Warner to fight to keep Madonna
The Financial Times publishes today an article about Warner Music in which Madonna is also mentioned.
Shares in Warner Music fell to a record low on Monday more than 60 per cent below their peak for the year as the last quoted recorded music company became the focus for investors’ bearishness about the industry’s prospects.
Last month’s decision by Warner, which is due to report third-quarter earnings today, to drop its seven-year pursuit of EMI has raised questions about its prospects in the absence of a merger, which could have provided cost-saving opportunities and built a stronger rival to the larger Universal Music and Sony BMG.
Its shares, which peaked at $27.24 late last year, were trading at $10.67, down 3 per cent, on Monday, after analysts at Citigroup lowered their price target from $19 to $10 per share.
Warner is expected to report today that its US market share is at its highest level for a decade, at 20.4 per cent, and its share of revenues coming from digital distribution continues to rise. However, such strengths have been overshadowed by continued bad news about CD sales, still the most important part of the recorded music market, and by concerns that Warner may have to pay up to keep some of its most valuable artists.
Sales of physical formats are down 19 per cent so far this year in the US, Warner’s largest market. Announcements in recent weeks showing that Universal and Sony BMG have increased recorded music sales in the face of these conditions have raised concerns that smaller groups may be suffering disproportionately.
Warner is also understood to be fighting to retain one of its best known artists. Madonna, who is signed to the group for one more studio album and a greatest hits album, is understood to have held talks with Live Nation that could see her record future albums with the concert promoter.
“We’d love to keep her and we’ll make an aggressive bid,” said one person close to Warner. Should Madonna leave Warner, the company would retain her recorded music catalogue and publishing rights but her defection would be a symbolic blow.
The same person denied industry rumours that Warner’s falling share price could trigger a shake-up in its executive ranks. The position of Lyor Cohen, head of its US recorded music business, has been strengthened by chart successes from Linkin Park, Nickelback and Michael Bublé.
Edgar Bronfman Jr, chairman and chief executive, is one of its largest shareholders, having invested in the private equity-backed buy-out from Time Warner in November 2003.
Less than a week after Terra Firma secured control of EMI, Warner executives are still thought to be interested in a combination with EMI Music, should the private equity group decide to sell on the recorded music division, as expected.
However, the downturn in the CD market could make Warner’s investors more wary of investing more in recorded music.
On Monday, the group announced its latest deal to bulk up Warner Chappell, its music publishing business, with the acquisition of Non-Stop Music for an undisclosed sum. Non-Stop has licensed music to films such as Pirates of the Caribbean, Harry Potter and Shrek 3.
Mr Bronfman is expected to tell investors today that healthier areas of the music business, such as publishing, strategic marketing and brand management, are likely to become a growing focus.
Source: The Financial Times
Thanks to our team member Vincy