Ken and Nancy's rock 'n' roll circus

He's the boss - and so is she. But there is turmoil at EMI, the $4bn record empire

Reprinted with permission of the Wall Street Journal Europe. Copyright 1998 Dow Jones & Co.

THEY are the anointed king and queen of rock'n'roll. In an industry which artists complain has been taken over by "suits" Ken and Nancy Berry stand out. The couple's home in the Bel Air section of Los Angeles often serves as a late-night crash pad for itinerant rock stars and music producers. It was on the Berrys' patio that five young women with a boom box choreographed their way toward a record contract and became the Spice Girls last year.

He is president of EMI Recorded Music, the largest and most important unit of the EMI Group. His $4bn empire includes and Virgin and Capitol labels and artists like Janet Jackson, Smashing Pumpkins and the Rolling Stones. She handles advertising and promotional campaigns for artists her husband signs.

But lately there has been tumult in the Berrys' musical kingdom. The Spice Girls helped raise EMI's US market share from last to third out of six in 1997 and plumped Virgin's profits, but new releases from stars such as Steve Winwood bombed. The Stones, David Bowie and Ms Jackson have undersold industry expectations, despite their multi-million-dollar advances and expensive promotions. When nominations for the Grammy Awards were counted, the Spice Girls were ignored, which doesn't bode well for the longevity of EMI's top-selling act.

EMI's stock has fallen 21 per cent in the past year after accounting for a stock split as the record industry has suffered through a global slump marked by weak sales growth and slipping profits. Last month EMI warned that poor sales in Japan and Asia would depress operating profit for the fiscal year ending 31 March. As the share price has dropped rumours have resurfaced that Seagram Co or Walt Disney Co may buy EMI though both deny current interest and EMI says it isn't for sale.

Meanwhile EMI's executive ranks have been in turmoil since last September, when Mr Berry, 46, elevated his wife, a 39-year-old executive in charge of "special projects" to the lofty title of vice chairman of Virgin Records American. Virgin President Phil Quartararo defected to rival Time Warner Inc's Warner Bros Records telling friends he was tired of sparring with Mrs Berry over everything from budgets to credit to developing the careers of rock acts.

The high-profile appointment of Mrs Berry only cranked up the volume on the negative buzz about her in the music industry from charges that she owes her standing to nepotism and treats subordinates badly, to more spurious reports about her sex life. Mrs Berry has been the subject of frequent attacks in the press, usually from unidentified sources, accusing her of having affairs with recording artists. Reports of her professional conduct and her alleged affairs so alarmed executives at EMI's parent company in London that EMI Chairman Sir Colin Southgate looked into the matter last summer.

No one disputes Mr Berry's talents in finding new music or his role in building Virgin into one of the hottest labels. But the controversy surrounding his wife has been a constant source of distraction and embarrassment for both the Berrys and EMI.

Mr Berry's future role at EMI has also been thrown into question by new uncertainty over who will take the helm of EMI Group. The board has effectively rejected a succession plan that called for its chairman, Sir Colin, 59, to be replaced by EMI Music chief executive James Fifield, 55, Mr Berry's direct boss and ally. Mr Fifield planned to sign a new contract to lead the company until 2002, after which insiders believed Mr Berry would be ready to succeed him.

But that plan was blown to bits when Sir Colin withdrew his support. Though he didn't return calls seeking comment, people familiar with the company say Sir Colin decided he wasn't ready to relinquish power yet and persuaded his allies on the board that Mr Fifield should continue to report to him. There are said to be concerns that Mr Fifield is angered by that decision and might now leave the company before his existing contract runs out next April.

How Sir Colin will deal with Mr Berry is unclear. Last May he praised him as the leader of "the next generation of management" at EMI. But people close to the company say he has become increasingly critical of some of Mr Berry's personnel decisions.

The Berrys dismiss charges of nepotism and say they are disgusted by the attacks on Mrs Berry's reputation. He says her appointment to vice chairman was simply recognition for years of work. "She has been in the company 20 years ... She is helpful in talking to artists, she is involved in signings, she knows how it works," says Mr Berry.

