1992 12 05 NME - Factory Records Going Bust

Blue Monday: Factory closes its gates

On Monday, November 23, Factory Records finally went into receivership. The last major independent force outside London, an unrivalled home for innovative and blatantly bloody-minded musicians, the last sanctuary of ‘Madchester’- all destroyed at a stroke.

So was it the exorbitant cost of the last Mondays album that broke Factory? Or the eagerly anticipated and much-delayed New Order album? And what will Tony Wilson - the mouthiest record company boss of all - do next? The NME news team investigates...

New Order, Mondays hold key

NEW ORDER hold the key to Factory’s future, as the receivers pore over the company’s accounts to establish just who owns the rights to the band’s new album and their lucrative back catalogue.

A spokesman for official receivers Leonard Curtis said the fact that New Order had never signed a contract with the label, opting for a “gentleman’s agreement” to give six months’ notice before leaving, had created a “complex situation” regarding Factory's assets.

The difficulties revolve round the ownership of New Order's completed but still unreleased new LP, plus their previous six albums, including the ‘Substance’ compilation.

According to insiders at Factory, it appears that New Order have all rights to their own material - including the new album which is rumoured to have cost in excess of £400,000 - possibly denying the receivers one of the company's biggest assets.

The loose arrangement between band and label was allegedly the stumbling block to the projected London/Factory deal which recently collapsed.

A document stating the ins and outs of New Order’s non-contractual agreement was presented to London earlier this year. Anthony Wilson told trade magazine Music Week: “You’ve never seen people’s faces drop as quickly as the London’s sides did. The piece of paper effectively said ‘New Order own all their music’”. Ironically, if nothing had been put down on paper, it's most likely that Factory would have retained the rights to the band’s back catalogue.

The concept of artist contracts was totally alien to Factory until 1988, a good ten years into their existence. Former NME writer Cath Carroll was the first to sign anything with Factory, but it is believed that every new act since then has had a contract.

A spokesman for the receivers said: “It's a real muddle and it’s going to take a while to sort it all out. We have to go through the books and the balance sheet, as in every receivership, but this carry-on of gentleman’s agreements and no artist contracts doesn’t make things any easier. It’s a fairly complex situation.”

What remains clear, though, is that New Order were talking to a number of labels, including Warner Brothers, before Factory went bust last Monday.

The receivers have to assess the worth of the Factory name and the company’s property, but if New Order fly the coop and the Happy Mondays also find a new home (as suggested by manager Nathan McGough), it leaves the bankable end of the label’s talent pool very shallow and will certainly reduce its market value.

The receivers’ spokesman added: “We cannot tell you if anyone has come forward yet, and we wouldn’t release details of any buyer until we had the money in our back pocket.”

In recent years Factory’s only other financially safe bet has been Barney Sumner's “sister” project to New Order, Electronic. But with the outfit’s last single being released on Parlophone, followed by rumours of an imminent long-term deal with Island, Factory’s only assets may be its Charles Street building and a 15-year legacy of challenging and inspiring pop music.

HAPPY MONDAYS manager Nathan McGough last week dismissed allegations that the band are partly responsible for Factory’s downfall, claiming sales of Mondays records actually stopped the label from going under earlier.

A statement from official receivers Leonard Curtis says delays in major record releases were a significant factor in the company’s financial problems, and McGough points the finger at New Order.

"The New Order LP has taken four years to make, and during that time the Mondays have been the only band on Factory who have been selling product in any significant amount," he told NME.

“If anything, we’ve kept them going for the last two years.”

McGough also laughed off industry rumours that the latest Mondays album,'. . .Yes Please!’, had only sold 10,000 copies and that the huge cost of recording the album at Compass Point in the Bahamas had left Factory financially crippled.

“That is total nonsense. First of all,’. . .Yes Please!’has sold about 50,000 in the UK alone, and you can check that figure with Pinnacle Distribution.

“As far as recording, the album cost about a quarter of a million pounds to make, which I do not regard as outrageous for a band with an international fan base like the Mondays.

"Factory have already recouped £100,000 of that outlay by licensing the album to London for Europe, and the same amount again from Elektra on the American licensing deal.

That’s 80 per cent of the total cost recouped before the album was even released."

The Mondays’ contract with Factory expires in mid-December, and McGough admitted that he had been talking to other labels since the receivers were called in last Monday. He was due to have meetings with both London Records and BMG last Friday.

“I don’t want people to think that the Happy Mondays have been hit hard by Factory going into receivership," he said. “We are one of their creditors and they owe us about £40.000, but that’s hardly going to have a huge effect on us.”

A RESCUE package to save the FACTORY label is underway, just days after the company was declared bankrupt, with rumours suggesting that Anthony Wilson is set to launch a new label in Manchester.

Factory Communications Ltd called in the receivers on November 24, with reported debts of over £2 million. Eight staff members were made redundant.

Wilson has been retained as director of the Hacienda and insiders claim that he began looking for new premises last week, as Factory's £400,000 Charles Street building was put up for sale.

A statement from receivers Leonard Curtis & Partners, who revealed that Factory’s annual turnover was in excess of £10 million, blamed the worsening recession and "delays in the production of new records” for the collapse of the ill-fated company.

However, there are clear indications that London Records are still in negotiation with Factory, with rumours suggesting that they may attempt to purchase the company at a knock-down price. One industry source told NME: “It seems likely that London understood perfectly well the financial state Factory were in and allowed the company to collapse without intervention. As a result, they get a relatively cheap deal and have no legal obligation to pick up the company’s previous debts.”

