Industrial Revolution: Warner Brat'ya

posted in: Features • Music News

Warner Music Group was sold to Russian-American billionaire Len Blavatnik earlier this month for some bootleg Beatles tapes and black-market blue jeans. But seriously, it went for $3.3 BILLION.

How on earth could a record company be valued so highly in this tenuous market, you ask? Warner is, of course, a long-running and highly respected major label (all things being relative). But even that prestige is not enough to explain such a high premium. Indeed, the failing business of selling records is the reason a company like Warner was up for sale in the first place. Still, there are other aspects of Warner that make it so desirable an asset.

Firstly, Warner Music has a highly lucrative publishing arm, Warner/Chappell, with a catalog boasting an incredible array of works by legendary figures from the Gershwins to Van Morrison to Michael Jackson and Madonna. It remains to be seen whether Warner/Chappell is assessed higher as an asset or a commodity to be auctioned off. There is no doubt that these catalogs will continue to steadily generate revenue for the foreseeable future, with little need for business maintenance or risk-taking.

Secondly, Warner (specifically former owner and still CEO Edgar Bronfman, Jr.) and its new owner, Len Blavatnik’s Access Industries, have already been talking loudly about their awareness that the record industry has changed, and that they must change with it. Though Bronfman is said to have acted conservatively in relation to expansion into digital media, recent rhetoric indicates that a shift in direction, perhaps as radical as abandoning physical music formats, could be imminent.

Thirdly, Warner Music is the perfect vehicle for future ventures and acquisitions. Even prior to this sale, it had been speculated that the next item on the auction block would be the troubled, but almost equally respected EMI, which itself has a rich history and valuable publishing catalog, but is in receivership to CitiBank. For anyone looking to become a power player in the music industry, Warner and EMI could be the ultimate one-two punch.

Which brings us to a very likely and familiar fourth reason, which should be considered in combination with any/all of the above, for Warner’s price tag: vanity. Blavatnik made his fortune in oil. The Bronfman family made theirs in whisky (Seagram’s). There is almost certainly a love of the game involved for men like these, and a prime directive to continue making money, but it’s difficult to discount the notion that they were both drawn into the music business for the glamour and the high profile. Blavatnik has previously displayed a similar penchant in ventures into film distribution and fashion. Warner Music, and a potential EMI merger, could turn him from a super-rich but generally unknown businessman into the most powerful man in the music business. Also, still super, super-rich.