Festival was established by one of Australia's first merchant banking companies, Mainguard, founded by Paul Cullen, a former Australian army officer. Mainguard had a wide range of investments including one of Australia's first supermarket companies, and a whaling business. It also backed famed Australian film-maker Charles Chauvel.
The origin of Festival was Mainguard's purchase of a small record pressing company, Microgroove Australia, one of the first local companies to produce the new vinyl microgroove record format. After buying Microgroove, Cullen founded Festival Records on October 21, 1952 and soon after he appointed popular bandleader Les Welch as artists and repertoire (A&R) manager. Another early staff member was Bruce Gyngell, who was later hired to help found Australia's first commercial TV station, TCN-9 in Sydney. The connection between Nine and Festival would reap great benefits for the label in the late 1950s and early 1960s.
Festival was able to gain a foothold in the Australian music market mainly thanks to Welch, who cannily acquired the Australian rights to the epoch-making Bill Haley record "Rock Around The Clock". The single had originally been turned down by EMI in 1954, when it was first released in the USA, but Welch was able to beat out EMI, securing the Australian rights for Festival in 1955, after the song became a smash hit in America and Britain thanks to its inclusion in the film Blackboard Jungle. "Rock Around The Clock" went on to become the biggest-selling record ever released in Australia up to that time, reportedly selling over 100,000 copies, and it established Festival as a significant player in the emerging pop-rock market.
When Mainguard began diverting Festival's profits into its other businesses, Welch resigned. He was replaced by disc jockey and former record store clerk Ken Taylor. Like Welch, Taylor didn't like rock 'n' roll, but he was an astute spotter and marketer of new talent. Thanks to Taylor, Festival was the first local label to sign Australian rock 'n' roll acts, including Australia's "Big Three" of the 1950s -- Johnny O'Keefe and the Dee Jays, Col Joye and the Joy Boys and Dig Richards and the R'Jays. Festival's sales trebled but by this time Mainguard was in serious financial straits and in 1957, Cullen sold Festival to property magnate L.J. Hooker.
Hooker was a music fan and reportedly took a keen personal interest in the company, even establishing his own boutique imprint, Rex, named after the Sydney hotel he owned. During this time, Festival had its first home-grown hit, Johnny O'Keefe's Wild One (aka "Real Wild Child"), a song later covered by Iggy Pop, and this was followed by four #1 hits in 1959 for the Col Joye & the Joy Boys. But despite the chart success, Festival continued to lose money due to poor management and a lack of international acts on its roster, and Hooker eventually sold it on to Rupert Murdoch's News Limited in 1961.
As with the Bill Haley single, Festival was again saved by an unknown U.S. act; in this case, Herb Alpert & the Tijuana Brass, who had been recommended to Festival in 1962 by top Sydney DJ Bob Rogers. The Tijuana Brass' breakthrough record, "The Lonely Bull" became a worldwide hit and its success in Australia enabled Festival to sign a crucial distribution deal with Alpert's label A&M Records, who went on to supply Festival with a stream of top-selling U.S. acts such as The Carpenters.
Under the astute direction of long-serving company chairman Alan Hely, Festival quickly rose to become one of the top pop labels in Australasia, although the New Zealand operation was a standalone company with differing ownership and management, and by the late 1960s it rivaled and often surpassed market leader EMI. Hely built up a strong roster by cultivating Australia talent and establishing distribution deals with important local independent labels like Spin Records and Clarion Records in the Sixties and Mushroom Records in the Seventies. He also signed crucial distribution deals with major overseas labels like Island Records, Chrysalis Records and A&M Records that gave Festival exclusive Australian rights to a steady stream of international hit albums and singles.
Festival played a major role in the Australian pop scene of the mid-to-late 1960s, and it competed strongly with market leader EMI. Festival recorded or distributed some of the most popular Australian acts of the decade, including Normie Rowe, Billy Thorpe, The Bee Gees, Ray Brown & The Whispers, Tony Worsley & The Fabulous Blue Jays, Jimmy Little, Noelene Batley, Mike Furber, Olivia Newton-John, The Dave Miller Set, Johnny Young, Wild Cherries and Jeff St John. An important factor in the company's success was its pressing and distribution deals with the independent pop labels such as Sunshine Records, Kommotion Records, Spin Records and the WA-based Clarion Records. Many of these recordings were made by producer Pat Aulton, initially the 'house' producer for Sunshine, Kommotion and Spin, who became Festival's house producer from 1966 until the early 1970s. Aulton was probably responsible for more Australian-made hits than any other record producer of his era.