He notes that she recently was instrumental in landing Nellee Hooper, a high-profile producer who has worked with Madonna, U2 and Bjork. Virgin is expected to announce soon that it will take a half-ownership of Mr Hooper's new label called Meanwhile ... .

Mrs Berry is not shy about defending her work. "I was certainly responsible for the strategy of working with superstar artists," she says. "I cut through the corporate red tape ... There probably isn't anybody like me who has had the opportunities I had to grow up with a company and learn all the international operations." Mrs Berry concedes that she is demanding but she insists that she hasn't received special favours as wife of the chairman. As for rumours that she has had affairs with musicians, "I don't have sexual relationships with artists," she says - "I have friendships with artists".

Mrs Berry hardly fits the current profile of many corporate record executives where most of the women in top jobs these days tend toward tailored Armani trouser suits. With a mane of black hair and striking features she wears tight slacks or short skirts and holds meetings in bare feet when she isn't balancing on platform heels. Her office is filled with scented candles; a pack of well-thumbed tarot cards sits on her desk. She once had astrological charts prepared for Virgin's employees and found "a high correlation to creative-oriented astrological signs".

But she has earned grudging respect for using her ties to artists, video directors and designers to create memorable and money-making campaigns for EMI artists. As for critics who say her aim is seizing more power, she says she doesn't care about titles or corporate fiefs and hasn't signed an employment contract.

Mrs Berry routinely throws late-night receptions at laces like the Opium Den in Los Angeles, frequents clubs like the Vault in New York City and slips backstage at Rolling Stones and U2 concerts - activities usually left to the twentysomethings in most record companies' "A&R" departments. The Berrys have forged friendships with veteran rockers like Mick Jagger and rising groups like The Smashing Pumpkins.

According to Mrs Berry the music scene is all part of her job. "Lenny Kravitz is never going to come to my office for a meeting. I see him backstage," she says. "I am doing that at one in the morning. I spend as much time as I can out on the road with artists ." In one recent week, she flew to Miami to be with the Smashing Pumpkins and the Rolling Stones for a benefit, then on to Las Vegas to be with Mr Bowie at a concert, to San Francisco to visit Virgin's new hit band Verve. "I saw more than 30 shows on the world-wide tour" for the Rolling Stones' "Voodoo Lounge'" she says.

As for her appearance - "I do dress young," she says. "The way I dress is not inappropriate for Virgin or my lifestyle." Mrs Berry blames much of the venom directed at her on the fact that she is a powerful attractive woman in a business still dominated by men. But critics have long contended that she uses her relationship with her husband to further her own interests; as far back as 1993 Billboard magazine declared her "the Hillary Clinton of the Global Recording Business". Even investors who follow the company find her role puzzling. Michael Woodcock, a stock analyst with Nikki Europe based in London, says: "We are intrigued where Ken and Nancy's responsibilities begin and end."

The Berrys deny that he simply rubber-stamps anything she wants. Last autumn she fought EMI executives - including her husband - over her spending plans for a David Bowie video. She says she had "heated discussions" with Mr Berry but ultimately convinced him it was worth it. She persuaded Trent Reznor, lead singer of Nine Inch Nails, to appear in the video, hired in-demand British directors Dom and Nick and helped to boost sales of Mr Bowie's latest record.

Mrs Berry co-wrote and oversaw the shooting of the $300,000 video on Manhattan's Lower East Side. "I can't remember the last time someone of her echelon showed up at a video shoot or repeatedly at my concerts," Mr Bowie says. "Nancy's a real rock `n' roll girl". Mr Berry, meanwhile wins praise as a low-key, determined man who knows when to stand firm and when to bend with petulant demanding rock stars. "Artists should be in the spotlight, not executives," he says and his wife concurs. Last autumn Mr Berry joined Mr Fifield in trying to placate country star Garth Brooks who was threatening to hold up the release of his highly anticipated Sevens album because he was unhappy with EMI's Capitol Nashville management.

