The Brutal 35-Year War Between Sony, Stephen Popovich & Meat Loaf (Excerpt From Fredric Dannen's New Edition of 'Hit Men')

belushi Meat Loaf, Steve Popovich Karla DeVito 650
(Photo courtesy of Steve Popovich Jr.)
From left: John Belushi, Meat Loaf, Steve Popovich and singer Karla DeVito

The story was originally published in the May 3 issue of Billboard.

In 1977, Stephen Popovich convinced a reluctant label to distribute the album "Bat Out of Hell." It became one of the ­biggest sellers of all time. Now, a reissue of legendary book 'Hit Men' revisits the dirty business that followed as a battle for royalties turned into a fight to the death.

Stephen Popovich Jr. lives with his wife and two young sons in Murfreesboro, Tenn., a working-class suburb not far from Nashville. Their home is modest -- "It's not a mansion by any means," he says -- and there is nothing at all about Popovich's lifestyle to suggest his late father had been the founder-owner of Cleveland International, a custom label distributed by Sony Music that is best-known for releasing one of the biggest-­selling albums of all time -- Meat Loaf's "Bat Out of Hell." Popovich Jr. inherited a good deal from his father, who died of heart failure in 2011: pride, stubbornness, a penchant for plain speaking and a reputation for honesty.

He did not, however, inherit a fortune. When Sony, in a breathtaking yet somehow classic display of plantation-system accounting, paid Popovich Sr. no royalties, and then had the gall to remove his label's logo from CDs of "Bat Out of Hell," Popovich pere fought back. His story, never before told in a national publication, has particular significance -- it illustrates that even a well-liked industry veteran could fall victim to a major label's brazen yet all-too-familiar claim that a megaplatinum album simply had not earned out. With crucial assistance from ousted Sony Music president Walter Yetnikoff, Popovich achieved a significant, and highly unusual, moral victory: He got a jury to award him damages from Sony -- albeit not enough to cover his legal bills.

Popovich Sr. was a coal miner's son proud of his blue-collar origins, and in appearance and demeanor unlike most music executives. He had a knack for signing overlooked talent, not so much because he had a great ear for music, but because he had respect for opinions other than his own. Popovich's ethnic background was Serbian, Slovenian and Croat, and his taste in music ran to polka bands. He was born and raised in Pennsylvania, but at 17 he moved with his family to Cleveland, after his father died and left behind an insurance policy that barely paid for the funeral. In the early '60s, Popovich learned that the Columbia label was opening a warehouse in town. He cold-called one of his idols, polka star Frank Yankovic, a Columbia artist, and with his help got a warehouse job. He worked hard and learned the business. In 1969, CBS Records president Clive Davis moved Popovich, then 26, to New York, and made him assistant head of national promotion, reporting to promotion chief Ron Alexenburg.

Yetnikoff barely had been installed as the new head of CBS Records in 1975 when Alexenburg and Popovich took him to a theater in Westbury on New York's Long Island to hear The Jackson 5, the Motown ensemble consisting of Jackie, Tito, Jermaine, Marlon and 17-year-old Michael Jackson. The group had had only one hit single in four years, and was generally regarded as past its prime. Alexenburg and Popovich thought otherwise. "The two of them badgered me to sign the Jacksons … and I was resisting," Yetnikoff later recalled in courtroom testimony. "And they both said to me, 'You haven't been in this job long enough to make those negative kinds of decisions.' I said, 'OK, OK.' " The Jacksons, as they were rechristened, signed with CBS in 1976. Six years later, Michael Jackson, by then a solo artist on CBS' Epic label, released "Thriller," which is tied with the Eagles' "Their Greatest Hits 1971-1975" as the best-selling album of all time in the United States -- certified for 29 million shipped, according to the RIAA.

In 1976, Popovich was earning around $100,000 a year, a big salary at the time. Nevertheless, he told Yetnikoff and Alexenburg that he wanted to return to Cleveland and start his own label. "They thought I was nuts," he said years later. With two partners, $150,000 in seed money from CBS and a distribution deal with Epic, Popovich launched Cleveland International in 1977. Seven months after the label opened its doors, he was handed a tape of songs performed by Marvin Lee Aday, better-known as Meat Loaf.