In 1970, Festival established a new progressive music label, Infinity Records (not related to the U.S. MCA affiliated label of the same name, see Infinity Records.) Early Infinity releases included Kahvas Jute, the "new" Billy Thorpe & The Aztecs and Blackfeather. Infinity's biggest success was Sydney band Sherbet, who became the most popular and successful local band of the early Seventies and one of the most successful Australian groups of all time.
Although the American-owned companies Warner Music and CBS considerably expanded their local presence and market share during this period, Festival enjoyed continuing success during the late 1970s and mid to late 1980s under the helm of managing director Jim White, and also thanks in part to its alliance with the Melbourne-based Mushroom Records label and Sydney-based Regular Records label (which included on their roster top selling bands such as Icehouse (band), Mental As Anything and The Cockroaches - who later changed their name and direction to become the hugely successful children's act The Wiggles). Both Mushroom and Regular recorded much of the best new Australian music of the time.
In the late Eighties change swept through the music industry, and vinyl was rapidly supplanted by the new compact disc format which Festival embraced, but started to lose manufacturing revenue because of its predominant vinyl and cassette pressing business and its lack of CD manufacturing facilities. Festival's revenue was also dented by the loss of most of the successful independent overseas labels it had formerly distributed (notably Island, A&M and Chrysalis) which were bought up by major labels like PolyGram, BMG (Bertelsmann Music Group) and EMI. The loss of these overseas labels took a sizeable chunk out of Festival's profits, a problem compounded by Murdoch's persistent siphoning-off of Festival's profits, leaving it without the cash reserves it needed to invest in new plant, new acts and new labels.
In 1995, Alan Hely was nearing retirement, but he agreed to stay on to tutor Rupert Murdoch's younger son James, who was -- to the surprise of many in the industry -- appointed as Festival's Chairman, despite the fact that he was then only 23 and had no significant business experience. James had a reputation as the Murdoch family rebel -- he bleached his hair and for some time sported an eyebrow stud, and to his family's dismay he had just dropped out of Harvard University to set up a hip-hop label, Rawkus Records, which for a time was the US's premier hip hop label, boasting Mos Def, Company Flow, and others.
Hely stayed on for some time after the appointment, but he resigned earlier than he had planned, and MD Bill Egg took the reins and then resigned after the appointment of Roger Grierson. Under Grierson and Murdoch's management, Festival bought out Michael Gudinski's controlling 51% share of Mushroom Records in 1999 for a reported AU$60 million. The two companies were then merged and renamed Festival Mushroom Records (FMR).
Notable figures were hired as executives, including Jeremy Fabinyi, former head of AMCOS and Paul Dickson, former head of Polygram Australia, respected musician Mark Callaghan (ex-Riptides, GANGgajang) and industry veteran and former Larrikin Records boss Warren Fahey. The company also established an online music site, Whammo, which offered online CD sales as well as hosting the internet version of Ian McFarlane's Encyclopedia of Australian Rock & Pop. The company had #1 records with Motorace, 28 Days, George, Amiel, Kylie Minogue and others under licence and distribution arrangements including Moby, Madonna, Britney Spears and Michael Crawford. They also had the highest selling album of 2002 with the soundtrack to Baz Luhrmann's Moulin Rouge. "Addicted to Bass" went to #2 in the UK charts and the band had top ten records in Japan through a licence arrangement with Sony Japan. In 2002, FMR had more #1 singles and more #1 albums than any other company.
Festival Mushroom Records won both the Song of the Year and Songwriter of the Year in 2004 with Powderfinger and Amiel.
Festival celebrated its fiftieth anniversary in 2002 with a major museum exhibition and a series of commemorative CDs.
News Ltd. undoubtedly poured tens of millions into Festival in the decade between 1995 and 2005; James Murdoch reportedly lavished AU$10 million on artists and repertoire, plus another AU$43 million to buy-out Gundinski's controlling share of Mushroom. Yet, by 2005, the company was insolvent, and it ceased trading in October.
In October 2005, it was announced that the recording assets of the Festival Mushroom group had been acquired by Warner Music Australia. The terms of the sale were not disclosed but sources at other labels estimated that the deal was worth between AU$5 million and AU$10 million. Festival Mushroom's offices in five cities were closed and 43 of the company's 54 remaining staff were retrenched, with eleven senior management, promotions and marketing staff moved into positions at Warner.
The combined Festival Mushroom Records-Warner Bros. Records recording archive contains a large proportion of the most important Australian pop and rock music of the late 20th century, and the collection is said to contain more than 20,000 master tapes, including music by Johnny O'Keefe, Peter Allen, Sherbet, Olivia Newton-John, Timbaland, Nelly Furtado, Madonna, Mika and Kylie Minogue.
FMR's other major asset, Festival Music Publishing, was acquired in November 2005 by Michael Gudinksi's Mushroom Publishing, for an undisclosed sum.