Industry Profile: Craig Kallman

— By Larry LeBlanc

This week In The Hot Seat with Larry LeBlanc: Craig Kallman

Craig Kallman, chairman/CEO of Atlantic Records, joined the famed U.S. company in 1991, when Atlantic acquired his feisty New York-based independent Big Beat Records label.

Atlantic was founded in 1947 by Ahmet Ertegun and Herb Abramson as principally a jazz and R&B label. In the early '50s, Ertegun was joined by Jerry Wexler and then Nesuhi Ertegun.

In 1967, Atlantic was acquired by Warner Bros.-Seven Arts which itself was sold in 1969 to the Kinney National Company that later became Warner Communications. After buying Elektra Records and its sister label Nonesuch Records the following year, the operations of all Warner record labels were placed under the holding company, Warner-Elektra-Atlantic (WEA), also known as Warner Music Group.

Warner Communications merged with Time Inc. in 1990 to form Time Warner. Time Warner sold Warner Music Group to investors for $2.6 billion in 2004.

Kallman began his music industry career while still a teenager, DJ-ing at the Cat Club in New York, while working in Columbia Records' dance department. At Brown University, he was a CBS Records college representative.

After graduating in 1987 with a B.A. in English, Kallman promoted New Order and Joy Division for Factory Records. He briefly worked in the chart department of Billboard magazine, while continuing to DJ at such New York dance clubs as Danceteria, Area, The Palladium, The Tunnel and Mars.

Kallman launched Big Beat with the 1987 single, "Join Hands" by Taravhonty. His second release, "The Party" by Kraze turned into a club smash, selling over 300,000 units.

In the late '80s, Big Beat was a significant imprint with hits by Robin S., Jomanda, Tara Kemp, Bucketheads, Artifacts, Double XX Posse, Dawn Penn, Inner Circle, Changing Faces and Quad City DJ's.

When Big Beat was acquired by Atlantic in 1991, Kallman joined the company as VP/Assistant to then co-chairman, Doug Morris.

Later, as executive VP, Kallman began to oversee Atlantic's A&R activities. His signings included Aaliyah, Brandy, Notorious B.I.G.'s rap clan Junior M.A.F.I.A., featuring Lil' Kim, P.O.D., Twista, the Donnas, Craig David, Nappy Roots, TapRoot, Trick Daddy and Trina.

In 2002, Kallman piloted a worldwide co-venture with dancehall reggae label, VP Records. The first album under the agreement was Sean Paul's "Dutty Rock" which sold 6 million units worldwide.

Kallman also oversaw the signings of indie rockers Death Cab for Cutie, hip-hop star Juvenile, R&B quartet Pretty Ricky; Latin icon Tego Calderon, and hip-hop star T.I. who debuted at #1 on the Billboard 200 chart with his album, "King."

In the wake of Warner Music Group's sale by Time Warner, Atlantic was retooled for a new era. This included the merger of Atlantic and Elektra and Lava Records as well.

A key moment in Kallman's tenure came in 2004, when Chicago-based rapper Twista's "Kamikaze" debuted at #1 on the Billboard 200 album chart.

Following his success in his native UK in 2005, James Blunt was championed by Kallman in the U.S., where his debut album, "Back To Bedlam" was certified double platinum by the RIAA.

Over the years Kallman has spearheaded Atlantic's partnership with key independent labels, including linking up with Downtown Records for Gnarls Barkley; Fueled By Ramen for Panic at the Disco and Paramore; and Sean Combs's Bad Boy label.

What are you excited about on the label?

One of them is, Serena Ryder, from Canada, who I love. Her album ["Is It Okay"] will be released in the summer. We're trying to build up the story and get some real excitement for the album. I don't want it to debut too low. She's now out there on the road.

I am excited about Carolina Liar and their song "Show Me What I Am Looking For" which is terrific. I am looking forward to breaking Shinedown wide open globally and having them in the mainstream. Then we have a young girl, Laura Izibor, from Ireland. And this young hip-hop band, 303, breaking. And I am excited about Zack Brown from Georgia, a fantastic country artist we've signed. He's got this song "Chicken Fried" that is terrific.

