The rise and fall of the Lookout Records empire.

A decade after going global with a song about being too bored to masturbate, Green Day has reclaimed its pop-culture stranglehold by dominating MTV's masturbatory (but oddly boring) Video Music Awards. During last month's prime-time awards broadcast, the East Bay trio raked in seven trophies related to its 2004 album American Idiot, which has garnered widespread critical praise and sold four million copies so far. The band is now conjuring cash at a rate unheard of since Dookie, its 1994 major label debut, went diamond (ten-million-plus units sold). With their latest, Berkeley's pop-punk geese have clearly laid another golden egg. And although it's been years since they've truly belonged to the East Bay or their old Gilman Street stomping grounds -- having long since ascended into the rootless strata of ultracelebrity -- at least one other local entity stands to gain mightily from Green Day's return to the limelight.

Make that stood to gain. The day after the MTV gala, Chris Appelgren, co-owner of Berkeley indie-punk label Lookout, led a tour of the elaborate two-story office he owns on Adeline Street. It's adorned with the usual underground-label detritus: old posters, random video-shoot props, and walls of mail-order-ready CDs, records, and T-shirts. What's unusual is that only two people occupy the cavernous space: Appelgren and fellow co-owner Cathy Bauer (their third partner, Appelgren's ex-wife Molly Neuman, now lives in New York City). Although the label plans to relocate to a smaller space soon, it used to have even more elaborate digs, and a sizable staff to match. At its peak in the mid-to-late-'90s, Lookout operated a record store and office warren on Berkeley's University Avenue, where it employed eighteen full-timers. As recently as late July, the label had six full-time workers in addition to the Cathy-Molly-Chris nucleus.

But Green Day funded much of that, and Green Day no longer will.

Lookout is notorious for giving the band its start, while Green Day's sales are notorious for keeping Lookout afloat. Signed in the late 1980s by label cofounder Larry Livermore, the trio put out a few EPs and two full-length albums --1,039/Smoothed Out Slappy Hours and Kerplunk -- on Lookout between 1989 and 1991. Three years later, major label Reprise unveiled Dookie and made Green Day a household name, and Lookout, which suddenly controlled the back catalogue of one of alt-rock's biggest sensations, found itself atop a gold mine.

Green Day could have taken those valuable early records with it, but instead opted to let Lookout keep control, and before long, both releases went platinum. Those successes, coupled with another prescient Gilman-connected Livermore signing -- ska-punk pioneers Operation Ivy, whose 1989 CD Energy sold more than half a million copies through word-of-mouth idolatry -- gave Lookout three megasellers that kept money pouring in. At its peak in 1995, the label boasted $10 million in sales, astonishing for a small indie label. Appelgren, a former employee who assumed full control of the label from Livermore in 1997, sat at the helm of a deified pop-punk imprint that seemed financially set for life.

All of which makes Lookout's current struggle to survive seem baffling. Yet somehow, a combination of managerial hubris, bad business decisions, and sales that haven't lived up to the increasing sums spent on promotion have decimated the label that once documented and defined the East Bay's signature sounds. Worse, through a combination of bad bookkeeping and poor communication, Lookout has left behind a string of disgruntled ex-employees and frustrated bands that have clashed with Appelgren over royalties and eventually fled to other labels. The list of defectors has grown over the years to include, among others, Screeching Weasel, Avail, Neurosis, Pansy Division, Enemy You, Blatz, Filth, the Criminals, and the Riverdales.

But the latest defector is by far the most devastating. In late July, citing unpaid royalties, Green Day legally pulled its Lookout back catalogue, cutting the label's fiscal umbilical cord. "It's been over ten years, and really, we're not the first band to do it," bassist Mike Dirnt explains. "I feel we've more than honored our handshake agreement with Lookout. I think that's really fair. There comes a time where you're like, 'Okay, how long do you want to support your record label?'"

Although Lookout reissued 1,039 last year, both it and Kerplunk are ripe for future boutique-repackaging affairs, possibly on East Bay punk label Adeline, co-owned by Green Day frontman Billie Joe Armstrong. For now, Dirnt says, "We're just going to hold onto those records for a while. Something like that comes up and everyone wants to know what you're going to do, but sometimes it's nice to just have them in your possession."

Green Day took some initial flak from overzealous young punks, and on the day gossip Web site reported Green Day's decision, Lookout co-owner Molly Neuman spoke out in defense of the band: "We have nothing but respect for them," she said. "We are a small business that's facing challenges. ... Although it's very, very difficult for us and the people we love who work for us, we have to face the size of the company that we are, and scale it down to what that is. And it blows. But we're gonna do it." On a tour of the Lookout space with Appelgren, the results were immediately apparent: A row of desks, each topped with a bright blue iMac, stood as reminders of the employees laid off following Green Day's defection. All upcoming releases and new signings have been suspended indefinitely so Lookout can focus on paying back the outstanding royalties that have been largely to blame for the artistic exodus.

"I like and respect everyone I work with," Appelgren says. "And I have a sense of having failed and having not done everything I could or should've done for them, and lost sight of them somewhat. If I can't restore everything, I can at least repair it as much as I can, and also hopefully bring Lookout to a place that is truer, truer to the size of label that we are, truer to the number of records I can reasonably expect to sell."

Repairing the finances will be tricky enough, but Lookout's reputation has taken a beating. Few musicians publicly accuse Appelgren and his partners of malice, but their sketchy bookkeeping and seeming inability to pay bands without being hassled is assailed by employees and artists alike, or both in the case of Jesse Townley -- a longtime local punk fixture who once served as the label's "royalty advocate" and has played in Lookout bands including Blatz and the Criminals. "I'll tell you this," he says. "When you talk to ex-employees and ex-bands frankly, you hear, 'I was so excited to be a part of something I thought was really special, but dot-dot-dot, XYZ happened,' or 'It turns out XYZ was really the case.' Time and time again. I'm over being frustrated -- I'm just resigned. It's like, 'Yeah, you know? It sucks.' It's one more thing that was really great at one point, and just went into a spiral of mismanagement, and that's that."


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