Allen Klein: The Man Who Transformed Rock & Roll

by Fred Goodman

  Of course, the same thought had already occurred to Cooke. “You’re right,” he said. “I want you to go after them.”

  Whatever frustrations Cooke was having with RCA, his years in gospel and then pop had produced a healthy respect for business, and he took an ambitious and informed approach to his career. Though employing a variety of managers, associates, and administrators, Sam was firmly in control and calling many of the creative shots. While personally signed to RCA, Cooke had established a record company, SAR, to find and record other artists, and he ran his own music-publishing company, Kags. In an effort to sidestep publishing agreements he had signed earlier in his career, Sam gave the songwriting credit on many of his biggest hits to his wife, Barbara Campbell.

  Klein quickly discovered that although Sam was far thinking, he was nonetheless cash poor. SAR was eating up a good deal of Cooke’s income, and whatever money he made on the road went out about as quickly as it came in. Though he lived comfortably, Sam didn’t have much to show for all the hits he’d enjoyed and songs he’d written.

  To give Cooke a quick cash infusion, Allen restructured Sam’s BMI deal, getting $29,000 in guarantees against his songwriting royalties for the next two years and an additional $50,000 for him as the publisher. It was the Klein specialty, just as advertised: found money. Delighted, Cooke solidified the relationship, giving Allen Klein and Company a five-year contract to administer Kags Music and SAR Records. Having quickly demonstrated that he could deliver, Klein set about taking the measure of RCA and crafting the most advantageous deal he could for his most promising client.

  Cooke’s introductory letter got Allen in the door at RCA but didn’t produce much cooperation from Yorke. That was all right with Klein; Sam’s RCA contract wouldn’t run much longer. And if RCA wasn’t willing to give them the money they wanted, they’d get it somewhere else. Indeed, they already had a circuitous in at Columbia Records, where Sam, through his William Morris booking agent, Jerry Brandt, had been talking about helping his friend boxer Cassius Clay make a record.

  Dave Kapralik was the Columbia A&R man for the Clay project. Klein approached him and said he’d be willing to bring Cooke to Columbia for the right deal—in his estimation, a 10 percent royalty. Kapralik nearly choked on Klein’s grand expectations but quickly handed him off to Walter Dean, an attorney who oversaw Columbia’s business affairs. Dean told Klein that no one at Columbia had a royalty rate of more than 5 percent and no one ever would, owing to what was known as the most-favored-nation clause. That contractual stipulation was given to stars and guaranteed them the company’s highest royalty rate. Paying Sam Cooke 10 percent meant a host of other performers’ percentages would have to be raised, and that wasn’t going to happen.

  If the clause was a negotiating ploy, it was a good one—but not good enough to prevent Klein from shrugging and saying they might be willing to take 5 percent on albums but that Sam definitely deserved 10 percent on singles since his hits sold themselves and Columbia didn’t have to do anything. Not surprisingly, that didn’t get any traction either.

  Allen was disappointed; he’d thought Columbia a better and classier record company than RCA and a more suitable place for Sam. However, it occurred to him that if Sam left RCA, he would be leaving his catalog behind. Spurned labels could be spiteful and weren’t averse to dumping previously unreleased or even substandard tracks on the market just as a former artist was promoting a record on his or her new label. Conversely, a smart record company could use a new hit to promote an artist’s back catalog—if they had it—and keep it viable, and that meant more money for everyone. Maybe it made sense for Cooke to stay at RCA, though Klein ensured that executives there knew he was talking to Columbia. The news that Bob Yorke, who’d been so slow to deal with Sam, was no longer calling the shots was another positive. Still, Allen walked away from his Columbia conversations thinking about the most-favored-nation clause. As far as he was concerned, it was a label scam for limiting artist royalties. There had to be a way to beat it.

  Yorke’s new boss was Joe D’Imperio, an attorney who’d risen through the ranks at RCA to become vice president in charge of business affairs. One of D’Imperio’s first moves was to reach out to Cooke and try to mend fences. The singer sent D’Imperio back to Klein.