In April, 2008, Atlantic scored four out of the top ten albums on the Billboard Top 200 with Day 26, Panic At The Disco, Danity Kane and Flo Rida as well-for the first time in over 25 years- three out of the top five. Atlantic also achieved its biggest single-week market share under SoundScan with 16.21%. A very good week?

That was a pretty amazing moment. When that happens you think, "Where do we go from here? How do you top this one?" For us, it was about how do we try and keep the party going as best we can. Obviously, getting to the #1 position was a very satisfying and proud moment for us. But the music business is often a momentum game. Momentum breeds momentum. Fortunately, we've got a lot of great energy at the moment and we are having continued success. We never take the foot off the gas. We are always flooring it.

Is transformation the right word to describe the retooling of the Atlantic and Elektra labels in 2004?

Transformation is an accurate word. We were dealing with a drastic collision of two companies that had occurred. We were able to create a new organizational chart for the future; one that is unique for a very large company. It was built by thinking, "How do we design a company from the bottom up given the digital and mobile future that we face?" We had a unique opportunity to build from the ground up--going into 200 empty boxes and saying, "Okay, if we were going to build a label today, how would we do it in light of what we know where the industry is heading?" Fortunately, we rebuilt the company with a digital and mobile point of view of view.

What does Atlantic look for in new artist deals today?

For us, it became obvious that the (more exclusive) strategy was synergistic. It is in everyone's best interest when you have complete alignment. The alignment is about being able to offer the fan whatever they want whenever they want it. If I am in partnership with the artist, I can now address the one fan who only wants a ringtone and a T-shirt. And I can address the fan who wants a download of the album and a concert ticket. Then I can address the one who wants the fan club and the deluxe physical package CD. And on and on. Every single fan is different and they all want something else.

Does this mean realigning your company to offer these services?

We have had a dramatic realignment. We bought what we thought was the best in-class fan club company in the artist arena. We brought over Matt Young from Band Merch who we thought was one of the best executives in merchandising. And we created what we feel is the best in-class merch service. So it isn't a land grab (during negotiations). It is about offering the artist the best they can find around the open market.

It is not likely that Atlantic is going to be a tour promoter.

That is not where we are going at the moment. What I will do, is invest in (an act's concert) production and invest in the promotion of their show. So when a band goes into a market, they will sell out. And the kids seeing that show will be blown away by the production. I am more involved as a partner helping their live experience than I ever have been before. More involved in their touring and helping them tour efficiently, and bringing economy to scale.

For all the talk of independent these days people overlook that Atlantic is a great major with strong independent roots.

One of the important components here is that so many of our people have come from independent labels or entrepreneurial self-starting indicatives. I think that lends a lot of the entrepreneurial spirit to how we have been able to grow Atlantic.

Today, at a major you have to think like an indie.

That's entirely accurate.

With a lot of the traditional tools for all labels, like media, radio and MTV no longer impacting as before, you have to build an act in more of an indie mode than your predecessors.

I think that's accurate because the business has gotten so much more complex. It is now harder to create that perfect storm of radio plus video-that sort of combustible dramatic moment coalescing all of the forces. You now really have to aggregate lots of important threads that you are weaving together to build the story. Radio, of course, is still of paramount importance but film and TV placement syncs have become important. Obviously, a mobile strategy is important. Your digital strategy. Your viral strategy. Video is still important but the video is both online and through terrestrial and cable. On and on and on. And still the fundamentals are still important as well. Touring and so on.

Your early background is of an indie Big Beat schlepping records around Manhattan.

Yes. Fortunately, I had four years cut from that (independent) cloth. When you have to be the jack-of-all-trades and be ready for anything and everything the oncoming train of what we have faced here the last few years, it brings me back to some of my early Marine-like training. I draw from those years more often these days. On how to think creatively. How important hand-to-hand combat is and converting one person at a time.

