Posted by on 12/19/2012

Memphis, Tennessee based record label Stax was forced into bankruptcy today (December 19, 1975).

Stax was forced into bankruptcy not because of its roster, or poor sales, but due to a restrictive distribution deal with CBS Records.

In 1972, Stax President/owner Al Bell entered into a distribution agreement with CBS Records and it’s then head, Clive Davis.

But Davis was fired shortly after signing the agreement with Stax for Payola, after being indicted with Kenny Gamble and Leon Huff.

The Memphis-based record label never had success dealing with the new group of executives that were running CBS Records after Davis’ departure.

The new guard at CBS felt that Clive Davis’ deal with Stax was a bad one that lost CBS money.

A group of new consultants reviewed the contract and felt that there were problems with the economics of the deal with Stax.

CBS attempted to change the agreement to a standard Production and Distribution deal, but Al Bell and Stax were not interested in changing the terms of the deal.

CBS allegedly refused to distribute Stax product and in essence, treated the company like a competitor.

At the time of Stax issues with CBS, the company was fighting off pending lawsuits from Isaac Hayes and producer Don Davis over royalties, as well as the Union Planters bank, which was owed almost $3 million in back loans to Stax.

This, coupled with the squeeze put on by CBS in failing to distribute Stax product, allegedly for its own, forced the label into bankruptcy.

Stax, which once counted artists like Carla Thomas, Rufus Thomas, Isaac Hayes, Booker T. and The MG’s, The Staple Singers, The Dramatics, The Bar Kays and Wilson Pickett as artists on the label, was official done.

When the doors to Stax’s offices were finally padlocked on December 19, the label had $304.59 in the bank

Posted in: Soul Music
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