Meat Loaf was an actor/singer with a powerful, almost operatic voice. In 1973 he was performing in "More Than You Deserve," a musical at New York's Public Theater, and befriended the show's composer/lyricist, Jim Steinman. Together, Meat Loaf and Steinman began assembling seven of Steinman's songs for an album that would eventually be released as "Bat Out of Hell." Todd Rundgren, who had worked with everyone from Grand Funk Railroad to the New York Dolls, produced the album and played lead guitar. The record, a decidedly original mix of gothic rock and Wagnerian bombast, was rejected by one label after another. As Meat Loaf recalled, in his 1999 memoir "To Hell and Back," "People at record companies hated it."

One of the cruelest rejections came from Clive Davis, then president/CEO of Arista. Meat Loaf recalled what happened when he and Steinman tried to audition the songs in Davis' office, with Steinman at the piano.

"We sing maybe two songs; that's as far as we get and [Davis is] already shaking his head. 'What are you two doing?' He turns to me and he says, 'You're an actor. Actors don't make records. You're like Ethel Merman …'

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"He turns to Steinman and says, 'Do you know how to write a song?' " Meat Loaf wrote. "And then he starts really laying into Jim, 'Have you ever listened to pop music? Have you ever heard any rock'n'roll music? … You should go downstairs when you leave here … and buy some rock'n'roll records…'

"We get down to the street [and] ... I'm screaming towards the top of his building, 'F--- YOU, CLIVE!' "

Popovich admitted that when he first heard "Bat Out of Hell," he did not much care for it. The album had seven songs -- three more than eight minutes long. Then he played the tape for two women whose opinions he trusted -- his sister-in-law and his ex-wife -- and they both loved it. "It grew on me," said Popovich. "I started to think, 'If it hits the radio and doesn't sound like anything else, it could be a great thing.' "

In October 1977, Cleveland International released "Bat Out of Hell." Epic, the CBS label, distributed the album, but with little enthusiasm. Popovich and his partners began promoting the album aggressively, first getting radio play in Omaha, Neb., Cleveland and New York. By year's end, the album had sold a respectable 140,000 copies by Popovich's account, but the promotion people at Epic were still unmoved. Popovich, in a letter to his former boss Alexenburg, complained, "Some of your guys have given up." Finally, in January 1978, Popovich arranged for Meat Loaf to perform at the CBS Records convention in New Orleans and, Popovich later recalled in courtroom testimony, Meat Loaf "tore the place up." CBS finally got behind the album, he added, "and it exploded in America."

By 1986, "Bat Out of Hell" had shipped 4 million units, according to the RIAA, but Popovich and his business partners had not been paid any royalties. CBS' contract with Cleveland International had included the standard cross-­collateralization clause, the music industry's contractual Catch-22. Under the clause's terms, which remain a staple of contracts today, record companies get to charge their artists for recording, packaging and promotion, and the companies can make the artists pay the costs of unsuccessful early albums out of the profits of successful later ones. The artist may have a hit record and receive no money from it at all, while the label cleans up. When CBS claimed it was entitled to recoup some $6 million in expenses for "Bat Out of Hell" and all the other albums put out by Cleveland International, Popovich's partners walked away, leaving him the sole owner of the label. Meanwhile, "Bat Out of Hell" continued to sell year after year. Sony Music reissued the album in CD format after acquiring CBS in 1987, and sales spiked again. Popovich still never saw a royalty check. (The album's creators evidently fared no better. In a 1993 interview for Q Magazine, Steinman said of himself and Meat Loaf, "We haven't been paid on 'Bat' since 1980.") Popovich did not believe Sony's claim that the album had never earned out, but under the statute of limitations imposed in his contract, the three-year time limit for conducting an audit had expired.

Popovich was in Yetnikoff's office one afternoon in 1990, and, he later recalled, "I said to Walter, 'To the day I die, I'll regret I didn't audit.' And Walter said, 'So audit.' " Yetnikoff liked Popovich, and had never forgotten his role in bringing Michael Jackson to CBS. As CEO of Sony Music Entertainment, Yetnikoff was agreeing to waive the statute of limitations. Yetnikoff was fired from Sony about a month later, and Popovich asked for, and obtained from Yetnikoff, a letter confirming the agreement made in his office that day. "I showed that letter to accountants and lawyers," said Popovich, "and they felt it presented a great case for me."

