I.B. BAD ANSWERS SOME PRESSING MUSIC BIZ QUESTIONS

THE NUMBERS GAME: If Doug Morris’ Universal Music Group makes good on its stated plan to pull out of SoundScan when its deal is up on Dec. 31, the move could fundamentally alter the way the music business gathers sales figures. SoundScan charges according to marketshare, so if UMG pulls out, the service will lose at least $5 million annually, or around a third of the revenue it gets from the Big Four, using a portion of that money to pay the reporting retailers (which begs the question: how much of that revenue goes back to the retailers and how much is profit?). If UMG pulls out completely, watchers will be watching to see if Sony BMG and its 25% marketshare defects as well, thereby essentially breaking the SoundScan stranglehold on sales-data distribution. Negotiations have currently broken off between the two parties, and insiders say that UMG is committed to proceeding on its own. SoundScan’s new UMG proposal would have put UMG’s cost at nearly $6 million per year, with a built-in 6% increase each year thereafter. With UMG having rejected the proposal, will SoundScan significantly reduce its price tag, and will UMG proceed to build or support another, lower-priced system?... Many believe that the future model for sales data mining will look more like the U.K.’s BPI system, owned and operated by the various label groups in the U.K., which in turn market the information themselves to prospective users. As of January, UMG could conceivably be trying to get data on its own titles, and if it can find a way to do so, the music group will have sufficient information to analyze the marketplace without any outside assistance… Vivendi Universal’s strong earnings for the first half of fiscal 2005 were driven in part by UMG's ability to combine massive hits with reduced costs. Morris’ legions have managed to pull off this coup through a series of aggressive moves, including taking the lead in curtailing the use of independent promotion and turning VOD into a new revenue stream, as well as having a run of smashes that have enabled the company to dominate the top of the charts, including 50 Cent (4.5 million), Mariah Carey (3.4m), Shania Twain (3.2m), Gwen Stefani (2.9m), Killers (2.5m), The Game (2.2m), Black Eyed Peas (1.4m) Kanye West (1.3m) and Jack Johnson (1.5m). By putting SoundScan on notice, UMG is leading the way once again in reducing costs by using its marketshare power to dictate marketplace business conditions… All four of Doug Morris’ divisions are having great years, led, as usual, by Jimmy Iovine’s IAG (which has racked up a jaw-dropping 12% marketshare for the year to date), with L.A. Reid’s IDJ (6.8%), Mel Lewinter’s Universal/ Motown (4.6%) and Luke Lewis’ Nashville operation (2%) also having profitable years in what continues to be a tough climate. It’s worth noting that Iovine’s 12% slice of the pie is as big as all of WMG’s, and more than EMI’s... In the wake of the record-breaking marketshare coming out of the House That Jimmy Built comes word that marketing guru Steve Berman and promo goddess Brenda Romano have been anointed as Co-Presidents of Interscope, joining Jordan Schur (Geffen), Ron Fair (A&M) and Polly Anthony (DreamWorks) on Iovine’s presidential dais... Now that the ink is dry on the Korn-EMI partnership, industry watchers are giving major props to the architect of the deal, The Firm’s Jeff Kwatinetz. They note that this is precisely the new model Kwatinetz has been talking about for several years. To sum up the deal, it puts EMI “in the Korn business,” sharing in all revenue streams through the course of the band’s next two album/touring cycles, in ex-change for an investment those in the know are putting at $25 million. For that investment, EMI gets 30% of the action, but it will recoup as much as half of that $25 million at a faster clip than 30%—close to 100%, say those familiar with the deal… Word that highly sought-after Lava A&R exec Andy Karp has decided to re-up, rather than waiting to see where former boss Jason Flom lands, as Lyor Cohen reconfigures the formerly full-service label as the Reprise to Atlantic’s WB. Also said to be sticking around is Karp’s marketing colleague, Lee Trink. The pair are expected to head up the rock sides of their respective areas of expertise for Atlantic/Lava… As for Flom, some who’ve been in contact with him say that he’s currently in a holding pattern as he and barrister Allen Grubman await the anticipated offers from Morris, Levy/Munns and Andy Lack. Flom will probably take the offer with the most dead presidents, which most believe will come from the EMI camp… Names in the Rumor Mill: Rick Dobbis, Rob Sisco, Andy Gould, Gary Stiffelman and Julie Greenwald.