Mr Berry flew to Chicago for a late-night negotiating session at the star's hotel. Mr Berry agreed to reassign the head of that label, promoted an executive Mr Brooks felt had his interests at heart, and Sevens came out as scheduled.

To a large degree, the situation at EMI reflects the uneasy marriage of the unconventional, irreverent world of rock'n'roll with the increasingly corporate world of the record business. When the Berrys started out in the late 1970s at the fledgling Virgin Records, the industry was the wild and undisciplined purview of entrepreneurs and risk-taking impresarios at independent record labels. Today the company they helped to launch is, like its rivals, part of a corporate behemoth pieced together by gobbling up companies like Virgin and Capitol, the legendary home of Frank Sinatra and the Beach Boys.

Mr Berry got his start in London back in 1973, as a clerk in the accounts department at Virgin Records. Founder Richard Branson took notice of the 21-year-old, plucking "Kenny in accounts" to be his personal assistant. "I could always get a straight answer from him," Mr Branson says.

In the late 1970s, Mr Branson dispatched his protege to New York to establish a US base for Virgin. It was there that Mr Berry met Nancy Myers, a 19- year-old secondary-school dropout who was peddling demo tapes for rock bands from Detroit. The two became inseparable, sharing an apartment (which also served as Virgin headquarters), and Nancy soon became an employee at the loosely structured Virgin.

But their attempts to get a US foothold floundered as they failed to land solid US acts. Chastened, they concentrated in the early 1980s on expanding Virgin's reach overseas. Though they remained based in London, where they married in 1985, Mr Berry gave the US market another shot in 1986, and this time struck gold. Now well-connected in the music business, he appointed American executives who quickly nabbed up-and-coming acts such as Paula Abdul and UB40 and successfully launched Virgin Records America in Los Angeles. With a few hits under his belt, he pursued luminaries, notably the Rolling Stones, who some thought were past their prime. Virgin paid heavily for the name recognition, paying the Stones $42m in 1991 to join Virgin.

In 1992, what was then Thorn-EMI put down $960m for Virgin Records, though its sales were about $570m and its operating profit only $40m or so. Mr Berry stayed on as chairman and chief executive of Virgin, doubling Virgin's profits in the first year under EMI after paring back the artist roster. In September 1994, he was moved to bring some the Virgin "shine" to EMI's operations and was given the new post of president and chief executive to EMI Records Group International, a new unit responsible for the world outside North America.

But EMI's trouble were piling up in the US, and top brass in London and New York came to regard the American company as a "rogue" operation, where executives enjoyed lush perks and high salaries but failed to make an impression on album charts. Last May, EMI ousted 57-year-old Charles Koppleman, who since 1993 had run the North American operations after EMI acquired his music-publishing company in 1989.

After Mr Berry's move last summer, he quickly closed EMI's New York headquarters, dropped two record labels and slashed 125 jobs. The label closings led artists such as Jon Secada and Sinead O'Connor to leave EMI. The company said it would take a $187m write-down for its US operations and for a then-troubled retail environment, resulting in a 24 per cent plunge in EMI's pretax profit for the year ended 31 March.

Meanwhile, as her husband's star rose, so did Nancy Berry's. Working out of London and then Los Angeles, she oversaw music videos and advertising campaigns for Virgin's biggest stars. Warned by her company to hold down costs on Ms Jackson's 1993 record janet, she, with her husband's clout behind her, got approval to conduct an expensive pan-European campaign using television and print advertising. "It was a matter of pushing and coming up with new way to sell the record," Mrs Berry says. And it worked: janet sold 10 million albums world-wide, and 6.4 million albums in the US

Mrs Berry also led the 1996 overseas marketing of a George Michael record, "Older", a hit on the Virgin label. But as Mrs Berry expanded the number of artists she wanted her "special projects" team to work with, she began to clash with some of Virgin's top executives, including the president, Mr Quartararo. Mr Berry at times was called on to settle rising tensions between the two, over everything from operating authority to who deserved credit for the success of the Smashing Pumpkins.