If this is the case, the move is certain to anger the dozens of creditors—including design house Central Station, recording studios and press and promotions companies - many of whom may be forced out of business due to Factory’s unpaid debts.

Tony Michaelides, employed by Factory as an independent radio plugger for over ten years, was more philosophical about the news: ‘I’m frustrated, but not totally shocked. It’s a great shame that such an innovative label has folded. Would there have been a Creation without Factory? We haven’t been paid for a year, but when you're in business, you don’t put all your eggs in one basket. We'll survive.”

NME understands that both Factory staff and artists on the label had also not been payed since early summer, with The Adventure Babies being owed over £30,000 In wages alone.

The prime movers at Factory remained tight-lipped last week over future plans for the label. A statement announcing the bankruptcy confessed: "In the final analysis, it wasn’t just the recession; Factory tried to do too many things, from adventurous buildings to ambitious recording projects, at a time when some foresight of the negative economic climate to come might have suggested restraint.” This was echoed by a Factory spokesperson who told NME: ‘Our longterm planning was adrift. We can only blame ourselves.”

Ironically, the Palatine Road office where Wilson, Alan Erasmus, Martin Hannett and Peter Saville hatched their ambitious gameplan in 1979 came back on the market the same day that Factory filed for bankruptcy.

A Nation mourns

"0id you see that thing in NME - Stop New Order taking Over The World? Forming other bands? Nah, all these bands, it’s good really. You’d think Factory would do better. Ha ha! I love’em.”

Peter Hook, NME, Jan 11, 1992

“I remember being very jealous of Daniel (Miller) because it seemed that Mute always had two major acts. And, at this point, we thought that having contracts might be a good idea.”

Anthony Wilson, November 30, 1991

“The level of commitment and involvement at Factory was staggering, it doesn’t matter who I record with in the future, it’ll never be matched. At which other record company does its head spend two weeks tracking down photographs for sleeve designs? Tony is a naive but totally genuine person - it looks like he was let down. He had total belief in what he did, he really did. ”

Steve Martland, Factory composer

“Yes, of course I’d do it all again today, provided I had the music. You can always deal with the business side, but you have to have the groups. If you don’t have great music, forget it. I’d do it all again because of the opportunity to work with brilliant people, to get to work with Ian Curtis and Shaun Ryder.”

Anthony Wilson, NME, July 25, 1992

“It was a bit of a shock to me, I don’t really know what to say. I can certainly sympathise with Factory. This is a real tragedy for independent music. ”

Geoff Travis, Rough Trade

“It’s a great shame. Factory have meant a lot. The independent scene will be poorer for their demise. I hope that something good may be resurrected from it. ”

Martin Mills, Beggars Banquet

“I feel very much the same as when Robert Maxwell fell off his boat last year.”

Dave Haslam, Manchester DJ and head of the First Love label

“We were trapped by the circumstances that Factory were in. We felt it was going to happen for ages, despite all the assurances we’d received about the London deal. In the long run, we think it’s the best for us.”

The Adventure Babies

Fac: accounting their losses

FACTORY RECORDS, launched in 1979 on £12,000 left to Anthony Wilson in his mother's will, became a victim of its own success with debts running into millions in spite of a massive annual turnover.

In the post-mortem following last week’s events, a number of key events have been noted as contributing factors to the label’s collapse. The delay in producing New Order's album and allegations concerning the cost of Happy Mondays’ last LP are well documented. Factory’s Charles Street offices, purchased during the property boom of the late ’80s, is rumoured to have been devalued by £200,000.

A popular notion blames the label’s A&R policy in the wake of the Mondays’ success, including the signings of Northside, The Wendys and The Adventure Babies. One Factory insider admitted last week that “our long-term planning was adrift. Cath Carroll and Revenge have made interesting music, but neither delivered the goods in terms of sales."

Factory Classical, whose roster included acclaimed composer Steve Martland and rising star Graham Fitkin, have also been pointed out as an expensive ‘indulgence’.

Martland unequivocally denied the allegation to NME last week: “The total cost of all Factory Classical releases was less than the sum spent on Happy Mondays in the last 12 months. Admittedly, the label was concerned more with innovation than hard commerce, but it was hardly the severed artery some people made it out to be.

“What went ‘wrong’ with Factory was that it had a Utopian vision based on the artistic side of the business. It says a lot about this country that, at the end of the day, it’s the unscrupulous people who succeed. This is another big blow to the North.”

Factory encountered serious financial problems on several occasions during the ’80s. A damaging legal settlement with former partner Martin Hannett and the spiralling cost of running the Hacienda club were offset by comparatively small production costs and multimillion sales for New Order. The company is known to have continued to pump money into the Hac throughout its fallow years and following its temporary closure last year on police advice.

The current economic climate combined with decreasing record sales across the board were undoubtedly at the heart of Factory’s demise. Radio plugger Tony Michaelides told NME last week: “As with most people connected with the label, I’m sad because I was such a fan of the music, but the bottom line is you cannot bulldoze your way through a recession.”

What NME described last July as “the periodically mighty Factory” is no more. Even though there are strong indications that it will resurface in some form in the near future, recent events suggest that this is the end of an era for the maverick independent label, driven by Anthony Wilson’s wayward Lancastrian vision.