NEAR TRUTHS:
AT THE INTERSECTION

MAXIMIZING: After Len Blavatnik bought Warner Music Group for $3.3b in 2011, Stephen Cooper was brought in from the financial sector and charged with revamping a business that had been horribly mismanaged. Lyor Cohen left the company and subsequently joined YouTube. Without going too far down a historical rabbit hole, since the ’90s, Warner—which had been one of the two biggest label groups during its glory days—had diminished, due to predatory and incompetent leadership, to a distant third behind UMG and Sony. In 2009, the current marketshare of Warner Bros./Reprise/Sire, Atlantic and Elektra combined had shrunk from a high of a 25 share to less than 10, lower than Interscope’s. The company (which had never had a global focus hitherto) simply didn’t have the scale of the bigger groups.

But Cooper got to work, and Max Lousada came in to fill the void left by Lyor. Both men were dedicated to making WMG a global company. Lousada has done a markedly better job than his predecessors, overseeing dramatic growth overall, the successful resurrection of Warner (Zach Bryan has been a game-changing career act) and Atlantic and big strides in Latin and country, among other sectors. Twelve years later, all boats have been lifted by the rising tide of the streaming economy, which has driven steady double-digit growth, and WMG has a market cap of $16.4b.

There’s been considerable chatter about Lousada in the 10 months since Robert Kyncl came in as Cooper’s successor. Though some growing pains have emerged, oddsmakers now believe the relationship between chief Kyncl and Lousada is on solid ground as they continue to lean into one another’s styles and get into their groove.

Lousada has one of the top gigs in the business—he makes big money, has huge stature and is well-liked by the artist community and its reps. He lives in London and hosts music royalty at his redoubt in Ibiza. If he left, his would not be an easy position to fill. All of which underscores why most of the chatter about Lousada appears to be smoke. He’s too young and ambitious to retire and hasn't finished squaring the circle quite yet. What’s more, he and Kyncl have an increasingly symbiotic relationship. Without a thriving music division, Kyncl knows he’d have a hard time making his tech-based vision successful.

The WMG chief has spent two decades—12 years at YouTube and seven at Netflix—at the booming intersection of technology and media, and his mantra is to grow WMG’s existing business via technological development. So Warner is once again being led by an exec from outside the music world, and that’s made this year a bit bumpy—the changes made by the new regime have left the creative music leadership feeling somewhat underappreciated, as they believe the jet fuel of the entire business is provided by big hit records with global appeal.

Kyncl is assembling his technology team from Google players and other digital-media hotshots, forging a new system within WMG that is intended to take data analysis, distribution and fan engagement to a new level. This massive investment in tech has evoked whining from some corners about the redeployment of resources, especially as said redeployment is resulting in some overhead and body-count reductions for the first time in many years.

However, tech-savvy insiders believe this investment will ultimately empower the music team with the tools it will afford; they also note that given WMG’s relatively small size compared to the other majors, Kyncl is aware of the importance of spending smart as opposed to spending big. Shedding some unproductive deals made by the prior administration over the last decade has also been helpful in this pivot and opens up space for more-targeted partnerships.

The deal for Elliot Grainge’s 10K brings, among other benefits, an infusion of youth into the recorded-music side of the company. This year saw another young player enter the WMG universe—Len Blavatnik’s 25-year-old son, Val, who joined the board this spring after serving for a few years on the investment team at LionTree, where he sharpened his strategic financial chops. Now, besides serving on the WMG board, he’s spending time at Warner Chappell, exploring opportunities to expand that fabulous catalog. He’s shown interest in the music group and is representative of the youth movement taking shape within Warner's walls. Speaking of the company’s publishing wing, WCM—thanks to shrewd A&R and innovative exploitation of the aforementioned catalog—may not be the biggest of the pubcos, but it is definitely punching above its weight.

All of this comes at a time when the Atlantic label group is experiencing its first extended cold streak since the advent of the streaming era. Most insiders see this as a temporary problem and expect that the storied label will turn this situation around soon. Rumors of retirement by top Atlantic execs don’t appear particularly credible but look instead to be another manifestation of the blue flu as music players push back on Kyncl’s major reallocation in a passive-aggressive fashion—amid self-serving rumors that key WMG execs plan to leave to join Lyor Cohen in the LionTree-funded takeover of Ghazi’s EMPIRE. Most believe Ghazi is not a seller, but big checks have changed other people’s minds. Bankers say EMPIRE has a valuation in the neighborhood of $1.5b.