Ryko Corporation

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Ryko Corporation

30 Irving Plaza, 3rd Floor
New York, New York 10003
U.S.A.
Telephone: (212) 287-6100
Toll Free: (800) 808-7956
Web site: http://www.rykodisc.com

Wholly Owned Subsidiary of Warner Music Group Corp.
Incorporated: 1984 as Rykodisc, Inc.
Employees: 75
Sales: $80 million (2005 est.)
NAIC: 512220 Integrated Record Production/Distribution; 512120 Motion Picture and Video Distribution

Ryko Corporation is a record company that offers more than 1,000 titles in such genres as rock, pop, folk, jazz, blues, country, and world music. The firm owns and distributes several labels including Restless, Hannibal, Tradition, Slow River, and Gramavision, as well as most of the recordings of the late Frank Zappa. Ryko also releases video DVDs and performs distribution of its own and other labels around the United States and in some international markets. The company became part of Warner Music Group in 2006.

BEGINNINGS

The origins of Ryko date to the early 1980s, when digital audio was in its infancy. Compact disc players were expensive and only a few albums had appeared in the format, with classical music the primary genre available. Disc manufacturing was performed at just five plants worldwide (four in Japan and one in Germany), and with little demand for popular music in the format few record companies had issued CDs from their back catalogs. In the fall of 1983 four men at a record industry conference in Cannes, France, met for drinks to discuss this situation, and by the end of their conversation a business plan for the world's first CD-only record company had been scrawled on a napkin.

The new firm would be headed by Don Rose of Boston, who had owned a Toledo, Ohio-based record store chain before starting New Wave music label Eat Records. Entertainment lawyer Arthur Mann, who had helped sign rock hitmakers Bon Jovi, would oversee the firm's business affairs from the Philadelphia area, while record distributor Rob Simonds (Rose's brother-in-law) would handle distribution via his established East Side firm in Minneapolis. Los Angeles-based Japanese record importer Doug Lexa used his connections to secure manufacturing, and also suggested the name Rykodisc, the first half of which was a Japanese term meaning "sound from a flash of light." The four partners would continue to live in their own home cities, as the new firm was initially just a sideline to their regular jobs. To fund the first batch of 200,000 CDs (blanks for which then cost $4 each) they used letters of credit from regional distributors as collateral for a bank loan.

In November 1984 Rykodisc issued its first CD, Comin' and Goin' by Native American jazz saxophonist Jim Pepper, licensed from EuropaDisc Records. Because the digital format was so new, obtaining rights was relatively easy as many labels had no plans to make CDs themselves.

During 1985 the company issued five more albums and took in revenues of $100,000. Early Rykodisc releases included folk, blues, and reggae compilations licensed from Rounder Records; an album from Grateful Dead guitarist Jerry Garcia and David Grisman; experimental rock music from The Residents; the soundtrack to the hit French film Diva; and a nature recording series called Environments.

LICENSING OF ZAPPA
CATALOG: 1986

Rykodisc's first major coup came when it secured the CD rights to the back catalog of legendary rock satirist, composer, and provocateur Frank Zappa, who owned his own master recordings and had been releasing them on vinyl and tape through EMI. With the latter firm ambivalent about preparing CD releases, he gave the new label a chance based on its early track record. Though Rykodisc had gambled by paying him a large advance, the initial 10,000-disc pressings of 20 different albums quickly sold out when released in 1986, and more Zappa product followed.

The success of the Zappa series brought the firm much industry attention, and other licensing deals were soon struck, including one with the estate of the late rock guitar legend Jimi Hendrix. A previously unreleased concert recording, Live at Winterland, was issued in 1987, and it became the best-selling Hendrix album in many years. Rykodisc would later issue it on vinyl LPs and cassettes, marking the label's first step "backwards" into analog formats.

