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In the midst of this train wreck, Bronfman’s reference to WMG’s “disciplined creative leadership” caused industry watchers to wonder what he’d been smoking.

I.B. BAD ON WHAT’S NEXT FOR WARNER MUSIC

With a Possible Fire Sale Ahead, Which Players Are Most Eager to Open Their Checkbooks for a Piece of the Action?
These are dire days for Warner Music Group, once the pride of the music industry, whose just-issued earnings report for its fourth quarter and fiscal year confirms both the company’s continuing malaise and the inability of Edgar Bronfman Jr. to do anything about it.

In the midst of this train wreck, Bronfman’s reference to WMG’s “disciplined creative leadership” caused industry watchers to wonder what he’d been smoking. Meanwhile, the stock continues to plunge, dragging WMG’s market cap down to the vicinity of $1 billion—an 80% drop from its peak value.

Insiders confirm those rampant rumors about T.H. Lee, Bain, et al. wanting out of their majority stake in the company, and that conversations are taking place between the WMG owners and Guy Hands, who is believed to be readying an offer of $12 a share, extrapolating to a market cap near $2 billion.

If Warner ownership is willing to accept the $12 offer, having wrung all the conceivable profit out of their $2.6 billion investment, Hands will then be in a position to sell off Warner/Chappell Music, which is valued at north of $2 billion by itself, thus getting back his outlay while adding significantly to his holdings in the recorded music sector. Bringing together the vast back catalogs of WMG and EMI would immediately give Hands a prominent seat at the table of what would then become a Big Three, while also holding on to one of the industry’s most consistent revenue generators in the Roger Faxon-led EMI Music Publishing… 

Of course, given the disparity between the current cap and the valuation of Warner/Chappell, Warner’s most logical move would be to sell the publishing company and the recorded music operation to two different entities, thus reaping the benefit of WCM’s perceived value, which remains high to prospective strategic buyers despite the fact that the pubbery is but a shadow of its former self (the result of several years of mismanagement), reinforced by the $2.03 billion UMG paid for BMG Songs.

Most believe that strategic buyer will be Marty Bandier’s Sony/ATV Music. But complicating matters in any buy/sell scenario is the several billion in debt accrued by the current Warner regime, which must then be assumed by the buyer or buyers—as Bronfman continues his track record as one of the most inept executives ever.

AN ASTRONOMICAL
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SPOTIFY WAVES THE ITALIANO FLAG
He does a touching karaoke rendition of "Volare." (5/13a)
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THE BIG CHEESE
Theories of evolution from 30,000 feet.
THE NEXT GIANT DEAL
A&R in overdrive.
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