Music Business News from Robert Fripp (King Crimson)
pkeets at hotmail.com
Wed Mar 16 09:07:34 CST 2005
Repost from Robert Fripp's online diary blog. Brief Who reference:
>Sean Fitzpatrick, artist-friendly A&R man, has copied to us an e-mail that
>is doing the rounds of the music biz. To put the letter in context, for
>innocent visitors to the music-industry world of deceit, greed, hubris,
>exploitation & theft, the subject is recent bonuses paid to Warner Music
>executives. From the Financial Times online
Warner Music executives net $21m
by Tim Burt in London
Published: February 20 2005 21:59 Last updated: February 20 2005 21:59
Warner Music, the former subsidiary of Time Warner, paid its top five
executives more than $21m in salary and bonuses following last year's $2.6bn
acquisition of the US music group by a private equity consortium.
The pay-outs include further guaranteed bonuses or change of control
payments at the world's fourth-largest music group, boasting 38,000 artists
including Green Day, Linkin Park and Madonna.
According to documents filed with the US Securities and Exchange Commission,
last year's total executive remuneration was more than three times higher
than Warner Music's $7m operating income for the 10 months to September 30.
In that period, the company reversed previous operating losses of $197m as
sales increased from $2.49bn to $2.55bn.
The management payments reflect Warner's success in cutting costs following
last year's completion of the Time Warner disposal. The company expects to
deliver $250m of annualised savings by May this year, achieved mainly
through 1,600 job losses.
Of the top management, Edgar Bronfman Jr, the chairman who led last year's
buy-out, received a $1m salary and $5.25m bonus. Paul-Rene Albertini, head
of Warner's international operations, was paid $1.25m in salary and a $3.15m
Lyor Cohen, head of the US recorded music business, received $1m and $5.24m
respectively. Les Bider, the veteran chairman of the Warner Chappell music
publishing business, received a $2.44m total payment.
The SEC document, filed as part of a $565m bond exchange offer by Warner
Music, also reveals misgivings by outside auditors over internal accounting
skills and royalty payment systems.
In its "S4" filing, Warner insists it has addressed problem areas such as
appointing a permanent chief financial officer and establishing an audit
But the company admits "additional measures will be necessary and these
measures along with other measures we expect to take to improve our internal
controls may not be sufficient to address the issues identified by our
Warner Music explained that these further measures would involve setting up
financial controls and management systems that were previously handled by
Time Warner, its former parent company, but were absent in the demerged
The weaknesses were identified as Warner Music is considering a potential
initial public offering in the first half of this year, expected to place a
$5bn enterprise value on the company.
The audit concerns do not relate to executive remuneration.
In short, the top five executives at Warner Music received huge bonuses for
reducing costs (achieved by sacking 25% of the workforce).
One of Warner Music's let-go employees wrote an e-letter to Edgar Bronfman
Jr. on the last day of his employment, before moving to Portugal. Sean tells
us he snuck off from his leaving drinks-party back into the office. What
isn't immediately obvious from the message is that man who originally sent
it copied every single Warner Music employee worldwide on it. As a result,
it has spread through the entire industry.
Since this is now effectively public domain, I include the posting in full
From: Anaia, Carlos (WMI, UK)
Sent: 23 February 2005 21:05
To: *WMG ALL (WMG); *WMI - UK - All Users
Subject: Warner Music Bonuses
Dear Mr Bronfman,
Re: the announcement from the Financial Times online last night (and
pointedly not from Warner Communications internally),
On every corporate e-mail ever sent out, it does say that any issues we
have, we can come to you. Well here it is, though in all probability you
will not actually get to see this e-mail.
Today is my last day of working for the Warner Music Group after five years
of hard work for very little recognition and an absolutely laughable salary,
considering that the Warners group used to be one of the mightiest record
labels in the world and has one of the greatest unexploited catalogues left
in the business. However since your acquisition of the Warner Music Group
last year there is probably more exchange of information of what is actually
happening at any level in this company than (sic) at a deaf, dumb and blind
We understand that you took on a huge task to turn around the ailing,
forgotten division of AOL Time Warner, but informing the already
morale-drained staff (via a third party) that the bonuses that the top five
executives took individually equal more than 20 times my total lifetime
salaried income (assuming I started at 18 and retired at 60), is somewhat
more than insensitive. If you want to make us feellike maggots, you
Paul-Rene Albertini gets paid $4 MILLION in total?? Hello !!!? The only
deals we are all aware of have all LOST money. Walt Disney Records?
unrecoupable -it's still more than $15 million in the hole. Milan Records ?
A French turkey. Need I go on? What deals has this guy done that actually
Lyor Cohen - to give his due, he did what he did at Def Jam, hope it works
out for Warners. He should do ..at $5 MILLION. A nice lifestyle guaranteed.
Rhino Records? Since the new order was imposed, Rhino, once the envy of
every record company catalogue division has been DECIMATED.
Everyone of any value and integrity has been sacked and the catalogue is
being whored out to every tin pot reissue cowboy label. We understand you
need the money, but only having eyes on the short-term, easy money is not
very STRATEGIC. $50,000 license fees for heritage artist repertoire?
Big deal, Rhino records as was, would convert that into $500,000 onto our
own bottom line. As you are well aware, catalogue assets are going to become
BIG business in the next 10 years (quite distinct from digital downloads).
We should be investing more time , money and MANPOWER to exploit the best
catalogue repertoire in the world, not starving it into oblivion for the
sake of a short-term buck.
>From the vicious rumour-mill that has replaced hard fact in this company, we
know that Warner is either being leaned down for sale or set for taking over
another three-letter-named label (EMI), with the inevitable blood-bath that
will follow. I am saddened that I am leaving. Music is my life; but I am
also relieved that I get to leave the company before everyone I know and
value for their knowledge, dedication and love of music gets shuffled out of
the door. You would not believe the dedication for this company that exists
at grass-roots level, and though we are the little people - we ALL make a
, carlos.anaia at warnermusic.com
( Tel. +(44) (0)20 7368 2573
4 Fax +(44) (0)20 7368 2773
+ The Warner Building, 28 Kensington Church Street, London W8 4EP UK
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