Popovich hired the Citrin Cooperman accounting firm, and wound up, he said, with an auditor's report calculating that "Sony owed me, my partners and Meat Loaf $19 to $20 million." He filed a $100 million lawsuit against Sony in 1995. Sony used every delaying tactic at its disposal, and by 1998, Popovich was exhausted and broke, but determined to have his day in court. A jury trial was set for Tuesday, Feb. 17, in Cleveland. An attorney for Popovich recalled that on the Friday before the trial, "with our bags literally packed and our papers literally at the elevator," Sony called and offered to settle.

Lawyers on both sides of the case arranged a weekend meeting in Cleveland, and were caught off guard to discover that Popovich, though eager to reach a financial settlement, had another issue of at least equal importance. Sony had removed the Cleveland International logo from CDs of "Bat Out of Hell." Apart from the incalculable value of having your company's imprint on one of the biggest albums in history, there was also the matter of pride -- had it not been for Popovich, the megahit might have remained an unproduced demo tape. "I wanted the legacy to pass on to my children and grandchildren, and they deprived me of that," said Popovich. He demanded a contractual guarantee that his logo would be restored, and Sony's lawyers would not concede. One participant in the meeting recalled that "Steve had actually given up on the settlement, was ready to go to trial … and was walking out of the building, and [a lawyer] was chasing after him to try to bring him back."
On what would have been the first day of the trial, the parties finally settled. Sony agreed to pay $6.7 million to Popovich and his partners, and restore the Cleveland International logo to future copies of "Bat Out of Hell." Though Popovich's share of the settlement would not cover what he had spent on the litigation, he was satisfied -- until he discovered that Sony, despite the agreement, did not have any intention of putting his logo back. In 2002, he sued Sony again, for breach of contract and fraud. This time there was a two-week jury trial, in the spring of 2005, in district court in Cleveland. Sony meanwhile had settled privately with Meat Loaf. But Popovich had a star witness of his own: Yetnikoff.

In 1990, Yetnikoff, once the most powerful record executive in the business, had been forced out of Sony in the wake of a spectacular meltdown. An article in Time magazine titled "A Music King's Shattering Fall" suggested that one factor in Yetnikoff's downfall was his less-than-flattering portrayal in the hardcover edition of "Hit Men," which was published that same year, though in truth Yetnikoff had all but guaranteed his firing by inexplicably making enemies of several of his most important allies, including Sony recording artist Bruce Springsteen and his manager, Jon Landau.

Back when "Hit Men" was first being reported, Yetnikoff angrily denied reports that he was a cocaine user. He also said that one day he would write his life story, and call it "I Wuz There: The Music That Changed the World." He finally did publish his autobiography in 2004, but it was titled "Howling at the Moon: The Odyssey of a Monstrous Music Mogul in an Age of Excess." Far more entertaining than either of Clive Davis' memoirs, the book is a chronicle of Yetnikoff's debauchery, drunkenness and cocaine use during the 15 years he ran the world's largest record company. Yetnikoff's book probably did little to burnish his reputation, but it did report, accurately, that since getting sober, he had faithfully volunteered at recovery centers around the New York area.

After Yetnikoff finished his direct testimony at the 2005 trial, Stephen Williger, the lead lawyer for Sony, commenced his cross-examination, armed with a copy of "Howling at the Moon." Williger probably relished the thought of questioning a confessed drunk and drug abuser. He seems to have underestimated both Yetnikoff and the affection jurors have for witnesses who freely admit their own human failings.

Williger: Now, you acknowledged [in your book] that you don't like Sony; isn't that right?

Yetnikoff: Yes.

Williger: And, in fact, you don't like Sony because of the way that you wound up leaving Sony?

Yetnikoff: That's only a little part of it. I don't like Sony because I don't think they're a respectable, good company.

Williger: And as a matter of fact, Mr. ...

Yetnikoff: You asked me a question. Can I answer it? I don't like Sony for a multitude of reasons … I don't like their behavior. I think they're bullies … They lean on people. You want me to continue? Because I will if you want.

Williger: No, actually ...

Yetnikoff: I don't like Sony because I think their senior executives lie ...

Williger: Well, as a matter of fact, Mr. Yetnikoff, you, as a senior executive, actually lied to your bosses when you were employed?

