If optimism can be measured by the number of people coming into a market, the music business looks a remarkably positive place, writes
Financial Times New York correspondent
Andrew Edgecliffe-Johnson in his comprehensive
rundown of the competition.
Here’s a handy-dandy list of all the reported bidders compiled from various reports, listed by the company each has its eyes on. The caveat here is that anyone in the market for a major music group containing a rich catalog and a powerhouse pubbery would likely grab whichever of the two it can get.
BUYERS FOR WMG
BMG Rights Management
Sony Music
Platinum Equity
Poju Zabludowicz’s Tamares
Ron Burkle’s Yucaipa Companies
Len Blavatnik’s Access Industries
BUYERS FOR EMI
WMG
UMG
Sony Music
Burkle
Blavatnik
BMG The fact that so many parties have bid in what could be a $3 billion auction is especially surprising considering that labels and, to a lesser extent, music publishers were supposed to be “the croaking canaries in the digital coal mine, the first of the old media to be snuffed out by piracy, downloads, and social networks,” as the reporter colorfully puts it.
More surprising still is that the competition for Warner and for EMI (still waiting for Citigroup to start a formal sale) is turning into a lively battle of new ideas about the future of the music business.As Edgecliffe-Johnson points out, auctions often pit private equity financial modelers (a role played here by Platinum Equity and Tamares), against strategic synergy-seekers (represented by Sony, which would find scale and savings in a Warner deal if regulators allowed, and perhaps by Warner’s management, which could sell just Warner/Chappell and bid for EMI). Nor is it uncommon to find a wealthy industrialist with an angle on such deals (Blavatnik’s Access Industries owns 2% of WMG).
But two other groups bring fresher, if more controversial ideas.
First is BMG, the music publishing joint venture between Kohlberg Kravis Roberts and Bertelsmann. CEO Hartwig Masuch, its chief executive, learned the business playing Kinks songs 30 years ago. He could find growth and savings at Warner/Chappell, but he has a further ambition: to tear down the divide between labels and publishers.
The split made sense when recorded music was mainly about getting millions of CDs to stores for an album launch. Now, with music retailers dying and thousands of digital revenue streams to manage, the label business looks more like publishing’s licensing model, Masuch has argued.His unified rights management approach, also favored by EMI’s Roger Faxon, would turn labels into less glamorous service businesses, giving new artists tools to take advantage of the digital distribution offers available to them, while collecting revenues for artists and songwriters. TV talent shows like American Idol and The X-Factor will take on the business of hit-making, he reckons.
But the bid from Burkle’s Yucaipa Companies, the Los Angeles buy-out group, is also a bet that digital music can now produce the upswing industry execs have been waiting so long for.Burkle, a retailer turned activist investor, has consulted the infamous and ubiquitous Sean Parker, who’s also backing Spotify. While Parker has yet to formally join the Burkle bid, it would be a dramatic way of putting his money where his mouth is and betting on the sunny digital future Spotify is painting, the reporter argues. It would also be ironic if the man who once threatened the record labels’ survival was to bid for a venerable stalwart of the music industry.
But whoever wins Warner or EMI, expect a major shake-up of the already embattled status quo.