You have to be more patient today and you to have a sincere belief in the long road. You have to believe in how important it is to build the right foundation for the artist. You also have to raise the bar. Quality, quality, quality becomes of absolute paramount concern. You know that if you have made something magical then you can spread the word with hard work and rolling up your sleeves. That's where we are at in a real way. Atlantic's strategy is that less is more. We are focusing on less and making that so concentrated an effort in every aspect of our campaign, whether it be the A&R or marketing.

You came into Atlantic as the VP assistant to Doug Morris. Was he a strong mentor?

Doug was a fantastic mentor. I learned so much. I had such terrific access to him and I got such great exposure to how he looked at both songs and records and how he handled artists. I got a terrific education from that. Doug had his unique style in running Atlantic and, again, it was very much as an independent music label. He's a man who really focuses on the song and knows the importance of the song, and the importance of reactivity and reading the marketplace. He was also very focused on building great executive talent.

As a VP assistant, you were like a gate keeper.

Doug very generously allowed me unilateral access and he threw me into to work with everyone from Mick Jagger to INXS to Debbie Gibson. Whoever it was that was important to Atlantic Records, at the time.

Lyor Cohen [the North American chairman/CEO of Recorded Music for Warner Music Group] has been another mentor?

Lyor has been an unbelievable mentor. He is someone who had such an incredible vision to help us sculpt Atlantic for the future. He's an incredible executive with the artist community. He understands artists and the importance of building close relationships with talent. He also understands having real transparency and honesty in that (artist) relationship. And he understands building a company from having real direct and honest relationships with the artists.

How did Ahmet Ertegun take to a young guy like you taking over the running of his company?

What an incredible mentor! To be able to sit next to him, which I was able to do for 17 or 18 years, and learn from Ahmet was nothing short of extraordinary. What was amazing was that until his last days Ahmet would come into the office every day and listen to and play records and he would turn me on to new acts. And he always loved to hear what the new Atlantic releases were and he wanted to meet the artists. He was passionate about (music) until his last days.

You worked briefly at the chart department of Billboard.

That's right. My very first official job (in the music industry) was (Billboard's former director of charts) Michael Ellis hiring me for the Billboard chart department in 1987. I was there a year. When Big Beat took off, I had to quit all of my jobs. I had a job at Billboard, a job at Factory Records working New Order and Joy Division, promoting all of their stuff. I was DJing at all of the big nightclubs in New York like Danceteria, Area, The Palladium and The Tunnel.

Big Beat's first single in 1987 single was "Join Hands" by Taravhonty. The second release, "The Party" by Kraze was an international club smash, selling over 300,000 copies. Its success must have gotten you a lot of industry attention.

That record blew up overnight. My phone rang off of the hook and I didn't have national distribution. I was only local. So I was borrowing my dad's car and I was running to S&J One Stop in Bronx, and Pearl One Stop in Queens. And I got calls from Liason in DC and MDI in Texas. I slowly expanded my distribution.

Were you on your own?

I was a one man show for awhile. I was running the company out of my bedroom of my dad's apartment. I had my home phone number on the record. On the first round I got a shopping cart from the supermarket and wheeled records up and down the streets of Manhattan going door to door to every mom and pop record store. I bought an invoice book at the drug store and wrote 25 records at $2 per record on consignment. I would hand the store the invoice and ask them to put (the single) up on the wall. And I would run around the city promoting the records. I would go to Frankie Crocker (at WBLS) and to (New York) radio stations, KTU and Z100 and run around the clubs. Just hustle trying to get them to promote records that way.

Then I hired a buddy who went to help me. I kept hiring people because I needed more and more people.

You forged a worldwide co-venture with dancehall reggae label, VP Records that led to Sean Paul's album "Dutty Rock" selling six million copies worldwide. Nobody then expected dance hall to be embraced by radio.

That's entirely correct. Everybody said to me that dancehall would never break big. That it would never go mainstream. It is too indigenous to Jamaica. Fortunately, I was able to convince VP Records to do a partnership with us. I really worked closely with Sean. He's a young, wildly original talent. The idea was to give him some light and water, let him blossom and give him a platform to hit the worldwide stage. That first record, once we put some real muscle behind it, we got it over the hump. Then (the single) "Get Busy" exploded and went to #1 (on the Billboard Hot 100) and it was a worldwide smash.

