PolyGram Is Back — How Much of the Music Industry's Upheaval Does This Once-Golden Name Reflect?

Only, it isn't coming back to carry on the music business that made its name and its fortune. It's coming back to make movies.

If you can still dig up a cassette or two of Alan Tam, Jacky Cheung or Chyi Chin at home, the odds are good that a smudged, half-legible name is printed on it: PolyGram.

The PolyGram label has been gone from the world's music scene for nearly 20 years. It was once shorthand for the hits of Hong Kong and Taiwan; the dazzling roster it built — including the famous names above — won it a place in Chinese-language music and gave a lot of people their first taste of pop.

As one of the "Big Six" record companies of its day, PolyGram took in US$3.8 billion in revenue and US$316 million in net profit in 1994. In the 1970s it was, for a time, the record company with the largest market share. In the 1990s it represented heavyweights such as Luciano Pavarotti, Elton John and U2. Beyond its own glory, PolyGram witnessed the music industry's golden age. To mourn PolyGram is, in part, to mourn a golden era that is gone.

An acquisition in 1998 folded PolyGram Records into Universal Music, and the name disappeared. On February 12, Universal announced it was bringing PolyGram back — not to carry on the music business that made its name and its fortune, but to send it into filmmaking.

The revived PolyGram's first project is a documentary called The Story of Motown, about the legendary label that stood for soul and Black music in the 1960s.

"As someone who lost my job when PolyGram was absorbed into Universal, I find this kind of revival disappointing," one reader wrote under a report about the news. Another said: "It's such a shame PolyGram isn't being revived as a record label."

Why does Universal want it back? What else besides music did PolyGram try its hand at over the years? Behind the rise and fall of one company lies the transformation of an entire industry.

PolyGram and Music's Golden Age

In 1962, the Dutch conglomerate Philips and Germany's Siemens came together to form a joint venture, the Grammophon-Philips Group. This was PolyGram's predecessor; the company formally took the PolyGram name in 1972.

Both Siemens and Philips had already dipped into the record business. Siemens picked up the patents for gramophones and records in 1941 by buying Deutsche Grammophon; Philips started its own record business in 1950. For both, the media that carried music belonged squarely to the manufacturing they knew best, so wanting a slice of the music business was no surprise.

PolyGram entered the industry just as music's golden age began.

For more than 20 years starting around 1960, the American music industry lived through a glorious stretch. The spread of vinyl made a complete industrial chain possible, and independent labels like PolyGram multiplied fast. The technology kept improving: multitrack recording made the art richer and more refined, while media such as the cassette improved how people listened. Add the reach of television, then a rising medium, and music and musicians became a global cultural phenomenon. The vigorous, varied currents of thought unique to that era gave music the best soil it could ask for.

So music kept branching out: the folk revival, the rise of disco, rock finding its cultural roots, the first outlines of punk...

It was also a golden period for independent record companies like the PolyGram of that time. Their structures were loose, they gave artists room to create, and because the people in charge usually understood art themselves, the labels followed an art-driven path.

Historically, independent labels have often been bound up with the arrival of new musical forms: Stiff and British punk; Sub Pop, which found Nirvana and Soundgarden and is treated as the starting point of garage rock; and Def Jam, founded in the 1980s, and rap. They added their own voices to a crowded field, and grew strong on the strength of a distinct sensibility.

PolyGram's early specialty was classical and jazz — the inheritance from Philips and Siemens. Having built itself up on that foundation, it began to expand, buying one label after another: Mercury Records, MGM Records, Verve, RSO... All were folded into PolyGram, which enlarged its market share by this crude, direct method.

In the 1970s it briefly became the record company with the largest market share.

Having bought up so many independent labels, PolyGram did not smother their creativity. It gave them full autonomy instead. The labels kept expressing their own character, free of pressure or interference from the parent company in the studio. PolyGram's resources came into play later, at the marketing stage.

This way of working made PolyGram look like a thriving business. It was around then, too, that it moved into the Hong Kong and Taiwan markets and found artists such as Alan Tam and Jacky Cheung, who would become superstars.

The whole music business was thriving along with it. Some of the best-selling albums in history were born in this golden stretch. According to Wikipedia's list of best-selling albums, seven of the eight albums that have sold more than 40 million copies worldwide came out between 1960 and 1990. The soundtrack to Saturday Night Fever, made by PolyGram's RSO label, is one of them.

What Made PolyGram Unusual Was Its Tie to Technology — But Technology Meddling in Music Was Never New

PolyGram had an advantage no other label of the day could match: it was attached to the technology its parent company, Philips, brought with it. Twice, a Philips invention — first the cassette, then the CD — put PolyGram on the fast track.

The cassette came first, and it was one of the reasons a relative latecomer among record companies stood out.

In 1963 Philips invented the compact cassette, and the new medium quickly became a heavyweight in the music market. It was portable as nothing before it had been, and when Sony soon after launched the Walkman and other personal players, people could listen anywhere, any time. Travelling or waiting around, they now had music as an option. All of this made cassettes enormously popular.

