Are ‘Very Bad Things Ahead’ For Warner Music Group?

Posted by on December 8, 2011

That’s what a recent article on Digital Music News cites a source inside the company as saying.  Warner Music Group was acquired for $3.3 billion by Russian billionaire Len Blavatnik’s Access Industries back in May. Now, according to the source, Blavatnik is having a case of buyer’s remorse. WMG chairman Edgar Bronfman Jr. is exiting the company now, and it looks like he’s only first in a line of planned reshuffling.

Allegedly, Blavatnik found out that the glory of owning a label group might not be worth as much as he paid, with recordings being overvalued, the possibility of core artists renegotiating their contracts and the fact that digital music sales are starting to plateau. In fact, fourth quarter revenue fell 7% at the label group this year, and for the full fiscal year, the label lost $205 million or a 4% decrease. What does this mean for WMG, whose labels include Roadrunner and Atlantic? Quite possibly more will follow Bronfman out the door, specifically, the higher-level executives with 6 figure salaries.

If there’s any silver lining in the WMG cloud, it’s that digital sales actually increased this year, up 3.2% from last year to $820 million. Yet as one of the only three major label groups, Warner finds themselves in a distant third. With Universal’s purchase of EMI, that mega-label group had a 46%  share of album sales in the United States in a recent week. We’ll have to see how this all shakes out, and hopefully there won’t be too much unnecessary bloodshedding at the label group.

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Categorised in: Gloom And Doom, Label Moves