UPDATE: LINKIN PARK WANTS OUT
The statement, issued by The Firm, begins, “The new owners of the Warner Music Group will be reaping a windfall of $1.4 billion from their $2.6 billion purchase a mere 18 months ago if their planned IPO moves forward. Linkin Park, their biggest act, will get nothing.
“Meanwhile, of the planned $750 million raised by an IPO, only about $7 million will be put toward the company's own operations, with no money going to WMG artists. Additionally, WMG has already seen a widespread reduction of its work force and substantial cuts in marketing and promotion expenditures. Linkin Park has become increasingly concerned that WMG's diminished resources will leave it unable to compete in today's global music marketplace, resulting in a failure to live up to WMG's fiduciary responsibility to market and promote Linkin Park.”
Having one of its biggest acts step out against what many have viewed as a group of Wall Street sharks squeezing cash out of a once-revered but now struggling music company is likely to give WMG and its owners an additional black eye in the media as the company’s well-publicized IPO approaches.
The statement also quotes noted music attorney Peter Paterno’s remarks in a recent unflattering New York Times profile of WMG. "The [WMG] guys who are running this thing are looking at it pretty cynically,” Paterno told the paper. “It's becoming more and more apparent that this is nothing more than a financial play for the investors. It's not about the music or the employees; it's about a return for private equity investors. It's kind of astounding when you sit back and look at the audacity.”
Paterno’s remarks are said to have infuriated WMG management.
The statement goes on to say, “Linkin Park has been responsible for approximately 10% of the entire Warner Music Group's record sales, selling over 35 million records worldwide in just 5 years. After reading numerous and daily articles about how WMG executives and corporate raiders have ridden the coattails of the creative community to extract massive rewards, Linkin Park has become increasingly offended and discouraged.
“We couldn't be more grateful for the support we receive from all our fans around the world. We feel a responsibility to get great music to our fans. Unfortunately, we believe that we can't accomplish that effectively with the current Warner Music.”
Linkin Park says is had been planning to start work on its next record, slated for release in spring 2006, but that it now wants out of its deal. “The band now wants off WMG and is weighing all of their options on how to best get new music to their fans,” the statement says. “Possible avenues include relying more on touring, merchandising and endorsements, rather than leaving their future in the hands of a weakened WMG.” The band owes Warner Bros. four albums under its current deal.
While the threatened work stoppage—not unlike a labor strike against an employer—can be perceived as negotiasting ploy, there's no question that the concerns expressed in the statement have some basis in fact. Further, though it wasn't mentioned in the statement, sources inside The Firm express grave doubts that WMG has a post-IPO plan in place.
It will be interesting to see how this heavyweight battle plays out.
