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THE NEW YORK TIMES
For Sale: A Latin Music Legacy
by MIREYA NAVARRO
June 7, 2001
A life's work "down the drain": Ralph Mercado, head of RMM Records, is about to sell that company and give up control of his label.
Long before the recent Latin music boom, Ralph Mercado became a pioneer whose passion for salsa and other tropical rhythms led to discovering a wealth of talent and raising the genre's profile.
Mr. Mercado's RMM Records ignited the salsa career of Marc Anthony. And its roster over the last 14 years has included both new and older tropical music stars Tito Puente, Celia Cruz, Tito Nieves, La India.
But now he is in bankruptcy court, about to sell his record company and give up control of the label that helped define tropical music in the 1990's. In an interview, Mr. Mercado equated the court proceedings to "seeing my life's work go down the drain."
Both Sony Discos and the Universal Music and Video Distribution Corporation have made competing bids of more than $16 million each for RMM Records. The buyer will acquire a significant Latin music catalog of 300 to 400 master recordings by more than 130 artists covering a variety of tropical music styles, from salsa and merengue to Latin jazz and Latin rock.
The pending sale, prompted by a multimillion-dollar award in a copyright infringement lawsuit against RMM Records, has saddened some past and present associates of Mr. Mercado's who say they worry that the sale of his independent label will leave a vacuum in the Latin music market. Mr. Mercado, they say, helped make tropical music a valuable commodity, gave chances to new artists and allowed the kind of creative freedom difficult to find in major labels.
"Artists are on the map because of his label," said the Latin jazz and salsa pianist Eddie Palmieri, who was represented by Mr. Mercado in the 1970's and recorded four albums with RMM Records, including "Masterpiece" with Tito Puente, a Grammy winner this year. "He took us to Madison Square Garden and Carnegie Hall."
But in a notoriously tough business in which money disputes are common, Mr. Mercado has not been immune to controversy. Just as his eye for talent and genius for promotion enabled him to build the most important independent label in the salsa market, others said his way of doing business drove away artists and other associates who felt he was not sharing fairly in the riches of his thriving company.
A star in Ralph Mercado's once-shining RMM Records galaxy, Marc Anthony.
"Ralph paved the way for a lot of people, including me," said Johnny Falcones, who worked for eight years for Mr. Mercado in artist management and marketing and is now chief executive officer of another salsa label, Viva Discos.
But, he added: `In business he doesn't want to share the pie. I'd rather be his personal friend because he's a nice guy. But in business it's all about him."
Mr. Mercado battled with some of his most important stars. One of them was Marc Anthony, whose singing career took off when he started recording in Spanish for RMM Records. In 1999, to get out of his contract, he threatened to sue Mr. Mercado and raise questions about his business practices, in particular the way the record label reported income to its artists. Mr. Mercado filed his own suit to prevent the singer from recording with another label.They settled, and Mr. Anthony is now with Sony Music.
Another high-selling artist, Linda Caballero, known as La India, now figures in the RMM bankruptcy case as a creditor, claiming more than $500,000 in underpaid and unpaid royalties. Mr. Anthony and Ms. Caballero declined to comment.
Mr. Mercado sought Chapter 11 bankruptcy protection on behalf of himself and his RMM Records and the Video Corporation in November as a result of yet another claim by an artist a composer who charged that RMM Records changed the lyrics of one of his songs and used it in several recordings and a documentary without permission and failed to pay royalties on it. The composer, Glenn Monroig, won his copyright infringement lawsuit and a $7.7 million award from a federal jury in Puerto Rico last June.
In a recent interview, Mr. Mercado acknowledged lapses in getting clearances to use the song and taking the lawsuit "too lightly." He said the lyrics were changed as one of the singers recording the song improvised.
But he called the size of the judgment, which is now the subject of both an appeal and settlement negotiations, "an injustice." And he denied assertions that he had not given his artists or associates their due.
"I paid everybody," Mr. Mercado said. "I may have been late sometimes but they all got paid."
Born in Brooklyn to a Puerto Rican mother and Dominican father, Mr. Mercado, 59, began in the music business as a teenager, organizing parties and dances as president of a neighborhood social club. In the 1960's, he promoted R & B and soul artists like James Brown and twinned them with Latin artists like Mongo Santamaria. In 1972 he established RMM Management, an artist management and booking agency whose mainstay for 25 years was Tito Puente, the timbales master who died last year.