It must have been tremendously rewarding taking an unknown all of the way.

It is always difficult breaking something completely original and unique, but one of the most exciting things you could ever do in the business is to bring something to the forefront of the mainstream that nobody had ever heard of or had experienced before. It is one of the greatest rushes you could have in the business. Some of my most exciting successes have been things that are totally outside of the box. Totally, the most unpredictable. Totally the ones that were assumed that would fail.

There weren't a lot of believers of James Blunt in the U.S. It took close to 18 months to break him there.

It was a tough slog. We had some fabulous (early) stories from the UK. And he was doing some great touring and he was connecting live. Then he started to make a big impact over in England and we were able to use that story. We put our heads down, put our helmets on and got at here knowing we had some terrific tales to tell from across the water. It was a matter of patience and staying in. Finally, we started to convert some people on "You're Beautiful." Once we saw how reactive that was we knew we had it. Again, it was a matter of putting the artist on the road and having him really connect one-on-one.

Atlantic has been home to Sean "Diddy" Combs and his Bad Boy label as well as Gnarls Barkley on Downtown Records and Panic at the Disco and Paramore on Fueled By Ramen. Those are impressive tie-ins.

I am a believer in finding great executives, and bringing young talented executives who are entrepreneurs with great ears into the fold. There are very few out there but when you have the chance to do it there are important strategic alliances to make. It is an important side of the business to find individuals who understand the business, the artistic and the commercial sides (of the music industry) and who have a great understanding of how to balance art and commerce so that artists can realize their vision while, at the same time, make a living at it and create a successful business from it.

Do you think the record industry lost a PR war with the RIAA strategy of utilizing lawsuits to hinder illegal downloading?

I think that's probably the case. You aren't going to win a PR war when you have to defend your copyrights with your consumers. It's a no-win situation. On one hand you are trying to protect the music of your artists and make sure that they are getting properly compensated. Yet, the people infringing on their rights and who are, unfortunately stealing, are the people that you are trying to sell to. It is a very challenging situation. I don't how anyone in trying to set an example can spin it in a way that's positive.

Downloading has driven down some music sales.

You have three categories (of music fans). There is a category of people who will steal all of the music. And there are people who buy some music and steal too. And you have people who will simply pay for it. We are not going to convert the pure pirates. We have to focus on the people who are both paying and stealing. Tell them that, "This is worth paying for." Give them some value so that they feel that their purchases are worthwhile.

The mobile phone market seems now to be an exciting market for music.

To potentially have 1 or 2 billion cell phones on the marketplace is an exciting opportunity. As the devices become more sophisticated, people will feel comfortable with video games, film and music applications in an all purpose device. The death of retail on the physical side is a horrifying notion but the opportunity for someone to grab what they want when they want it on demand on the mobile side is quite exciting.

There is also the opportunity for pushing into new markets for the Western music industry. India and China.

India seems a little closer than China. In the longer term, they are both important markets.

In 2008, you produced and co-wrote "Daydreamin'" by Lupe Fiasco featuring Jill Scott that won a Grammy in the "Best Urban/Alternative Performance" category.

I tell you I had to dust myself off from my old Big Beat days. As you said, (today's market) brings me back to my early entrepreneurial days. I used to live in the studio as a writer/producer when I started Big Beat because I had no choice.

I was hanging with Lupe one day and brainstorming. He told me he wanted to do some pop records that were out of the box. I said I had all of these ideas and that I wished I had the time to go in and make some records. He said, "Go and do it." So I created a track and he loved it. So we went in and we recorded it. Then it turned out that it won a Grammy.

Winning a Grammy is sweet.

When I got the word that that it won, it was an off-camera award, it was a thrilling moment.

Your father must have been impressed.

It was certainly a proud moment. There are bragging rights at the water cooler there.

Larry LeBlanc was the Canadian bureau chief of Billboard from 1991-2007 and Canadian editor of Record World from 1970-89. He was also a co-founder of the late Canadian music trade, The Record. He has been quoted on music industry issues in hundreds of publications including Time, Forbes, the London Times and the New York Times.