  It was the moment Allen had been waiting for. D’Imperio might be a new face but RCA had been giving Sam the runaround for far too long and Klein had a message to deliver: Things were going to be different. He drove the point home with an elaborate piece of theater.

  A lunch meeting was set up at RCA with D’Imperio, executive Norm Racusin, Klein, and Cooke’s partner and adviser J. W. Alexander. Looking to turn the page, D’Imperio was outgoing and gracious, emphasizing how much he thought of Sam as a performer and how happy the label was to have him; he suggested they forget about the past and talk about a new, extended contract.

  Allen wasn’t going to let the company off the hook so easily. He noted that while Sam’s hits hadn’t sold as well as they should have—for which he blamed RCA—he nonetheless believed that Kags Music, as the publisher of most of those hits, was owed a lot of money by the label, perhaps as much as two hundred thousand dollars. He expected the label to provide them with a complete accounting. Though D’Imperio didn’t refuse, he clearly didn’t like the idea and he reiterated how much faith they had in Cooke and that they’d like to craft a new agreement. Klein, who knew the label would resist giving them detailed financial information, played his next card. A few minutes after Klein and Alexander left the office, process servers came in and hit RCA with a demand for an audit.

  Eager to gauge the reaction, Allen and J. W. hung around the building lobby. They were getting their shoes shined when an apoplectic Racusin burst out of the elevator waving the legal service, his face flushed. “I invite you here for lunch,” he said. “And you serve me with papers?” It was clear what he thought Klein could do with the documents—and any further negotiations.

  Allen feigned shock. “What? You’ve been served? Let me call my lawyer.”

  With Alexander and Racusin watching, Klein went to a pay phone and called Machat. “Marty? I’m at RCA. I came over to have lunch with Norm Racusin and he’s just been served with papers. How could this happen?”

  “Allen, you told me to do it!”

  “Oh, this is terrible. I can’t believe you did this!”

  Klein made a show of apologizing profusely to Racusin and D’Imperio, but no one missed the message. Cooke got full access to his RCA accounting, and Allen had a stronger hand when, indeed, they sat down to negotiate the new deal.

  Without Each Other, Klein’s first foray into producing films, never found a distributor and never made a dime. It nonetheless may have been Allen’s greatest investment, as it gave him the first experience with a business model he would use and expand on again and again over the years. Noting how Hecht-Hill-Lancaster had revolutionized the film industry, moving the locus of control away from the studios and to the filmmakers, Allen got to thinking. Why couldn’t the same be done in the music business? You didn’t need a studio to produce a motion picture; did you need a record company to produce your own records?

  Though seemingly obvious now, at the time, it was actually a radical question. Fans might be interested in the performers, but in practice, pop records were a producer’s medium. At the major labels like RCA, Columbia, and Capitol, casting was as important in making records as it was in making movies. The executives who oversaw the process were known as A&R men, for artists and repertoire, and it was their job to match performers with producers and material. With few exceptions, it was the record company, not the performer, dictating what was to be recorded and how it was to sound. Success and a growing artistic ambition might allow a Frank Sinatra to exert control over his material, but many others were perfectly content to follow the record company’s lead. As Warner Brothers Records executive Joe Smith recalled, Dean Martin could hear one of his own records and wonder when it had been
recorded.

  At the small, independent record companies like Sun, Red Bird, Philles, and Scepter that were proving so important in the growth of rock ’n’ roll and R&B, the situation was only a bit different. In virtually every case, those independents were run by or relied heavily on masterly producers like Phil Spector and Luther Dixon, men who had a deep appreciation for the music and were at least as likely as the performers to be its true architects. The independents weren’t necessarily any more generous or artist-friendly than the majors, and their immediacy and savvy owed as much to a scratch-and-claw desire to succeed financially as it did to their understanding of the music and the young people they were making it for. They had broken out on their own for a variety of reasons, including a feel for the music, a belief in its commercial and artistic viability, and—certainly not least—a conviction that they could succeed on their own without the major labels. The producers and label owners reaped the rewards of independence, not the artists.

