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Given the presently unsettled hierarchy at EMI and the limited pool of proven executive talent, Sperling’s white knight could conceivably appear in the familiar form of Roger Ames and/or Tony Wadsworth.
I.B. BAD ON WMG: TAKING STOCK
A Badly Outmanned Front Office Fiddles While Wall Street Burns
Baby, it’s cold inside.

Merrill Lynch analyst Jessica Reif Cohen’s upgrade of Warner Music stock to “buy,” with a target price of a mere $6.50, indicates just how pathetic the situation at the once-proud music group has become under the mismanagement of Edgar Bronfman Jr.

The latest report from Pali’s Rich Greenfield focuses on Bronfman’s covert acquisition of money-hemorrhaging Bulldog Entertainment—the only plausible rationale being to enhance his social standing in the Hamptons—reinforcing the embattled Warner Music chief’s status as industry laughingstock. Making things worse are rumors that Bulldog was the company that wrote the $400k check for Lyor Cohen’s Knicks courtside tickets to a music executive who is an alleged Bulldog consultant.

Considering Bronfman’s seeming inability to do anything right, Greenfield and others are publicly asking why he hasn’t been fired, concluding that his removal, along with the axing of chief henchman Lyor Cohen, is the only way to turn around WMG’s free-falling stock, thus providing the company’s private-equity owners a way out of the mess they now find themselves in.

As the Warner situation continues to worsen, many are asking why T.H. Lee’s Scott Sperling still hasn’t made good on his promise at the outset to the acquisition: “The deal with Edgar is, he does a good job or someone else comes in to do a good job.”

The industry consensus is that Bronfman remains as clueless about the music business as the day he entered it; indeed, many of those who worked with the Seagram heir at MCA/Universal still consider him to be fundamentally incapable of running a record company, pointing to the systematic scuttling of WMG as incontrovertible evidence of Bronfman’s incompetence.

Further evidence is his desperate desire to keep Cohen, who is clearly over in the eyes of most, while many of his onetime co-workers think that he never had it to begin with. They attribute the success of Def Jam not to Cohen, but to Russell Simmons, noting that Cohen not only lacked creative chops but also surrounded himself with mediocre executive talent.

Why, then, does Bronfman insist on keeping him, and if that is the case, what is the problem with getting his deal done?

Insiders say that Cohen’s current exit package is far greater than what is being proposed under a new deal being offered by the WMG board, and that Cohen is balking at signing the new deal, having concluded that the present regime has no prayer of righting the sinking ship.

Bronfman has also told the board that Cohen’s exit package, combined with those for his key people, who would also need to go if Cohen was not re-upped, is simply too big a number, and new deals with mitigated exit packages for all is the only way to play it.

Meanwhile, Bronfman is said to be going around to banks, hat in hand, hoping to persuade them to buy now that the stock is so cheap, but so far no takers—not with him running the company.

Who, then, should run WMG? Given the presently unsettled hierarchy at EMI and the limited pool of proven executive talent, Sperling’s white knight could conceivably appear in the familiar form of Roger Ames and/or Tony Wadsworth.

Strange times indeed.

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