As a company Philips held a stake in, PolyGram went along for the ride. It recorded classical music onto cassette to great success, and it was considered the most aggressive label of all at pushing the format: it squeezed the music of two vinyl records onto a single cassette and sold it at a discount.

The second time was the CD, which pulled PolyGram back into profit after a run of aggressive acquisitions had driven it into crisis.

Philips and Sony developed the CD together in the early 1980s. Thanks to digital recording, CDs sounded better — no scratching, and none of the distortion vinyl or cassettes suffered near the end of a side — and they became fans' new favorite at once. Another piece of luck for PolyGram: many of the first listeners to take up the CD were classical fans, which suited the company exactly. Its roster held not only the Three Tenors but celebrated conductors such as Herbert von Karajan, Claudio Abbado and Seiji Ozawa, along with national-treasure orchestras such as the Vienna Philharmonic, the Berlin Philharmonic and the Amsterdam Concertgebouw.

The CD is estimated to have lifted PolyGram's profit margin from 4-6% in the late 1980s to 7-9% in the early 1990s.

How much media technology matters to the music industry hardly needs saying. Ever since sound was first recorded, that technology has been part of music, and one of the most visible parts of the chain. Before the cassette there were vinyl and the gramophone, which freed music from the concert hall; after the CD came the lighter, handier MP3, and then streaming, which moved listeners online.

Every upgrade has changed how people experience music, and how they buy it. And whoever catches the wave — or leads it — prospers. That is true of record companies like Warner and PolyGram, and just as true of technology companies like Apple and Spotify.

Cassettes and CDs gave PolyGram the money to buy other labels and branch out. Sony's Walkman line ruled music for more than 20 years. In 2002 alone, 11.62 million MP3 players were sold worldwide. Apple, which answered the shift to digital, watched the iTunes Store grow from 200,000 users to 26 million in a decade, at one point taking 69% of the US digital music market. And Spotify, which caught streaming, now has more than 100 million active users worldwide...

Given the windfall technology can produce, it is easy to see why every company strains to invent something new. But media technology faces a hard fact: a new technology's birth usually means the old one's death.

Think about it and you notice that every time a new medium appears we rush to crown it the dividing line of a musical era, and start saying things like "the pre-CD era" and "the post-CD era." Partly that is because a medium makes itself so strongly felt. But it also reflects how little room a medium leaves for the one before it.

Music is permanent, and media as a whole will always take part in it. Any single medium will not. However many decades a medium spends on top, once the wheel turns it can only decline. That was true of Sony's Walkman, and it is true of Apple's iPod.

Consolidation and Diversification: Like Many Others, PolyGram Once Tried to Build an Entertainment Empire

The 1980s opened the age of consolidation for record companies. The ones with deep pockets bought up independent and mid-sized labels one after another until they had the shape of giants.

PolyGram's growth is a textbook path for a giant: buy labels across every genre until you are an all-encompassing whole.

From the late 1980s, PolyGram dug deeper into pop by buying Island Records and A&M Records, then acquired Motown — the label at the center of the new documentary — which brought a deep catalog of soul, and finally took Def Jam, rap's stronghold label.

The international recording industry was run by a small group of large international corporations. By the late 1980s the business was talking about the "Big Six" record companies: PolyGram, Bertelsmann, EMI, Warner and Sony.

It wasn't only music. The 1980s were the decade entertainment consolidated everywhere. Big companies bought up different entertainment businesses and assembled them into sprawling empires. Hollywood was turned upside down as a result: the old studios became one part of a larger corporation that also ran television, music, publishing, theme parks and more.

PolyGram cannot be accused of missing the trend. In 1975 it bought the RSO label and sent it into film. RSO's first two films, Saturday Night Fever and Grease, were both enormous hits. Together the two cost less than US$100,000 to make and brought PolyGram more than US$600 million at the box office.

That clearly whetted its appetite. In 1980 it set up a division devoted to film, PolyGram Filmed Entertainment, and went on to buy and absorb a number of independent production companies: the remaining 51% of Working Title Films in 1993, Island Pictures in 1994, and the remaining 49% of Interscope Communications in 1995.

The work was good. You might not guess that two influential films came out of PolyGram's film arm: Tim Burton's Batman and the Coen brothers' Fargo. One number says more about PFE's filmmaking: between 1991 and 1998 it won 10 Academy Awards.

PolyGram made films its own way. A picture usually succeeded through talk and coordination among the producers, management and the marketing department, unlike Hollywood, where a handful of producers hold the say. PolyGram also left its studios a great deal of room to decide for themselves — the self-governing model it had carried over from its music labels.

Alain Levy, a former chairman of PolyGram, once put it this way: "If you don't have a palette of diverse entertainment assets, you'll end up either fading out of the industry or becoming part of another group."

PolyGram Had Its Low Points, But Its Sale Was Partly Bad Luck

From the birth of the PolyGram name in 1972 to its end in 1998, the ride was not smooth. At one point the company was losing US$300,000 a day.

That crisis came from misreading the market.