  Klein represented the artist. He believed the deck was stacked unfairly against the artists in recording deals, and he now took the same doggedly indignant tone he’d used so effectively in audits into contract negotiations. His gleefully pugnacious style would resonate with artists and annoy the hell out of record executives, as would his voluble pride in his own audacity. He loved it when labels complained. It was the best endorsement he could earn. “Talk about my reputation, what about the record companies’?” he asked. “It’s not like I was in church kicking over statues.” Allen ingeniously recognized that a complete artist like Cooke—who could write, perform, and produce his own records—had a wealth of leverage at his fingertips. Sam Cooke didn’t need RCA. RCA needed Sam Cooke. Klein let them both know it. Record-company contracts presupposed a pop performer’s complete creative and commercial dependence; it was assumed that the singer should not make artistic decisions. That wasn’t a true assessment of Cooke’s artistic abilities and the value he brought to any recording agreement. Financing aside, he needed a record company only to manufacture, market, and distribute his work. Why should the company be involved in creative decisions that Sam was better suited to make? More to the point, Klein knew that an independent film producer like Hecht-Hill-Lancaster maintained ownership of the films it created. Why should RCA own Sam Cooke’s recordings?

  Allen explained the idea, first to Sam and later to RCA’s D’Imperio, and had Cooke start his own company. Tracey Ltd., named for the singer’s daughter, would produce and own Sam’s recordings. RCA would pay for the sessions, and in return for that and a royalty, it would get exclusive distribution rights to Tracey and to Sam’s recordings. Tracey—not RCA—would manufacture and package the records, which would then be sold to RCA, which in turn would raise the price and sell them to retailers. Klein told D’Imperio that Tracey was willing to give RCA exclusive rights for five years, after which all rights would revert to Tracey. The executive said that was out of the question—RCA wouldn’t agree to fewer than thirty years.

  That RCA would allow the rights to ever revert to Cooke was a surprise. Columbia had agreed to fifty-year reversions to the artists, but that was nearly the legal length that a sound recording could be copyrighted,* so the corporation wasn’t giving much up. Other labels—notably Capitol in its dealings with Frank Sinatra—had staunchly refused such arrangements.

  Whether out of a sense of fairness or simply because he was unconvinced that Cooke’s work would still have significant commercial value after thirty years, D’Imperio allowed Klein and Cooke to open negotiations in an area previously closed: ownership of the recordings. In future years, reversion of masters to performers would be an important and lucrative bargaining point for recording artists, with term lengths shrinking. Not coincidentally, one of the most masterly negotiators in this area would prove to be another Klein graduate, Mick Jagger.

  Klein was proposing that RCA sign a contract not with Cooke but with an outside company that controlled Cooke’s rights. That would have two important and immediate results.

  The first was that Tracey would press the records, which meant the company had the chance to make even more money. RCA, instead of manufacturing the records and paying Cooke approximately twenty-five cents an album as a royalty, would pay Tracey a bit over a dollar an album on average, out of which Tracey had to pay all royalties, licenses, and manufacturing costs, including pressing the records and making the covers. The margins were slim but there was certainly an opportunity to grab a few more cents out of every dollar. Klein insisted that RCA provide an accounting to Cooke every month rather than twice a year; if money was due, he didn’t want someone else sitting on it.

  Second, Klein argued that since Cooke wasn’t signed to RCA, the most-favored-nation clause didn’t apply and the executives were free to set a higher royalty rate. In actuality, it didn’t matter to RCA what the royalty rate was since Tracey was responsible for paying it out of the set price for the delivered album, and D’Imperio agreed to a royalty rate of 6 percent. The additional point proved more than a psychological victory for Klein; he would later say he convinced Cooke to let him, as Tracey’s administrator, keep the approximately five cents RCA paid per album. Call the deal for Tracey a sleight of hand or call it brilliant, it was state-of-the-art; in his first negotiation of a major recording contract, Klein had taken the standard deal apart and put it back together the way he wanted it.