When Mr Quartararo's contract negotiations started last summer, he asked Mr Berry to rein in his wife and prevent her from interfering with his operations as president of Virgin Records America. Mr Berry will not reveal what Mr Quartararo asked for, but he acknowledges that one topic on the table was "Nancy's role in the company". Mr Berry, however, says: "We worked it out."

By last September, with Mr Quartararo fielding an offer to take the job of president at Time, Warner Inc.'s Warner Bros. Records unit, Mr Berry decided not to sign Mr Quartararo. Virgin staffers and industry executives were shocked when, on 22 September, Mr Berry named his wife vice chairman of Virgin America and Virgin World-wide. A press release that day said the announcement of Mrs Berry as well as a new British executive team to run Virgin America, "followed" Mr Quartararo's resignation and decision to pursue interests outside Virgin. Mr Quartararo made an agreement not to discuss the matter and says he is sticking by it.

Mrs Berry's fierce determination to win often led to clashes with fellow executives. In the autumn of 1996, she eagerly tried to sign Glen Vallard, who produced and co-wrote Jagged Little Pill, the Alanis Morisette record- setting debut album. But Mrs Berry lost the producer to Gary Gersh, head of EMI sister label Capitol Records. Though she denies it, others at the company say Mrs Berry had Mr Gersh barred from attending a Virgin Records party at New York's luxurious Four Seasons Hotel in September 1996. Mr Gersh will not discuss the matter, but Mr Berry says, "Nancy was unhappy because he prevailed," adding that it was "water under the bridge".

But the most damaging attacks on Mrs Berry began appearing in the press in early 1996, when the Daily Mirror reported that she was the "other woman" in a marital split between actress Patsy Kensit and Jim Kerr, singer with Simple Minds, a band signed to Virgin. A spokesman for the Berrys called the reports "ludicrous, just gossip". A brief article in Forbes in November labelled her a "groupie turned record executive" and added, "her relationships with many performers - well, let's just say they're unusually close".

Sir Colin, EMI's chairman, wrote to Steve Forbes, editor in chief of the magazine, calling the article's "malicious innuendo ... unworthy" of Forbes. But earlier last summer, the patrician Sir Colin asked Mr Branson, Virgin's founder, to talk to his longtime friend Mr Berry about "getting his wife under control", according to a top executive at EMI in London. EMI's chairman considered gossip over her exploits "damaging to the reputation of his company", the executive says.

Mr Branson confirms that he spoke to Mr Berry shortly after his wife's promotion in September, but would not say if it was at Sir Colin's request.

Mr Berry decided to confront the charges of his wife's alleged affairs in an interview with the Los Angeles Times last November. But that only fuelled talk in the music industry where many of the professionals who work for Mr Berry are becoming increasingly alarmed by the toll it seems to be taking.

"I need Ken Berry to be strong and focused," says Miles Copeland, manager of Sting and founder of Ark 21, a record company distributed by EMI. "I don't want to see him distracted by some rumours about his wife."

Mr Berry, for his part, claims to be bewildered by the attacks on his wife and the questions about her promotion. "If we knew people were going to write malicious articles we wouldn't have made the change." Mrs Berry says: "This has been destructive to me on a personal level and disruptive on a business level for me."

Mr Berry says his priority is building EMI's roster and improving its operations. "Can we make it more successful?" he says. "Absolutely. I will try my best." In recent weeks, according to people close to the company, he wrapped up the purchase of the 50 per cent of Priority Records EMI did not already own, giving EMI instant credibility in rap-music, where it has been weak.

Meanwhile, the Berrys continue to do their jobs in their own, contrasting styles. At a wedding reception in Los Angeles last summer for a Virgin executive, Mr Berry dutifully stayed through the night chatting with guests. Mrs Berry? She left early to be backstage at the U2 concert across town.