The year 1987 also saw the firm's first non-catalog release from Australian rock band the Screaming Tribesmen. The label took on the new challenge of supporting the group's American tour by orchestrating an advertising campaign and working to secure radio airplay. Though the band achieved moderate success, the effort strained the resources of the small Rykodisc staff, and the company returned to its focus on catalog releases shortly afterwards. With the label issuing between 25 and 30 albums per year, sales for 1987 hit $5 million.

In late 1988 Rykodisc entered a bidding war for the RCA label catalog of rock icon David Bowie, who had won back the rights to his work. After a year of negotiations the firm was given the assignment, though it would reportedly have to sell one million Bowie CDs to break even on his advance. Rykodisc would handle the 16 albums in North America, but, as its international presence was still small, EMI would sell the discs in foreign markets. The first release was a four-disc box set called Sound + Vision, after which the individual albums became available with rare and unissued bonus tracks. The box's clear plastic design won the label its first Grammy Award in 1990, which helped boost sales past 200,000 units. That same year a single-disc Bowie hits compilation, Changes Bowie, sold more than one million copies, becoming the label's first "platinum" seller. The year 1990 also saw cofounder Doug Lexa sell his stake to the other three partners, while Rob Simonds was leading a successful crusade to ban the disposable "longbox" package then favored by retailers.

ACQUISITION OF
HANNIBAL: 1991

In 1991 the company bought British folk music label Hannibal Records from founder Joe Boyd, who would become Rykodisc's director of project development from his London home base. Hannibal (whose business operations were later renamed Rykodisc Europe) also brought with it a sister label called Carthage and the copyrights of Boyd's Warlock Music Ltd. firm, which included the songs of doomed British folkie Nick Drake and Hannibal mainstays Fairport Convention.

Rykodisc's own publishing unit had assembled a small group of copyrights from some of the label's other artists as well as music recorded by Grateful Dead drummer Mickey Hart, who had been assembling compilations of international folk music for the firm since 1988 (and had won the first world music Grammy in 1991 with his Planet Drum album). In 1992 a new British subsidiary, Rykomusic, Ltd., was formed to create a worldwide rights administration network and license music to producers of films, commercials, and television programs.

COMPANY PERSPECTIVES

Rykodisc was the world's first CD-only label, now operating in all formats, dedicated to the highest standards of quality in the industry, both in new releases and re-releases.

In May 1992 Rykodisc distribution unit East Side Digital (ESD) formed a joint venture with roots-music label Rounder Records, later absorbing Seattle-based Precision Sound to create a distribution firm called REP. It would handle the product of Grateful Dead Merchandising, Blind Pig, and Green Linnet Records, among others. That year also saw new Rykodisc act Sugar, featuring Bob Mould, sell 300,000 copies of its debut album Copper Blue, while the firm introduced an interactive trivia game called "Play it By Ear" that utilized hundreds of audio snippets on a compact disc.

With sales approaching $20 million, Rykodisc was the second largest U.S.-owned record label after Warner Brothers. New releases included albums of rare material from art-rock group Devo, new music from cult band Morphine, a live album by Beatles drummer Ringo Starr, and a box set of recordings by Beatle John Lennon's widow Yoko Ono, which featured Lennon (and occasionally Starr) on backup. The firm now released all of its CDs in a trademarked green-tinted clear plastic jewel case.

LICENSING OF ELVIS COSTELLO
CATALOG: 1993

In the summer of 1993 the company secured North American rights to legendary British rocker Elvis Costello's first 11 albums through the efforts of Artists & Repertoire Director Jeff Rougvie and President Rose. The albums would be released in a "universal edition" that reconciled different track lineups between the United States and England, and also offered much bonus material. Like the Bowie series, the first release was a box set which compiled Costello's first three studio albums along with outtakes, demos, and live recordings, with liner notes written by the star himself.

In addition to marketing its product via record stores, Rykodisc was also successfully using alternate retail channels that included museum stores, women's specialty stores, and college bookstores, as well as through a printed catalog and by advertising in such publications as Utne Reader and Mother Jones. The company distributed its albums throughout the United States and marketed many internationally, either via its U.K. subsidiary or through local licensees in Australia, Japan, Southeast Asia, and elsewhere. Rykodisc, which had a total of 80 employees, was releasing about 50 albums per year.