Mr. Mercado founded RMM Records in 1987 and the label soon started adding some of the best talent in salsa music: José Alberto, Tito Nieves, Oscar d'Leon, Tony Vega, Domingo Quiñones. The label also recorded the Fania All-Stars, a group of singers and studio musicians from the heyday of Fania Records, the powerhouse salsa label from the 1960's and 70's.
At its peak, RMM Records had 55 employees and distribution deals in 42 cities around the world, and occupied 9,000 square feet in two floors at its SoHo headquarters. "It just kept growing," Mr. Mercado said. "The 90's belonged to RMM the way the 1970's were Fania's. RMM created a second wave of an explosion."
While Fania Records put out pure, danceable salsa, RMM's product was a cross between swinging salsa and the romantic, ballad-type of salsa of the 1980's.
As an independent record label, RMM worked in the trenches, scouting new artists at clubs and other venues. And because Mr. Mercado's businesses included concert productions and artist management, he was able to develop his new artists quickly, sometimes pairing them with veterans at large concert venues like Madison Square Garden or Radio City Music Hall just as they were making their first record.
Former employees say Mr. Mercado ran his label like a mom-and- pop operation. Sergio George, RMM's influential music producer in the early years, said he worked and produced hits for RMM on a handshake agreement, without a contract for six years until he left in 1995. Mr. Falcones said employees and artists used to go camping together, and artists like Mr. Quiñones, a former heroin addict who starred in the 1999 Off Broadway production "Who Killed Hector Lavoe?," said Mr. Mercado paid for his drug rehabilitation.
But behind the familylike atmosphere there was an important movement afoot, Mr. George said. He said RMM Records got young people interested in salsa again and made radio and the record industry take notice of tropical music for the first time.
"Without RMM there wouldn't be a BMG or Sony making that kind of music because they wouldn't have cared for it," he said. "To this day RMM has passion for the music while the majors don't have any. All they care about is sales. They don't care if it's polka."
But Mr. Monroig, 43, the singer- songwriter from Puerto Rico who sued Mr. Mercado, said the record executive also typified an industry that he says exploits artists and cares more about money than art.
"He infringed pretty much everything he could," said Mr. Monroig, the son of a well-known Puerto Rican balladeer, Gilberto Monroig, who died penniless after a life plagued by drug addiction.
But Mr. Monroig's award after the jury found RMM Records to have encroached on his author rights is now worth about $11 million with interest, a figure that Mr. Mercado says he finds preposterous.
Mr. Mercado, a widower with three adult daughters and one son, said his company's days seemed numbered even without the jury award. He pointed at the increasing competition the label faced from major record companies that came up with their own Latin divisions offering artists better promotion and distribution than was possible for an indie.
In documents filed with the United States Bankruptcy Court for the Southern District of New York, Mr. Mercado said that RMM Records had an erratic cash flow over the last two years because of cost overruns in producing records and an inability to compete with the major labels.
In the interview, he added other obstacles. "Sales are not as great as they used to be," he said. "Radio is playing it safe. It's very hard to get new talent played."
These days RMM's percentage of record sales are in the single digits while Sony Music Distribution dominates the domestic Latin album market with a share of about 27 percent, according to SoundScan, a firm that tracks album sales. Among RMM Records' current roster of 28 artists, most are young singers in development.
In a courtroom in lower Manhattan this week and last, Mr. Mercado, dressed in his usual impeccable suits, has sat silently as a battery of lawyers for the bidders fight aggressively for his company and hash out the terms of the auction, scheduled for later this month. Spokesmen and lawyers for Universal, which both had deals with RMM Records to distribute its music and eventually became its competitors, refused to comment on the sale. A lawyer for Sony said that RMM's catalog would be a valuable addition to the companies. `We both have interest in particular artists," said the lawyer, Ross L. Weston.
While Mr. Mercado has been dealt a major blow, he is hardly finished. He retains control of his other RMM businesses, including RMM Filmworks, three in-house music publishing companies and Ralph Mercado Presents, which produces the New York Salsa Festival in Madison Square Garden, now in its 26th year, and other major concerts. Mr. Mercado also owns Babalu, a Latin club in Midtown Manhattan, and has business interests in two other nightclubs, the Latin Quarter on the Upper West Side of Manhattan and the Conga Room in Los Angeles.
But he said that his immediate role as a recording executive largely depends on the deal he can negotiate for himself with his company's new owner. "I'd like to keep my hand in the recording business," he said. "To develop an artist you have to record them and walk them all the way through." As he set out to weigh his options, Mr. Mercado said he was at ease with himself. "I know what I've done and I'm satisfied with the legacy that I'm leaving," he said. "But life goes on. You're as good as your last hit.
"I'll have a few more."