What's impressive about Doug Morris' midtown Manhattan office presents itself in modest statements. In one corner is a giant white canvas with a charcoal scrawl of a little boy; it turns out to be a self-portrait by Universal Music Group artist Bono. Another wall holds portraits of Louis Armstrong, Count Basie and Dizzy Gillespie, given to him by producers Jimmy Jam and Terry Lewis. The room is big enough to hold two couches, but it's not ostentatious. By the standards of CEO offices, the digs are unassuming-and after spending a few minutes with the man, this feels pretty right. In a two-hour conversation with Billboard, Morris creates his own credit crunch-he hardly gives himself any. But the reality is that his music company is now responsible for a 32% market share and that UMG has led the way in pressuring digital services to cough up equity and cash in exchange for its music. Morris discusses these business moves with almost folksy common sense, but he lights up about two things: One is music, whether he's talking about his early days as a songwriter or the records that excite him now. The other is his own history, which intertwines richly with that of the modern music business. "It's not about how you go down, though," Morris says, describing his dramatic exit from Warner Music Group in 1995. "It's about how you get up. That's a great lesson in life." And not a bad one for the music business.

I understand you don't necessarily jump at the chance to be honored at benefits?

I did one in 1980, and I didn't like the experience. I think I did it for my mother than anything else. But Ahmet [Ertegun], my boss, asked me to do it, so I did it. I didn't like the experience because I wasn't qualified or in a position where I should have been up there in front of thousands of people getting any accolades. That's how I felt. I felt humbled by it, and I thought, "It's much better to write a check each time." And then of course now, getting to the present, fast-forward 28 years, Ahmet had been trying to get me to do this for quite a while.

And Interscope Geffen A&M chairman Jimmy Iovine is going to introduce you? No pressure.

I hope there is. [laughs] He better be careful how he introduces me, because I come next.

Let's talk about Universal Music Group. What have your highs and lows been this year?

The positive was that Lil Wayne became Lil Wayne, and the disappointment is that U2 will fall into next year. That would have been incredible to have, but you can't put artists out until they're done, and that's certainly the way it should be.

The U2 camp must have felt pretty strongly, because the band had recorded a lot of songs for this album. What did Iovine think of what he had heard?

He thought it was marvelous. But he's not the answer. The answer is the group. If the group thinks they can make it better, they make it better. It's just such an important worldwide act that it has to be what they want it to be.

I'd like to take a step back and talk about your history for a bit. Tell me about your earliest days.

I started as a songwriter, when I was in college, and I loved that. My father was a lawyer, and my mother was a dancing instructor, a ballerina. And I was a songwriter, and the basic question in the family was, "Who's going to take care of Doug?" You know, when you have a passion for it and nothing can get in your way-that's how I felt about it. I still feel the same way.

I first started with Lou Levy, and then I worked for Robert Mellin, it was a publishing company. He wrote songs like "Twist and Shout," "Take a Little Piece of My Heart," just an incredible guy. And then [in 1965] I went to work for Laurie Records, a small independent company that had artists like the Chiffons, Dion & the Belmonts . . . and I learned the music business, the record industry, very quickly. You need a great record. That's all you need.

You need something that somebody's going to react to and like. Once you really see it in action, it never fails. There are certain rules in the business that never change.

Who was your mentor at Laurie?

There was no real mentor. It was just the job. I was fascinated by the business, and when you're fascinated by the business, you learn every bit of it.

I remember how I actually learned the business and decided to go into my own business: I bought a record, signed two guys-Jerry Kasenetz and Jeff Katz-Kasenetz and Katz. And I think I paid $800-no, $500 and 8%, and it was Laurie 3308. Now that's really textbook record business 101. And the record went out to promotional departments. Nobody really did anything. And I'd go sit behind the order taker, his name was Murray Zucker. The orders were basically singles in those days, and a deal was 1,200 records. You'd get paid on 1,000, and 200 you didn't.

And the orders come in, and one day I'm watching over his shoulder and an order comes in for a quarter of a deal for Laurie 3308. And I say, "Murray, what's that?" And he says, "Ah, that's bullshit, that's nothing. Some jukebox liked it." And I said, "Really?"

So I went back to my office, and I noticed that it was Schwartz Bros. who had ordered 300. So I called Schwartz Bros., and I asked for the guy who takes the orders, and they gave him to me, and I said, "Listen, I noticed you ordered 300 pieces of Laurie 3308. Why'd you do that?" And he said, "Well, there's two stores in Cumberland, Md., that ordered 100 pieces each." I said, "Really? What are the stores?" He said, "Banagriffs and Sears." I had never heard of those.