  The RCA contract put ready money in Cooke’s hands. A three-year deal with two option years, it guaranteed Sam a cash advance of $100,000 per year with an additional $75,000 for each option year. If the deal went to term, it was worth no less than $450,000.

  According to Klein, he was trying to minimize Cooke’s tax liability when he had Tracey pay the first $100,000 to Cooke in the form of preferred stock, an investment that mimicked a bond by paying set dividends and that Klein had become keen on. The certificates were deposited in Cooke’s California bank account.

  As Klein explained it to Cooke, Cooke would have to pay taxes only when he converted a portion of the stocks to cash. The reason they could do this, Allen said, was that he’d set Tracey up as a holding company that he, Allen, owned, and he’d registered the company in Nevada, where corporate regulations and taxes were light. If it had been Sam’s private holding company, the IRS was certain to treat money paid to Tracey as personal income. This gave Cooke and Klein more latitude. “If he’d owned the company,” Klein explained years later, “he would have had to pick up the income and not let it lay in the company.”* Whatever the setup, it was hard to see Tracey as anything but Cooke’s business; it was named for his daughter, and its president was his long-term partner J. W. Alexander. Sam was delighted.

  Yom Kippur is the holiest day of the Jewish year, a day for fasting and reflection. On Yom Kippur 1963, Allen found himself in a New Orleans hotel rather than a New York synagogue. Cooke was on tour and Klein was there to go over how they would handle the first $100,000 advance from RCA—and to collect his commission. It was a check that Sam was more than happy to write. Indeed, Cooke had a surprise for Allen.

  “Would you manage me?” he asked.

  Klein was at a rare loss for words. “I never managed anyone before,” he sputtered.

  Sam shrugged. “I was never a songwriter until I wrote my first song.”

  For Klein, who regarded Cooke with an admiration that bordered on awe, it was all the encouragement and validation he needed. Allen knew he’d gotten the job done with RCA—“It was the first time Sam ever saw money like that,” he later said—but he hadn’t expected or even angled for this. He quickly warmed to the idea.

  Indeed, it wasn’t long before Klein was actively looking for other artists to manage. He had a very specific type in mind: performers who, like Cooke, had the track records and musicianship to make their own records and fit into the independent-production model that Allen had extrapolated from the film business. The pop singer Bobby Vinton caught his eye. Vinton was on a roll—between the summer of 1962 and
the fall of 1964 he’d scored four number-one singles—and Klein and Machat approached him and offered to handle him.

  Vinton said he already had a manager. But he didn’t have what Sam Cooke’s manager said he could get him: a million dollars. It was a huge sum of money, even for a performer enjoying a hot run on the charts. Allen told Vinton he had a plan, and once again, he had borrowed it from somewhere else and reimagined it for his own purposes.

  The month after Allen Klein became Sam Cooke’s manager, another enterprising music manager, Brian Epstein, got an enormous break. The Beatles, his young English band, were a bona fide phenomenon at home, setting off fan riots wherever they appeared. But the United States was proving frustrating; executives at Capitol Records, the American affiliate of the band’s British record company, EMI, didn’t like the Beatles and had steadfastly refused to release an American single. All that changed when the American television host Ed Sullivan, traveling in London, got a firsthand look at Beatlemania. Booking the band for three appearances on his Sunday-evening variety show, Sullivan forced Capitol’s hand. By mid-January of ’64, the Beatles’ first Capitol single, “I Want to Hold Your Hand,” was number one, a position it held for seven weeks; it was replaced by another one of their singles, “She Loves You,” which Capitol had refused and EMI had licensed to another label. The first wave of what was soon called the British Invasion had crashed on America’s shores.

  Klein’s initial contact with the newcomers was fleeting but significant. The Dave Clark Five, one of the Beatles’ earliest and most successful rivals for America’s affections—they were the first British Invasion band to tour the U.S. and made more than a dozen appearances on the Ed Sullivan Show—had signed a successful but short-term contract in the States with CBS’s Epic Records. Both sides were eager to extend it. The band’s London agent, Harold Davison, engaged Klein to negotiate on their behalf.