In July 1994 the firm bought out Rounder's 50 percent stake in the REP distribution venture, which had moved from a 25,000-square-foot warehouse at the Rykodisc headquarters building in Minneapolis to a new 60,000-square-foot site in Bloomington, Minnesota. It was handling about 50 different labels, including some titles from Geffen and other major firms. August saw the company acquire the Gramavision label of Katona, New York, which had released jazz and other instrumental music for 15 years by acts including John Scofield and Medeski, Martin & Wood.

In October the firm was restructured to create a parent unit called Ryko Corporation and subsidiaries Rykodisc, Inc., REP Sales, Inc. (later Ryko Distribution), and Rykomusic, Inc. The company also completed a $44 million recapitalization through Genesis Merchant Group to complete the REP buyout and finance the acquisition of the late Frank Zappa's master recordings from his estate. In early 1995 Ryko released 53 albums that he had remastered before his December 1993 death, and other Zappa titles would appear in following years.

In early 1996 the company released ten budget-priced albums from the recently acquired Tradition catalog, which had released folk, blues, and jazz music since its founding in 1955. The year also saw Rykodisc begin to sell albums online via its web site.

KEY DATES

1984:: Rykodisc is founded to release music on compact discs.
1986:: Frank Zappa reissue series is launched.
1989:: Firm wins bid to license David Bowie catalog.
1991:: Company buys Hannibal Records of England and music publishing affiliate.
1993:: Elvis Costello catalog is licensed.
1994:: Zappa catalog and Gramavision label are purchased; company undergoes recapitalization and restructuring.
1995:: Tradition Records is acquired.
1998:: Rykodisc is sold to Islandlife unit Palm Pictures; RykoLatino, Candescense labels debut.
2001:: Rykodisc is acquired by Chase Capital-led group.
2002:: Restless Records is purchased.
2005:: Rykomusic publishing unit is sold for $10.5 million.
2006:: Warner Music Group buys Ryko for $67.5 million.

In 1997 the firm added titles from popular Canadian folk-rocker Bruce Cockburn and the late comedian Bill Hicks, who had died in 1994 on the cusp of stardom. The company also began partnering with movie studio MGM on a series of soundtrack albums, including one from Zappa's 1971 United Artists film 200 Motels. During the year founding partner Rob Simonds departed to create a new label called Northside, while the company closed its Minnesota distribution operation and moved it to Salem, Massachusetts. Rykodisc was releasing 100 titles per year and had 130 employees worldwide. For 1997, revenues topped $70 million.

SALE TO PALM PICTURES IN 1998

The popularity of carefully remastered CD reissues packed with bonus tracks, which had brought the label its success, had slowly begun to prove its undoing as established record companies saw the merits of releasing material already in hand, and choice catalogs became elusive. In 1997 the firm's license to David Bowie's albums expired, and with debt from the Genesis recapitalization dragging down the bottom line, in the summer of 1998 Rykodisc's owners decided to sell the firm to Chris Blackwell's Islandlife company, where it would become part of the Palm Pictures music/movie unit. The price was approximately $30 million. Palm titles would be distributed by Ryko, which would continue to be led by President/CEO Rose and Executive Vice-President of Business Affairs Mann.

In the fall the firm moved its headquarters and distribution operations from Salem to New York, where Palm was based. Don Rose was subsequently tapped to work in the new parent company's chairman's office and George Howard, the head of recently acquired rock label Slow River, was named president. He would work from Gloucester, Massachusetts, while the firm's publishing and international units continued under Mann in Ardmore, Pennsylvania. The company had also launched two new labels during the year, RykoLatino and new age imprint Candescence.