So, next call went to Banagriffs. It was a department store. They switch me to the record department, and I asked them, "I see that you ordered 100 pieces of Laurie 3308. Any reason?" He says, "Oh, my God, there must have been 50 kids in here on Saturday looking for it alone." And I said, "Well who's playing it?" He says, "WCUM, state rock. It's the 'rocket record.' "I get off the phone, call WCUM. "Can I speak to the music director?" "Yes." "Who's the music director?" "Jeff Henderson." I still remember all of this, because it was actually a big lesson. So I get Jeff Henderson on the phone, and I say, "Listen, are you playing a record, Laurie 3308?" He says, "Yes. It's my 'rocket record' this week." I say, "How's it doing?" "Monster record. It's already No. 1 in requests, and I got everyone in the area calling me where to get it."

At which point, with my hands shaking, I went up to the bosses and told them. And they obviously put the mechanism to work, how to get records played in those days. And the record I believe went to No. 1, and from that one experience, I understood the record industry, how it works. To this day, nothing has changed.

So it's radio, it's regional . . .

It doesn't have to be radio. It has to be some form of distribution that gets someone to hear something. Doesn't have to be radio. But what hasn't changed is that you need something that somebody's going to react to and like. Once you really see it in action, it never fails.

There are certain rules in the business that never change. Now, you get people who enter the business at later stages in their lives who never believe that. They believe that if you get a record played a lot, it'll sell more . . . it's all nonsense. If you get a hit record played three times, it's like it lights up, it's like magic.

And I decided, about six months later, that I'm going to go out on my own business. I can get those records and do the same thing, which I did.

And then you started Big Tree Records in 1970.

Yes. That stayed in business until 1978, and then I sold it to Ahmet Ertegun at Atlantic. [But] the philosophy was incorrect with what I was doing. I was really promoting songs, not artists.

When I joined Ahmet he asked me to be the president of Atco and the custom labels, so I had Led Zeppelin and the Rolling Stones. Immediately my whole philosophy was that I'm never selling another act unless there was more of an artist story to it.

Now on Big Tree, we did have artists like England Dan or Hot Chocolate, with big hits like "You Sexy Thing" . . . we really were quite successful. But I went into Atco, I grew a beard, and I decided that I'm never going to do a singles-oriented thing again. And if I'm going to put the time into something, I want to have some long-term relationship with these groups. And it worked out great.

I had a great time with Atco. We had a fabulous first year, signed Stevie Nicks out of Fleetwood Mac, signed Pete Townshend out of the Who, Gary Numan, INXS out of Australia.

Tell me about the first time you met Ertegun, if you remember the moment.

Well, I put out a record by a group called the Magic Lanterns on Big Tree, and it debuted on the chart at No. 80. And he called me and he said, "What are you doing putting out my record?" I had no idea what he was talking about. Now what had happened was a lawyer had sold me a record that Atlantic had put out three or four years earlier, and when I put it out I got a lot of stations on the record and it debuted on the Billboard charts. So he called me up and he said, "What is this all about? You stole my record!" And I said no, and I sent him the contract, and from that moment he asked to meet me, we got together, and he offered to buy the company . . . and that didn't take long.

Do you feel like you've mentored certain people through the years?

Well, I don't know what the word "mentored" means. The ones I've worked with . . . I mean, I've worked with Jimmy [Iovine] for years. I've worked with Jason Flom, Craig Kallman, David Foster. I've got an amazing team of people here now . . . most of the major people who are in the industry today.

What do you look for - I mean, this is a great diversity of people you've just talked about. They're very different styles.

That's a very good question. Whatever their education is, whether it is or isn't, it's about them having some connection with culture and the fact that they are competitive and driven and intelligent. When you get that group of people together, you win. I can recognize them a mile away.

Your leaving of Warner Music Group is pretty well-documented.

When I got fired [in 1995] it was very painful. It's not about how you go down, though. It's about how you get up. That's a great lesson in life.

What were you told when then-Time Warner chairman Michael Fuchs fired you?

"You're fired!" [laughs] I was expecting to be promoted, actually.

When you look back on your time at Atlantic, was there anything you got really wrong?

Yeah. I could've [signed] Bob Seger, and I didn't. Every time I hear "Night Moves" . . . I love that record.

What about a time when you made the right call under tough circumstances?

Moving ahead and supporting artists against censorship, under tremendous pressure. And that was the right move. As far as the artists were concerned, my job was always to look out for their rights, and very often it's a difficult slope.

Tell me about those situations.

It started when I signed 2 Live Crew, and it started a national debate about these kind of groups: "Should they be sold? How should they be sold?" And we took a lot of flak on it. It is an interesting discussion, and it's hard to defend sometimes, but I do believe in freedom of speech.

I didn't put out the Ice-T ["Cop Killer"] record, but Warner did. I got jammed into a hotel and I'm sitting next to the police when Ice-T is driving around the hotel giving everyone the single. And don't you think it's odd that today he plays a police officer on "Law and Order"? It just shows you the reality of all this . . . it's all posturing and rebelliousness.

