- The Washington Times - Saturday, April 4, 2009

FORT MILL, S.C. (AP) - About the only quiet places in the headquarters of Muzak Holdings LLC are, believe it or not, the building’s elevators.

The omission is intentional. Muzak management wants visitors to know that the company has abandoned those milquetoast renditions of pop songs that got toes involuntarily tapping in elevators everywhere.

But while Muzak Holdings spent years reinventing itself by selling restaurants and retail stores custom “playlists” _ of real songs, not elevator-music versions of them _ the company sank deep into debt and lost money. Now Muzak is restructuring under Chapter 11 bankruptcy protection.

“This was a financial situation that was looming for 10 years,” said Bruce McKagan, Muzak’s vice president of content services. “This just happened at a devastating time for everyone.”

It doesn’t appear to be the day the Muzak died. The company plans to emerge from bankruptcy fairly quickly as it restructures its $436 million debt. Muzak’s filing cited assets of $324 million.

Meanwhile, Muzak has been cleared to keep operating its library of more than 2.6 million songs.

Even so, Matthew Dundon, managing director at Miller Tabak Roberts Securities in New York, said Muzak will come out of Chapter 11 into a tough spot. It figures to be hard to achieve steady growth as retailers close and fewer new potential clients emerge. Already Muzak was having trouble growing; its 2008 revenue of $249 million was essentially flat from 2007.

“The wind in 2009 is anywhere but at their back,” Dundon said.

Muzak tried last year to merge with a rival, DMX Inc., but the deal fell apart as the credit markets soured in September. Brian McKinley, DMX’s vice president of marketing, said his company might reconsider a deal with Muzak if it makes sense down the line.

What’s so costly about the business of Muzak?

After Muzak switched from playing cheesy remakes to packaging songs by their original artists in the mid-1980s, the company accumulated much of its debt by buying out franchisees who had been selling music playlists to retail outlets and offices. The company’s creditors also include companies to which Muzak pays more than $26 million annually in royalties, licensing and other fees associated with acquiring music for playlists.

Those tunes envelop Muzak’s workers the moment they pull into the parking lot and play throughout the 110,000-square foot headquarters here. On one recent day, Prince’s “Kiss” rang through the lot. In Muzak lingo, songs are tucked into one of nearly 90 playlists, or “programs,” sorted by genre, and “Kiss” is on one called “The Boulevard,” for adult R&B.;

The offices were designed like a European village, complete with a central square for concerts by local acts. Wide walkways link sections of the complex. In one building, thousands of plain white shoe boxes line the walls, storing the numbered CDs from which songs have been ripped.

Nearby, things are quieter among the so-called audio architects, the people who customize music layouts for such clients as Ann Taylor, McDonald’s and Caribou Coffee.

It’s done with a mixture of science and art, and with the help of a digital library called “The Well,” from which Muzak employees select the optimal songs for sipping lattes or hawking lawnmowers. Name an artist and Muzak’s got it. It has nearly 900 Beatles titles, and close to 2,000 Elvis songs, all ready to be playlisted and sent to clients.

Audio architect Steven Pilker explains that sometimes a customer wants a simple playlist _ say, all country and western. But much of the time, Muzak’s artists get to create.

“That’s the fun part,” said Pilker, a fan of electronica who got his start working in record stores.

Muzak was founded in 1934, though its roots go back earlier, to a company called Wired Radio Inc. It was founded by Maj. Gen. George Owen Squier, an inventor who patented a way to play a phonograph over electric power lines during World War I.

The company could not compete with radio for residential customers and instead targeted restaurants and hotels. Then elevators brought an opportunity.

As skyscrapers added lifts for speedier travel, their riders were often scared by the height and the contraption’s rattling. Joseph Lanza, author of “Elevator Music: A Surreal History of Muzak, Easy-Listening, and Other Moodsong,” wrote that elevators invoked fears of “motion sickness and snapping cables.” Music helped calm people.

Muzak’s business was boosted further by studies in the 1930s. A British government report found workers were more productive and resented their jobs less when they were met with music in the workplace each morning. And the Stevens Institute of Technology found that “functional music” at work cut absentees by 88 percent and reduced early departures by 53 percent.

During World War II, Muzak piped patriotic music into more than 1,400 factories turning out military equipment. Over the next four decades, Muzak became synonymous with the mushy background music in dentists’ offices and oh so many elevator rides.

It’s an image the company hasn’t completely shed.

“When we sit down some clients, we always have to deal with the elephant, the elevator, in the room,” McKagan said with a chuckle.

The company continues to research the best songs to reduce stress or to spur shoppers to buy something. A blare of horns in a song, for instance, is thought to help focus a potential consumer walking through a department store.

There’s also a growing voice sector, with 125 vocal talents who record more than 32,000 tailored messages in Muzak’s studios. Those are the messages welcoming shoppers to a store or asking people to hold for customer service.

But it’s music that truly drives Muzak. About 100 of the roughly 500 employees here play in their spare time and have thrown together their own disc of originals. McKagan’s brother, ex-Guns N’ Roses bassist Duff McKagan, contributed a solo track.

Pilker, the audio architect, said he has faith in the company’s future.

“It’s music,” he said. “People will always like to listen to music.”

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