Warner, Sony Picking Up The Pieces
When Lucian Grainge pulled the rug out from under Sony Music and Warner Music last month with the surprise acquisition of EMI, it left both companies sucking for any leftover oxygen. Warner was counting on picking up EMI at distress prices in order to benefit from economies of scale and provide growth opportunities for the future. Sony and its septuagenarian CEO Doug Morris were blindsided and destined to be the perennial Number Two. Warner Music, continuing to rack up huge losses, is a very distant third with 18.6% of the US market and is a virtual non-entity.
Now sources say that Warner is in serious discussions with Sony Music for a distribution deal, leaving the former major label as little more than a big production company. Even though Warner has a huge hit with Michael Bublé’s Christmas album, that’s really it. Sources say that the upcoming Warner release schedule is as barren as the Mojave Desert and with nothing in the pipeline and only one big holiday seller, the company will eventually be forced to make a lot of cuts. In fact, according to another source, “They’ll [WMG] have to just keep cutting and cutting until finally they just won’t be able to do the job any longer”. Right now it looks as though the company may have a very hard time being competitive.
Sony, of course, will do anything they can to pump themselves up. You just know that the Sony brass is going crazy over the fact that Lucian Grainge has suddenly come out of nowhere to become the undisputed King of the World in what is now a two-horse race. Sony execs may think that cutting a distribution deal with Warner may give them bragging rights to the extra market share when in reality it’s nothing more than scrapping around for crumbs. Every little bit helps, I suppose.
We can discuss the pros and cons of a Sony/WMG distribution deal and Warner’s future after having doubled their losses last quarter, but to what end? The more important question is “How will all of this effect Lyor’s bonus?”