So then you hooked up with Edgar Bronfman and started the company that became Universal Music Group.

I had known him; we had had lunch together. The day I got fired he called me and said, "Have you seen 'The Shawshank Redemption'?" and I said, "I haven't." And he said, "Go see it tonight." I called him the next day and he said, "Doug, you're Morgan Freeman, and I'm the guy on the beach waiting for you." He offered me a deal with the stipulation that we get it done really quickly. And 48 hours later he and I had a joint venture called Rising Tide.

Just a year or so later, Warner dumped off Interscope, largely due to the pressures associated with those 2 Live Crew and Ice-T records.

I brought Interscope into this group as one of the great founding blocks of this particular record company. It was run by an incredible, brilliant executive. And they got rid of him, too. When they let that company go they allowed us to breathe, because there was no way I wasn't getting them . . . it all turned around. We very quickly became the dominant company in the music industry and [WMG] came down.

If you had to choose between saying "I love music" or "I love the business of music," to define yourself, which would it be?

Oh, much more the music end. Oh, absolutely, no comparison. To run a record company, you have to be bilingual, though. You have to be able to deal with the music people with music, and you have to deal with the business part, because they go together more and more.

Let's move to present-day issues. When you come to work, what do you see as your biggest challenge?

The biggest problem is always getting hits. That's the one thing that has never changed. The way of delivering music has changed, the way of listening to it has changed, the way of distributing it has changed, but it's always the music.

The next is the challenges of the technology. Everyone knows the record business has been hurt badly by criminal behavior, by people stealing our music. They think it's a victimless crime. Meanwhile, we have probably half as many people working for the company as we used to.

Were the RIAA lawsuits a good idea?

It was an act to try and publicize that this is stealing and this is wrong. That's one way to look at it. Did it work? I don't know. Maybe it stopped some people from stealing, maybe it didn't . . . Did they deserve to get caught? Probably. People don't like policemen. I understand that. And maybe they're right. But when you see all the stores close and you lose half your employees and you can't sign bands to record them because people are stealing, we do things to try and stop it. You have a lot of people who think that things should be free. I don't know how they think we should produce it for free, but there's a lot of people who aren't logical.

The lawsuits have been rough from a PR standpoint, in terms of developing a real hubris from a certain subset in the blogosphere and magazines like Wired. I felt, and many others I spoke with felt that Wired-a magazine I once wrote for, by the way-took some cheap shots in a November 2007 article that you were interviewed for. How did you feel about that piece?

They can write whatever they want. I think they see things differently than I do. My job is to protect artists, the people that work here, the copyrights . . . they have a feeling that I stop technology by trying to stop companies from infringing on our products-that we stopped the growth of all these companies because we don't like the use of our product without a license. I think that's their point of view. I have no problem with their point of view. I thought the magazine was funny because it's supposed to be a professional magazine but then they try to ridicule people to make a point.

They were trying to make fun of me because I'm older and because I come from a different era. But like I told you from the beginning, there's a couple of things that just don't change. People don't get that. They're so entranced and enthralled by all the shiny, new technology, they don't understand that it doesn't work unless you have music that people want. No one's going to download music they don't like.

What I take seriously is the fact that we're people who create art. Whether you like our art or not, it's what we do. My whole point of view is this problem we're in, which is caused by technology, will be solved by technology. Some genius on the other side will figure out how to stop the piracy that seems very logical to me. So all these people who come up with these opinions that they should have done this and that, it's all ridiculous.

Meanwhile, what have they done? We're running the most dominant company that there ever has been in the industry. We're trying to do it in a way where we're really respectful to people, where the people in this company are treated great, where they're paid properly, where women are working in key positions in the company, where two of our chairpeople are people of color. Our greatest asset in our company is our people.

It's such a bizarre equation that requires thought to separate what is real from what people would like people to think. I don't understand. There's a lot of unreasonable people in the world. You start with that. Frustrated, disgruntled people with their own lives who attack people who have done really important work. And I can judge this company because I've been here from day one, hired everyone here, and I know how we're doing. For me there's a great level of satisfaction.

I never listen to people. What will affect us is if we make a big mistake and we don't get any hits and as a journalist I'm happy people write whatever they want to write. Some of the records we've put out I hate much more than I did that article, but I've held my nose and said they're entitled to do it.

One of your strategies has been to take equity investments in up-and-coming music Web sites and services like Buzznet and MySpace.

No one's going to build a build a business off our backs if I can help it without us being part of it. It's just not fair. We had numerous situations of criticism by the techies that "we're stopping progress." And that's not what happens. What happens is they come back and we say, "Well, we want to be in business, but we've got to be in business in a legitimate way and give these songwriters and these artists the royalties they deserve." Is that being aggressive? Is it being aggressive or is it not being taken advantage of?

