Death Row Records looking to leave ally Interscope

Death Row Records is shopping for a new distribution deal and is angling to part ways with longtime ally Interscope Records, sources said.

The future of the controversial rap label has been hanging in the balance since November, when Death Row founder Marion “Suge” Knight, once intimately involved in overseeing production of all recordings at the label, was sent to prison for nine years and barred by law from involvement in the firm’s daily operations.

Interscope executives have been under pressure from Edgar Bronfman Jr., chief executive of parent company Seagram Co., to dump Death Row since the rap label became the target of a federal racketeering probe last fall, sources said. In addition, some members of Seagram’s board of directors have raised objections to violent and sexually explicit rap music released by Death Row since February 1996, when Seagram’s Universal Music Group sector purchased half of Interscope for $200 million, sources said.

Executives at Seagram, Universal Music Group, Death Row and Interscope declined to comment about speculation that the rap label would make its exit before Seagram’s annual shareholders meeting in November.

“We know that there has been a lot of pressure around Death Row,” an Interscope spokesman said in a phone interview Wednesday. “We’ve been grappling for months with how to deal with this issue. We have a distribution pact that is still in full force and effect. We believe that Death Row’s artist roster and release schedule is extremely healthy.”

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But Interscope has decided it will not distribute Death Row’s next two releases: Nate Dogg’s “G-Funk Classics” and a soundtrack to the film “Gang-Related.” Those recordings will be distributed by EMI Music-affiliated Priority Records under a pact signed two weeks ago by Death Row.

Priority is one of several record companies, including PolyGram and Sony Music, that have met with Death Row over the last month to discuss a potential distribution deal. Indeed, Death Row representatives were scheduled to review details of a multimillion-dollar offer today from one New York label that is already on the table, sources said.

It has been five years since Knight and former partner Andre “Dr. Dre” Young launched Death Row, building it into the first rap label to consistently dominate the pop scene with a parade of hits that generated as much as $100 million annually.

But as the government moves into the final stretch of its criminal probe, the once-thriving rap label is said to be struggling.

Plagued by cash flow problems, Death Row recently laid off half its staff and is having difficulty paying a number of its creditors--several of whom, including American Express, have filed lawsuits against the company. Since the slaying of rap star Tupac Shakur and the exit of Young, who left to start his own company, morale has been low among artists and employees, sources said.

And this month, Death Row got more bad news when rapper Lady of Rage’s “Necessary Roughness” plunged to the bottom of Billboard’s top 200 pop chart just six weeks after its release--an unprecedented event at the label, where recordings by such acts as Shakur and Snoop Doggy Dogg have regularly entered the chart at No. 1 and rested comfortably in the top 10 for months.

Sources in the rap community attribute Death Row’s decline to a lack of support from Interscope co-founders Jimmy Iovine and Ted Field, who some believe are more interested in selling the second half of Interscope to Seagram than standing up for Knight or his company.

Iovine and Field declined to comment Wednesday, but sources close to the two executives said they were disturbed about speculation that they had abandoned Knight and Death Row.

Despite the legal problems, Interscope has continued to advance Death Row millions of dollars over the last eight months to help keep the company afloat--even though Knight and Young are no longer at the helm.

Indeed, Interscope executives played a key role last week in helping negotiate a settlement between Death Row and the estate of Shakur, whose mother sued the company in April contending Death Row cheated the slain rapper out of millions of dollars. Under that settlement, Shakur’s mother will be granted ownership of the slain rapper’s unreleased recordings, which will be marketed and distributed by Death Row, sources said.

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In addition, sources said Death Row is optimistic about obtaining a cash infusion from another company and is preparing about a dozen albums for release, including new work from Snoop Doggy Dogg, The Outlawz, Tha Dogg Pound and Shakur.

Analysts estimate that with proper management, recordings by Shakur and other Death Row acts could generate about $40 million in revenue annually for years to come--if the company can avoid being seized by the Justice Department.

Although officials have routinely declined to confirm or deny the existence of a Death Row racketeering probe, sources said the Justice Department is investigating Knight and others associated with the company for alleged tax violations and purported links to street gangs, drug trafficking, money laundering and violent acts.

The conclusion of the investigation, which sources say could result in criminal indictments against Knight and several others at Death Row, is months away.