Yetnikoff: Absolutely. I was drunk at the time. That's 16, 17 years ago. I am sober and clean for all that time, and the reason I don't like Sony is because of questions like that, looking to impugn my current testimony for things that I did and said 16 years ago, when I was not clean and sober ...

Williger: You want blood from Sony?

Yetnikoff: No, because I think the blood would be poisonous.

The jury returned a verdict holding Sony in breach of contract. The Cleveland International logo had been left off of more than 10 million "Bat Out of Hell" CDs, and the jurors awarded Popovich 50 cents per album in damages -- to the tune of $5,057,916. Sony appealed the verdict, tying up Popovich in court for yet another round of litigation. In 2006, Popovich begged his former boss Davis, who was now chairman of Sony-owned BMG North America, to intercede. "I do feel your pain but I'm totally helpless to further your cause," Davis wrote Popovich in an email. Popovich might have gone under, had it not been for Steven Van Zandt, the "Sopranos" actor and member of Springsteen's E Street Band, whom Popovich had befriended years earlier. "When I was dead f-ing broke, Steve gave me 50 grand, and he never let me pay him back," recalled Popovich.

In November 2007, a three-judge panel of the U.S. Court of Appeals for the Sixth Circuit voted 2-to-1 to uphold the jury verdict. Sony finally paid Popovich $5.7 million -- the damages awarded, plus interest -- in 2008. But the "battle out of hell," as the Cleveland press had dubbed it, was not over. Popovich, who had been fighting Sony for more than 15 years, and had spent far more money than he had recovered -- and that was leaving aside his physical and mental anguish and lost productivity -- was still not receiving royalties.

In August 2009, he commissioned Citrin Cooperman to audit Sony's royalty statements from July 2000 through December 2008. The report, which cost Popovich an additional $100,000, was completed in March 2011. The audit left many questions unanswered, including exactly how many copies of "Bat Out of Hell" had been sold. Some estimates have gone as high as 43 million, surpassing even the Eagles' "Greatest Hits 1971-1975." According to the RIAA, the album is 14 times platinum. SoundScan-era sales figures, which began in 1991, indicate that "Bat Out of Hell" has sold 5.1 million units (compared to "Thriller," at 6.4 million, and the Eagles' "Greatest Hits," at 5.7 million) -- enough to place the Meat Loaf album among the top sellers of all time.

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When Clifford Drobnick, Popovich's longtime personal CPA, read the report, he was outraged. Sony had allowed Citrin Cooperman to see barely half of the documents it was legally required to disclose. Drobnick wrote Popovich, "Prior to the audit report, you believed that Sony was sending you false, fraudulent and misleading semi-annual royalty statements. After the audit report, you know that Sony is sending you false, fraudulent and misleading royalty statements, but you still do not know the extent of the understatement of royalties due you." Drobnick recommended nothing less than a forensic audit.

It was not to be. On June 8, 2011, Popovich, 68, who had recently moved to Murfreesboro to be closer to his son and grandchildren, died in his apartment. He had had a history of heart trouble, but the stress of the Sony litigation was a likely contributing factor to his death.

Popovich Jr. says he "wrestled with" pursuing the case, but at the end of 2012, he reached a confidential settlement with Sony, ending the litigation once and for all. "I did a lot of soul searching, and I prayed a lot," he says. "I spoke to my wife, and a few other people. And I came to the realization that I want to be here for my kids like my dad was here for me. I saw the toll it took on him the last 10 full years he was around. It just got to the point where it totally consumed his life." (Sony had no comment on the settlement with Popovich Jr., but a representative for the company said, "We disputed the allegations of the auditor [Citrin Cooperman] at the time, and continue to do so.")

Instead, with his own money, and donations from friends including Van Zandt and Alexenburg, Popovich Jr. established a scholarship fund, in his father's name, at Cuyahoga Community College in Cleveland. The scholarship is designed, says Popovich, "to help students pursue a career in the music industry." He adds, "We need new leaders in the music business. Leaders who believe in morals and ethics."

The following article is excerpted from the forthcoming, newly expanded edition of Hit Men: Power Brokers and Fast Money Inside the Music Business. Continuously in print since its first publication in 1990, Hit Men will be rereleased May 5 by Vintage Books/Random House in all e-book formats, with a new last chapter, bringing the book's narrative to the present. The legal dispute recounted in this excerpt spanned a good portion of the two decades since the original edition was published.

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