The year 2000 saw a joint venture, Trumpet Swan Records, created with former Columbia artist Sophie B. Hawkins. Successful Ryko albums of this period included titles from country singer Kelly Willis and blues/soul guitarist Robert Cray. The firm was also releasing music-related DVDs and selling recordings online as downloadable MP3 files.

With Chris Blackwell under increasing pressure from investors, in the spring of 2001 he sold Ryko to a group led by Chase Capital Entertainment Partners (later known as JPMorgan Chase Capital Partners), which owned a stake in Palm. The company would be headed by Chase board member Sam Holdsworth, a former publisher and editor-in-chief of industry publication Billboard magazine.

Before the Palm split was announced Joe Boyd left the firm, and soon afterwards label head George Howard also quit. Arthur Mann would continue to run the publishing and international units, while original cofounder Rob Simonds returned as a consultant. His Northside label would also again use Ryko for distribution, after having left around the time of the firm's sale to Islandlife. According to departing President Howard, the merger with Palm had had a negative impact on Ryko because the companies' combined promotional units focused too heavily on Blackwell's acts.

PURCHASE OF RESTLESS: 2002

In 2002 the newly independent Ryko bought the catalog of Restless Records, which included such popular acts as The Flaming Lips and The Replacements, as well as the Twin/Tone label. Restless cofounder Joe Regis was soon named head of the Ryko Label Group unit. The company also acquired the copyrights of World Circuit Music during the year, which would boost its accumulated holdings to 10,000 titles. Rykomusic was having much success licensing its copyrights for TV, movie, and advertising use, with 35 national ad campaigns in 2001 having featured its copyrights, along with numerous films and television shows.

New releases were becoming a priority for the label, and in 2003 these included albums from rock groups Fire Theft and Fastball, folkie Kelly Joe Phelps, and the last album by famed songwriter Warren Zevon. The latter was released in partnership with New York-based Artemis Records, which Ryko would distribute to most of the world.

With 2004 came the release of a specially priced two-CD compilation that celebrated the firm's 20th anniversary and the first DVD by comic Bill Hicks, who had seven Ryko CDs in print. The company also bought Emperor Norton Records of Los Angeles, which had issued the soundtrack to the Oscar-winning arthouse film Lost in Translation. In the summer Restless cofounder William Hein was named to replace Regis as head of the Ryko Label Group.

In March 2005 sole remaining Rykodisc partner Arthur Mann left the company to pursue new ventures, and his duties were taken over by Hein. Summer saw the firm cut a deal to reissue the All Saints label, which included albums by electronic and ambient music icon Brian Eno and others. During the year Ryko also reissued the influential first album by Nine Inch Nails, signed popular New Jersey-based rock band The Misfits, and released discs by pop acts Josh Rouse and The Posies, as well as a benefit album for victims of Hurricane Katrina.

JPMorgan Chase had begun seeking a buyer for the company, and in December Rykomusic was sold to Evergreen Copyright Acquisitions for approximately $10.5 million. That was followed in March 2006 by the sale of Ryko's label and distribution units to industry giant Warner Music Group for $67.5 million. Ryko would become part of a firm that housed several active reissue labels including Rhino Entertainment, which had taken over the Costello catalog. The firm's revenues stood at close to $80 million, $10 million of which came from U.S. record sales, $20 million from international sales, and $50 million from U.S. distribution.

In the more than 20 years since its founding, Ryko Corporation had grown into one of the largest independent record companies in the United States and had assembled a catalog of more than 1,000 titles. With the powerful backing of Warner Music Group, the firm would soon begin to write a new chapter in its history.

Frank Uhle

PRINCIPAL SUBSIDIARIES

Ryko Label Group; Ryko Distribution.

PRINCIPAL COMPETITORS

Legacy Recordings; Universal Music Enterprises; EMI Music; Rounder Records Corp.; Welk Music Group; Koch Entertainment; Varese Sarabande Records; Razor & Tie Direct, LLC; Sundazed Music, Inc.; Collectors Choice Music.