If these companies are successful, we'll do well. It's better than having a company like MTV, where we gave them our music for very little money and they built a $30 billion company or whatever it was for nothing. If one of these things becomes a big enterprise and it's off of our product, it seems to me that we should own part of it.

So you're placing your bets and seeing . . .

It's not like we're placing our bets. My real job is that people work here: the artists, the writers and the repertoire-all copyrights. You have companies getting into businesses by the process of infringement. They put up our product with no license on a site to draw people hoping to get advertising. And then after they start drawing people, they come to us and say, "Hey! We're in business, let's make a deal!"

These things basically become settlements. It has nothing to do with a bet. We're not paying for it. We're getting it as part of them using our product. In other words, if they don't want to use our product, fine. If they want to use our product, then we do not want to just be licensing.

There's talk that UMG, as your deal with YouTube is over at the end of this year, will come to market with a Hulu-like online video service. What is the timing on that?

If we do that, it will be January. If we renew the [YouTube] deal, we wouldn't do that. The odds are that we will have a deal with the participation of another label. With YouTube, the quality isn't great; it gets low [cost per thousand]. On the other hand, more professional [services] get a higher CPM. So the idea of us getting tied into a lower CPM isn't a smart thing. Why would you want to be in the middle of music-generated product that doesn't demand high CPMs? I haven't made up my mind completely.

What about the promotional value of YouTube?

We don't look at anything as promotion. Take a look at MTV. It turned out to be a disaster for us. We sold some records, but they built this huge company and we gave them our [music] for nothing, and what did we get?

Three years ago we were losing $7 million a year in the production of videos. One day I noticed that the videos were coming up on our computers . . . I said, "How much are we getting paid for this?" And the [answer was], "Nothing, they're promotion." And we called [Yahoo] and I said, "You're making money off our videos and not paying us anything . . . we don't want the promotion, we want to get paid." And [they] said basically something like, "Over my dead body." And we took all our videos down. As soon as our videos came down their viewership went down, because we're about a third of all their videos. At some point we changed our video business from a deficit to a profit because we're getting paid every time someone views one of our videos.

It's been cited elsewhere that videos are bringing in $20 million per year.

Not even close. Not even skimming the surface. It's far more than that. Videos are very valuable. And they're harder to steal.

Who is the smartest person in the music industry?

Steve Jobs. He came back stronger and smarter than anyone has ever done in any industry. Not only did he sell Pixar and become the largest stockholder in Disney, but he's captured 85% of the digital market and came up with this device which has changed everyone's lives. We work with him and we try and get what we want with him and I'm sure we aggravate the hell out of him sometimes, but when you look at the whole picture, we make a lot of money through iTunes. We consider him a friend . . . I talk to him about once a month. I like him very much. I have dinner with him occasionally, and he's the kind of guy we'll be talking about 100 years from now. He's a brilliant guy.

What are your expectations about the international business in the coming months and years? In particular, cracking the market in China and India.

It's never been done before, and I do think the downloading of music will start to penetrate those markets. But there's not much you can do until the legislation within the country starts changing. We're opening companies there and trying to sign local acts and move ahead, but you're fighting against a culture [in China] that is not easily moved. Even in 1980 people were saying there are great opportunities in China and Russia. Maybe in the future as we start penetrating the middle class [with] digital. I think physical products are going to be hard to sell there.

What kind of volume are you seeing moved in China?

To be honest with you, we're making real efforts in the area and I just know the potential is much better than it was before. These digital downloading companies will pay us. India will be particularly good. I think all of this is the beginning. We're seeing the first crack in the dam for these places. I believe the trickles from these places are going to get stronger and stronger.

What do you think of what Guy Hands has done? Is there merit to his centralized approach in running an international label?

Cost cutting is not a bad thing. We do it all the time. Did he make a good deal or a bad deal? Time will tell. I don't know how to centralize structure when you're [in the United States]. The market is different. You have to be in the U.S. to understand the way the market works, have to be in France to understand how the market works. It can't be done centrally.

I understand you've renewed your deal with Vivendi and it's a long-term deal.


Will it be the last one you sign?

Yes. I'm enjoying what I'm doing enormously right now. I want to take the company through this bumpy period, to the takeoff. And it's close to the takeoff.

Do you ever think about your legacy in the music business?

I don't believe in any of that. I really don't. I think it's all nonsense. I want to do a good job, I want the people to enjoy working here-I have my own philosophy, and it works for me. I never want anyone to have a bad evening because I caused it. I judge everything on, and this is my own personal way of managing, on intent. If the person's intent was to do the right thing, do it well-great. Even if they fuck it up, if their intent was good, I'm with them.