Japanese Industry Awaits Avex Fallout

By PETER SERAFIN
Publication: Billboard
Date: Saturday, September 4 2004
The Japanese record industry is awaiting developments at the country's leading independent label group, Avex, after its top executive stepped down.

Disagreements at the board level and the intervention of major artists at the Tokyo-based company were followed by the Aug. 3 resignation of chairman/CEO Tom Yoda.

Managing director Toshio

Kobayashi was named to the new role of Avex president the same day, taking over most of Yoda's responsibilities. Yoda has taken the post of non-voting honorary chairman.

Yoda also exited as chairman/CEO of the Recording Industry Assn. of Japan, a post he had held since March 2003. RIAJ senior managing director/COO Osamu Tanabe is serving as chairman/CEO until a permanent replacement is chosen.

Yoda's departure shocked many industry insiders.

"His presence [at the RIAJ] will be sorely missed," one industry source says. "As chairman/CEO, he has proposed and fought for a number of key initiatives that will benefit the music industry, artists and consumers for years to come."

BOARDROOM DISAGREEMENTS

Yoda's departure from an active role at Avex followed a July 30 boardroom spat that saw two other leading execs temporarily quit the company. The two were senior managing director Masato "Max" Matsuura (one of the company's founders) and Ryuhei Chiba, president of talent-agency subsidiary Axev.

At a reportedly acrimonious board meeting, Yoda introduced a resolution calling on Chiba to resign because of an alleged conflict of interest. A source says the disagreement arose because Chiba had signed to Axev an artist managed by a member of his family.

The board backed Yoda's resolution in a 6-1 vote. However, Matsuura—described by insiders as a close ally of Chiba's—then introduced a second resolution demanding that Yoda step down due to "a difference of opinion in management principles."

Matsuura's motion was defeated 5-2. He and Chiba resigned the next day.

The company issued a press release Aug. 1 announcing the resignations. But when the news came out, several priority Avex acts, including J-pop acts Ayumi Hamasaki, Exile and Kumi Koda, publicly declared their support for Matsuura.

Hamasaki accounts for about 10% of Avex's revenue, according to the company. The diva issued a statement Aug. 2 saying, "I will decide on my future course depending on [Matsuura's] fate."

Exile frontman Hiro described Matsuura to the Japanese press as his mentor and declared that he wanted to continue working with him. Other artists posted messages of support on their Web sites.

Matsuura is considered a visionary, hands-on record producer. He discovered and developed a number of Avex's top acts, including Hamasaki, Exile and J-pop vocalist Namie Amuro.

The boardroom dispute and the artists' reaction prompted fears that the label could lose some of its most important acts. Those fears had an immediate impact on Avex's stock price: By close of trading Aug. 2, its shares had dropped 16% on the Tokyo Stock Exchange.

Following closed-door meetings with Matsuura and Chiba, Avex issued a statement Aug. 3 saying that the two had agreed to withdraw their resignations. Both were also reappointed to the board of directors, pending final approval at a shareholders' meeting Sept. 28.

Avex also announced Kobayashi's elevation to president and confirmed that Yoda had stepped down as chairman/CEO.

Hamasaki subsequently told the press that since Matsuura had been reinstated, she would stay with Avex.

At an Aug. 3 press conference, Yoda said, "From now on, I'd like Matsuura, Kobayashi and Chiba to establish their own management system."

He added, "I would be lying if I said the reaction of some of our artists and the drop in share value didn't have anything to do with this decision."

DYNAMIC STYLE

Avex launched in 1988 as an importer of overseas product, especially Euro-dance tracks. It was also the Japanese licensee of Jive Records until Zomba opened its Tokyo office in 2000. With a strong local roster, Avex grew quickly, becoming one of Japan's biggest music business success stories.

Entrepreneur Yoda was tapped to head Avex four months after the company was founded. He earned a reputation throughout the industry for his smart, aggressive style. Observers cite the combination of Yoda's business acumen and Matsuura's creative insight as the basis for the company's rapid ascent.

One industry source notes that Yoda "introduced a dynamic management style that afforded the company's creative staff the perfect environment in which to develop and bring to market key acts, and [he] enabled Avex to be listed on the Tokyo Stock Exchange. [That is] no small feat for an independent music software producer."

Another observer notes that Yoda's fluency in English and experience gained while living in the United States greatly raised the international profile of domestic Japanese product.

Avex reported sales of 73.9 billion yen ($673.3 million) on a consolidated basis for the fiscal year ended March 31, down 8.8% from the previous year. The company has been listed in the First Section of the Tokyo Stock Exchange since 1999.
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