LABEL RE-LANDSCAPING: A GUIDED TOUR CONDUCTED BY I.B. BAD

With more than two months to go before Doug Morris’ arrival, industry lips are already flapping about what the revamped Sony Music might look like. Red-hot Columbia will almost certainly stay the same at the top, with Steve Barnett and Rob Stringer running the show. These two executives have been a winning team since Stringer was running Sony U.K and they broke acts together on both sides of the Atlantic. The smart money is on L.A. Reid being reunited with a number of his former acts, including Usher and Pink, and it’s possible that he’ll also be put in charge of Epic, which presently reports to Stringer. Along with his other responsibilities, Reid will be busy as a judge on The X Factor, putting him in a working relationship with Simon Cowell, who has had a great run with Barnett and Stringer via breakthrough acts like Susan Boyle and Jackie Evancho. According to scuttlebutt, Sony’s third label group will be built around the existing RCA/Jive roster, with RCA/J President A&R Peter Edge heading it up. While it isn’t yet clear what roles current RCA and Jive execs Tom Carrabba, Tom Corson, Ivan Gavin, Richard Palmese and Joe Riccitelli will play, all are expected to have positions on the new team. The other big question has to do with how Morris will go about fixing an international division whose structure is awkward and doesn’t presently function as a well-oiled part of the overall machine... As the drama surrounding the imminent sales of Warner Music and EMI continues to unfold, two scenarios have come into focus for each of the two music groups. In either case, if a strategic player—presumably either the Hartwig Masuch-led BMG Rights Management or Sony—winds up with the prize, the new owner will inevitably break up the company, retaining the pubco while selling off most, if not all, recorded music assets. The latter move would be necessary in order to get the deal through regulatory, much as UMG did when it bought BMG Songs in 2007. The majors have learned their lesson through bitter experience. Indeed, if Ken Berry had agreed to some of these same divestitures in the initial attempt to combine WMG and EMI in 2000, that merger probably would have gone down under the Roger Ames-led plan—fundamentally altering the landscape of the modern-day music business… If BMG were to buy EMI or WMG, it would keep the pubco and entertain bids from Sony and Universal for big pieces of recorded music. For example, the U.K. company could conceivably end up with Sony while the U.S. company could go to Universal—although BMG would still own certain rights to those deals under its rights management model. If Sony buys either company, it would integrate the pubco with Sony/ATV under the oversight of Marty Bandier. It would also mean that the Michael Jackson estate would wind up owning half of the combined new Sony/ATV entity—which would make the original $47.5 million deal John Branca cut on Jackson’s behalf back in 1985 to be one of the most significant financial coups in music business history. (Most believe that the greatest deal cut in recent times was Clive Calder’s sale of Jive/Zomba to BMG for $3 billion in 2002.)... By contrast, if a straight financial player—for example, Ron Burkle, Len Blavatnik or Tom Gores, the three WMG finalists according to an April 8 Bloomberg report—were to buy either company, the integrated single-company scenario would appear to have some traction (example: Terra Firma’s 2007 acquisition of EMI), while the present leadership would have a reasonable chance of being retained. If EMI winds up with a financial player, it would mean that Roger Faxon had played out this gambit like the seasoned dealmaker he is. For WMG, such an outcome might enable Edgar Bronfman to realize his rumored plan of selling off Warner/Chappell and combining the recorded music divisions of Warner and EMI. But has Bronfman managed to persuade any or all of the three reported finalists to go along with such a plan? Further, would Lyor Cohen, whose expertise has been absolutely essential to Bronfman during the last seven years, be part of the new entity?... Insiders point out that not all of the 10 reported WMG suitors made actual bids. Some of these alleged bids, they assert, were fed to the media by various players involved in the process in order to advance their respective agendas. Most believe that the selling price will be north of the current $3 billion high bid… Names in the rumor mill: Richard Sanders, Joel Katz, Scott Sperling, Steve Schnur, David Munns, Howard Kaufman and Shelli Azoff.