulgence they desire. Music videos have become a game of “mine costs more than yours,” running an average of $750,000 for major artists. “We’re banks,” says LaBaron Taylor, Sony’s senior vice president, corporate affairs. “Except when we spend millions to produce enough songs for two CDs, we don’t always get it back.”

Harrell walked into Motown like a kid in a candy store, eyes wide open, gazing at the vast resources available to him after years as an entrepreneur with a management style he calls “organized chaos.” Had Polygram done its homework, it might have learned that Harrell at times had payroll glitches at Uptown, though employees were eventually paid.

The combination of all these factors was already a formula for disaster–and then came the ad campaign. Harrell says he was merely trying to lift Motown’s standing among artists and producers when he flooded New York City subways, trains, bus stops, and trade media with posters and ads featuring himself lounging in a wing chair, cigar in hand. “From Uptown to Motown…It’s On!” the legend read. The campaign backfired. It incensed many of Motown’s top artists, who felt that Harrell was putting himself above the label. It came off as pompous and premature to industry executives and as simply a bad idea to many of Harrell’s friends. “It’s all about finding the talent, not the label,” says an industry insider. “Andre was pretty much enamored of his own abilities. That was his undoing.”

Even one of Harrell’s closest friends shakes his head: “He put a target on his back, and [Polygram] hit the bull’s-eye.”

Recalling a decision gone awry is never easy. “The idea was to attract artists and executives to the reinventing of Motown,” Harrell said recently at his sprawling apartment on Manhattan’s Upper West Side, his head down and voice low. “I wanted to take the energy and credibility I’d built at Uptown and say, ‘Hey, this place is about to happen!’ When it’s your own company, nobody cares.”

While both Polygram and Harrell say the campaign did not kill their relationship, it was not a good start. Three other factors made matters worse: One, his key senior managers were chosen by Polygram, which contributed to an air of distrust. Second, Harrell moved company headquarters to New York from Los Angeles, an effort that took months and cost millions. Third, Harrell invested heavily in acts like Taral Hicks, 98 degrees, and 708–all of them solid, but not a superstar in the bunch. “I did not think we were going to be able to manage this business with Andre in that position,” says Roger Ames, president of the Polygram Music Group. “We may have failed. Maybe we should have intervened earlier. We hire entrepreneurs and we try to work with them in a corporate environment. Some of them work out, some of them don’t. He was in the wrong job.”

Harrell says he was prepared to solve the problem with massive cutbacks of Motown’s huge staff. But by the time he submitted his proposal, Polygram officials had decided that an even greater change was in order. “I couldn’t have seen the extent of the transition I would have to make,” says Harrell. “I was a big fish in a small pond, and I had the flamboyancy to match. When you become a big fish in the biggest pond, you need to take a different profile, and I didn’t realize that until the backlash began.”

Over lunch one day late last summer, Goldberg asked Harrell to remain at Motown under the new plan, reporting to Goldberg rather than Ames. Harrell believes the new structure is good for his successor, but at the time he saw it only as a blueprint for failure–his own. “No matter what happens now,” Harrell told Goldberg, “you’re going to be the hero, and I’ve been called an ass—- too many times to let you become a hero.”

If nothing else, Harrell, 37, got the requisite golden parachute. According to a source familiar with his deal, Harrell had a buyout clause in his contract that called for him to receive its full value–$35 million- if Motown was ever restructured so that he didn’t report directly to Ames. “Maybe Motown’s mission,” says an industry executive, an African American, “is to every few years make one black man rich beyond his wildest dreams.”

This month Harrell will move on to his next opportunity. He’ll become CEO of a new joint venture with Sony that will oversee a record label, television and films production, and other media ventures.

The twist in this saga is that for Harrell’s successor, the timing and circumstances couldn’t be better: First, Motown expects Evolution to sell 2.5 million units this year, providing the label’s first major revenue infusion in years. Meanwhile, Jackson will start out with the go-ahead to slash Motown to a manageable size. Before the end of the year, the label will be “significantly smaller” than it was under Harrell, says Goldberg, adding quickly that Motown won’t, however, lose its soul. “It won’t just become a catalogue company,” he says. “Motown will sign new artists and make new records. The plan is also to get it into its healthiest financial shape. Lean and mean–but as a full record company, not as a lesser thing.”

Next year is Motown’s 40th anniversary. Big things are planned. A 14-minute Super Bowl halftime tribute. A four-hour miniseries in February on ABC. A docudrama on the Temptations. Commemorative sets. Celebrations. Enough diversions to give Jackson time to build his team and scour the planet for the next Motown superstars–very quietly, of course.

Reporter Associates: Lixandra Urresta and Wilton Woods