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Warner Bros. Records re-sign R.E.M. for $80 million

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Monty may have gotten a raw deal, according to the R.E.M. song, but Michael Stipe & Co. have done very well for themselves, thank you. Warner Bros. Records re-signed the jangle rockers for a staggering $80 million — the highest sum ever paid to a band.

The agreement calls for the Athens, Ga., quartet, which fulfilled its original contract with this month’s New Adventures in Hi-Fi, to make another five records. ”A deal like this is about how you’re perceived in the industry as much as anything else,” says band biographer Anthony DeCurtis. ”Whether R.E.M. sells enough records to make this deal profitable is almost irrelevant. Warner Bros. needed to demonstrate its strength and prominence at an important time for the label.”

Important is right. The company has been rocked by management shake-ups, including the ouster of popular longtime label heads Mo Ostin and Lenny Waronker in 1994 and ’95. Many of the artists the duo signed began to question their future with the company, despite the arrival of cochairmen Bob Daly and Terry Semel, who also run Warner Bros.’ movie division. After 19 albums, The Artist Formerly Known as Prince became the artist formerly signed to Warner because of what he called an ”unstable and ever-changing management structure.” Anita Baker, who released three platinum albums for the label, is trying to get out of her contract. And Neil Young, who signed with Warner in 1968, grumbled about its uncertain direction. When R.E.M. made noises about moving to DreamWorks SKG, Ostin and Waronker’s fledgling record division, Semel and Daly had to act boldly.

They did. R.E.M.’s $80 million windfall surpasses the record $70 million Janet Jackson received from Virgin earlier this year; Metallica previously held the honor of Highest Paid Group when they signed with Elektra in 1995 for an estimated $60 million.

Such megadeals have more modest companies worried: ”My fear is that these ungodly contracts will devastate smaller, independent labels,” says Christopher Appelgren of Lookout Records. ”Young hopefuls suddenly have expectations [we] won’t be able to match.”

Still, are R.E.M. worth it? They did return Warner Bros.’ original reported $10 million investment with Out of Time, Automatic for the People, and Monster, which collectively sold nearly 10 million copies in the U.S. ”It was a great business decision,” says Charles Koppelman, chairman and CEO of EMI/Capitol, which also pursued R.E.M. ”Sure, Warner might make less per record, but if they lost R.E.M., they’d have no profits from those albums.”

Adds Steven Baker, president of Warner Bros. Records: ”The signing goes beyond money or even prestige. R.E.M. now represents the greatest rock & roll fantasy there is. That says a lot about the label, and it has to be appealing to other bands.”

But does this mean Stipe will be trading in his Salvation Army-style threads soon? ”I don’t think you’ll see bigger spending sprees in [the band’s] future,” says Bertis Downs, R.E.M.’s legal counsel. ”They have as much money as they could ever need.”

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