The early days of audio CDs were pioneered in the U.S. by this company that is spread out across the country.
Scattered over 6,000 miles, Rykodisc may be the best-connected company in the world. Imagine how in tune it'll be when it gets the hang of E-mail
Don Rose swiveled in his seat and reached across the rickety table to grab a cocktail napkin. "Okay, Arthur," he said, Bic pen poised, "what would it take for us to produce our own CDs?" Arthur Mann, an arts-and-entertainment lawyer just in from Philadelphia for the recording industry's MIDEM trade show, had agreed to join Rose, then head of EAT Records, and his fellow audiophiles, Rob Simonds and Doug Lexa, for lunch at a little sidewalk cafÉ in Cannes, France, to kick around some ideas about importing CDs. The year was 1983, and the slick five-inch discs were being produced solely in Japan and Germany. But now the conversation had taken a radical turn: from how to bring CDs home to how to make them Stateside and send them afield.
Furiously scribbling, Rose sketched a rough mandate -- from division of labor to Frank Zappa as client -- for Rykodisc Inc., the CD-production company dreamed up by the foursome on that winter day. The only problems were that the would-be founders lived in four different cities, all had full-time jobs, and all were unwilling to move. "We decided, What the hell?" recalls Simonds. "We were into the music, and we just wanted to be around it."
The result was that from its birth Rykodisc was a scattered company, split functionally into four geographically distant and separately managed pieces. Conventional management wisdom would have dictated that the company was doomed to disintegrate into squabbling, incoherent, and largely redundant fiefdoms. Instead, Rykodisc grew up to humble many of its far-larger competitors in the cutthroat recording industry. It is now the largest independent record label in the country, with sales of more than $60 million for 1994. The key to its success, its founders say, has been information sharing -- specifically, its obsession with keeping every type of information constantly flowing among all its employees, no matter where they are situated geographically, functionally, or hierarchically.
What didn't matter was that, despite their technological boldness in embracing the newly developed compact disc, the founders harbored and even nurtured an aversion to information technology. While far less information-intensive companies all around them were flocking to networks and E-mail, Rykodisc was building its communication habits around phone calls, faxes, and airline schedules. Even voice mail was terra incognita.
Only recently have Rose and his fellow executives begun to gingerly experiment with voice mail, E-mail, and networking -- and even with stepping out onto the World Wide Web. The challenge for them is not to bring in the best and the brightest in technology but rather to move slowly enough to avoid eroding the sense of community they've fostered among widely scattered employees. As they proceed, they are proving a point that often gets lost in the rush to automate: being a well-wired company usually has more to do with work processes and culture than it does with computers and networks.
* * *
The road to Rykodisc was paved less with intention than with sharp instincts and good timing. Rose, now 40, came to the company by way of Boogie Records, a three-outlet record-store chain he'd owned in Toledo, and Boston-based EAT Records, his first independent label. Simonds, 38, had worked for Rose at Boogie Records before moving to Ann Arbor, Mich., where he set up East Side, a distribution company feeding record stores and chains Japanese vinyl direct from domestic Japanese music suppliers. His work had led him to Doug Lexa, 45, who worked for the U.S. subsidiary of the Japanese trading company that processed some of his orders.
The opportunity to mine the CD came thundering out of the blue. Simonds had purchased a Sony CDP-101, the first commercial-model CD player. It was big, heavy, and expensive -- $1,200 retail. And there were no CDs to play on it, except for the sample CD Sony had produced to show how the machine worked. Simonds brought the machine to Rose's house, then in Boston.
Rose likens their reaction to that of the apes gathered around the monolith in 2001. "We were knocked out by what we heard, or really, by what we didn't hear," he recalls, referring to the absence of hisses or pops. Rose encouraged Simonds to join him at the upcoming MIDEM show to scout out opportunities to import CDs. "I knew that if the CD format were to succeed it would succeed first with the audiophiles," Simonds says. "And they were the same people who were buying Japanese vinyl from East Side. I already had the market. All I needed were the products."
Lexa was at the show, too. And so was Arthur Mann, whom the threesome took out to lunch. As Rose jotted down notes on a cocktail napkin, the conversation reached a staccato pitch. With so little CD product in the marketplace, the group wondered, what would it take to produce their own CDs? Lexa had contacts with the Japanese CD makers; if he had the rights and the masters, he could get the CDs made. But could you license digital-only production rights? "I told them if we could convince the artists and the labels I could get it done," says Mann, 44.
And so Rykodisc was born, with each partner's role drawn up on the napkin: Rose would handle artist relations, publicity, and packaging from Salem, Mass.; Lexa, manufacturing from Los Angeles; Simonds, distribution from Minneapolis; and Mann, deal making and legal matters from Philadelphia. Simonds and Lexa drew the company name from the Japanese word ryko, which means "sound from a flash of light." The choice helped the fledgling enterprise capitalize on the quality reputation Japanese technology companies enjoyed.
The partners refined their strategy of going after the audiophile by zeroing in on artists who already commanded audiophile respect. "Frank Zappa was on the napkin," notes Rose about the first big-name star to do business with Rykodisc. After peppering Zappa with letters and phone calls for nearly two years, Rose finally landed an audience, in Zappa's home. The deal they struck, moved along after Rykodisc bought Zappa his first fax machine, left Rose looking for the $400,000 letter of credit he needed to get the first batch of CDs made. He finally found a Zappa fan at Norwest Bank, in Minneapolis.
