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Not everyone has believed in Davis' ears. He launched Arista only after being canned by Columbia Records in 1973. By the 1980s, the former lawyer was tasting major success with a diverse group of performers, including Barry Manilow and the Grateful Dead. BMG purchased Arista in 1979, but Davis still operates virtually independently, unusual in an era when big corporations rule music. That might be because he has served the bean counters well too, finding efficient ways to achieve growth. Instead of shelling out millions for outright acquisitions of artists or their production companies, Davis puts money into joint ventures in which the producer-artist makes records under Arista's banner, while the label foots most of the studio and marketing costs. Profits are shared.
Davis didn't invent the JV, but he was one of the first to show how lucrative it can be. Arista's 1989 investment in hip-hop-heavy Bad Boy Records, run by Puff Daddy, and its 1994 investment in R.-and-B. powerhouse LaFace Records, run by L.A. Reid and the producer Babyface, were mere chicken feed: about $3 million apiece. Last year LaFace chalked up sales of more than $75 million and Bad Boy of about $35 million. "Rather than buy companies and pay multiples," says Davis, "we started from scratch and made a relatively modest investment. We split profits immediately as opposed to paying off hundreds of millions in acquisition costs." Says industry analyst Michael Nathanson: "The low-debt producer-artist model works well, provided you have an ear for talent."
Which is after all what drives music. "He's still the best talent finder in the business," adds Nathanson. "He's one of the last of the old-fashioned music men, and he's adapted to the times." And for music's sake, kept the bean counters at bay.