From the 1960s on, new genres blew hard through the music business. In the 1970s, disco moved out of underground clubs into the mainstream and caught fire.

Several of the most famous disco labels in history — Casablanca Records, Salsoul Records, West End Records, Prelude — were founded in the '70s and grew fast.

PolyGram, determined to take a share of the craze, bought half of Casablanca Records, a label whose artists — the "Queen of Disco" Donna Summer, KISS, the Village People — would make it the best-known disco company of all.

At first the decision paid. During a small golden period for disco in the '70s, PolyGram's US market share shot from 5% to 20%.

But the disco wave came fast and went faster. Its rise and its collapse happened inside the same decade. The seeds sown by the thinking of the '60s sprouted through the '70s, and the voices of that generation of young people were full of revolt. They had no time for disco's escapism, and disco was stuck with more and more negative, cheap labels: "stupid," "consumerist," "running away from reality." Rock became America's mainstream genre.

PolyGram never noticed the wind change and kept turning out records in the style. By the end of 1979 disco's decline was unmistakable. The following year PolyGram stubbornly bought the other half of Casablanca Records anyway. That label would eventually cost it US$220 million in losses.

You can say PolyGram had a sharp eye, or you can say it misjudged how much weight the trend carried. At disco's peak, PolyGram was one of very few record companies actually out buying disco labels. Of the labels named above, only Casablanca was bought during that stretch. The rest stayed independent, and none of them stayed lively for long.

The side effects of the buying spree started to show. PolyGram had spent nearly US$30 million on its 50% stakes in RSO and Casablanca, and Casablanca, for all its rich catalog, was famously free with money, forever throwing lavish parties for its artists — which dragged PolyGram's results down further.

When disco lost its market, the company that had bet wrong was thrown back to where it started. By 1983 PolyGram was losing US$300,000 a day. Between 1977 and 1983, its cumulative losses reached US$200 million.

This was one of PolyGram's low points. Only layoffs, consolidation and the CD got it back on its feet.

There is an irony here. PolyGram learned its lesson, stopped putting all its eggs in one basket and diversified — and still failed to become the empire it wanted to be.

In 1988 Philips bought the remaining 50% of PolyGram from Siemens and took it fully under its wing. Ten years later, its own core business faltering, Philips had no choice but to let PolyGram go.

In fairness, PolyGram was still making good money. In 1996 its profit still held at US$349 million.

But by then its parent had trouble of its own. In the late 1990s Philips's core business was blurry, several of its key products earned poorly year after year, and its brand was slipping in the public eye. In 1996 Philips took in 59.7 billion Dutch guilders in revenue (about 10 billion yuan) and made a profit of just 39 million guilders (about 8 million yuan).

Cor Boonstra, the CEO at the time, decided to slim the company down and sell off everything unrelated to its core businesses — semiconductors, lighting, consumer electronics. That is how PolyGram came to be sold.

The buyer was a Canadian company called Seagram. It had started in beverages, grown into a world-class giant, and then turned its eye to entertainment. In 1998 Seagram bought PolyGram for US$10.6 billion. Before PolyGram, it had already bought another record company, Universal Music.

Although PolyGram held the larger market share at the time, Seagram decided to fold it into Universal and run everything under the Universal Music name. In one move, Seagram became the best-resourced company in the music business.

And so PolyGram, once music's golden name, vanished.

Its film business followed the music business out the door. Seagram only wanted the music; it already owned a film company, Universal Pictures. It looked for a buyer for PolyGram's film division but never agreed on a price, and the business was folded into Universal Pictures in the end.

Reviving It for Film — Playing the Nostalgia Card

Reviving PolyGram to make a documentary about Motown is, in its way, a sentimental act.

Like PolyGram, Motown — founded in 1959 — is a label that stirs nostalgia. When PolyGram bought it in 1991 for US$301 million, Motown had no rival in Black music, either in catalog or in artists. Its 30-odd acts included the legendary soul singer Marvin Gaye, known as the "Son of Motown," and The Supremes, the girl group at the height of their fame in the '60s.

"Motown is one of the loudest and most prestigious names in entertainment," Alain Levy, PolyGram's chairman, said of that acquisition. "I believe we can also help this label expand its influence — not only in music, but in other areas of entertainment, such as film."

More than 20 years later, Levy's wish finally has its chance. Universal appears to be taking it seriously: Motown's founder has joined the documentary's production.

"PolyGram will play a fairly important role in Universal Music's global strategy. It will present high-quality visual storytelling and become an important platform for artists to express their feelings and their creativity," Michele Anthony, Universal Music's vice president, said in announcing the revival. "Music is vital to television and film, and the stories and works of these artists are precious storylines for the world."

As things stand, though, the revived PolyGram will not be getting back into music in any serious way. The PolyGram music brand did come back once, in Hong Kong in 2013: it re-signed Priscilla Chan and staged the "PolyGram Eternal Hits" concert tour. But three or four years on from that tour, no big news about PolyGram has followed.

Cover image and images in this article: Wiki Commons.