| Bank Notes |
1 December 2003
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Bronfman Buys Warner Music Unit -- Good Deal for New Artists, Sort of
Time Warner wanted out of the music business, and Edgar Bronfman, Jr. wanted back in. So, $2.6 billion changed hands, and everyone is happy -- except for EMI, which opted not to match Bronfman's offer. The surprise winners in this are the artists, and especially new ones.
Mr. Bronfman used to run Universal Music while at Seagram's. He had a reputation for spending on new talent, in particular urban (i.e., hip hop), while cutting out the not-so-profitable acts. Having sunk a load of cash into this business, Mr. Bronfman is ready to start getting some back. That means that he's likely will start cutting costs quickly, and that means getting rid of those performers who haven't performed financially. Then, he'll need some new faces to sell to the public.
Had EMI won out, there would be one less music company offering record deals, and EMI hasn't the same cutting edge reputation (remember, EMI fired the Sex Pistols, as did A&M, before Virgin took them on). Less money for the new kids.
The 800-pound gorilla at the table, though, is the internet. If has never been cheaper for a new band to make itself heard, and it has never been harder for record companies to hold their top line steady. Mr. Bronfman may have entered an industry that, while not quite dying, is in sorry shape and only likely to worsen. If the current trend continues, Mr. Bronfman may be the most generous in the industry for artist development, but he may wind up spending far less than he did at Universal because his revenues have shrunk.
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