Warner Music Group

Warner Music Group Corp.

Type	Public (NYSE: WMG)
Industry	Music & Entertainment
Founded	1958 (as Warner Bros. Records) 1971 (as WEA) 2004 (as WMG)
Headquarters	New York, United States
Key people	Edgar Bronfman, Jr.: Chairman & CEO Lyor Cohen: North American Chairman & CEO Michael Fleisher (Michael D. Fleisher): Vice Chairman
Revenue	$3.491 Billion (USD; 2009)[1]
Net income	$56.0 Million (USD; 2009)
Employees	4,000 (as of 2008)
Website	WMG.com

Warner Music Group is the third largest business group and family of record labels in the recording industry, making it one of the big four record companies. The current incarnation of the company was formed in 2004 when it was spun off from Time Warner, and as a result, Time Warner no longer retains any ownership. Warner Music Group also has a music publishing arm called Warner/Chappell Music, which is currently one of the world's largest music-publishing companies.

Key People

Edgar Bronfman Jr. - Chairman and CEO
Lyor Cohen - Vice Chairman and Chairman and CEO, Recorded Music - Americas and the U.K.
David H. Johnson - Chairman and CEO
Michael Fleisher (Michael D. Fleisher) - Vice Chairman, Strategy and Operations
Michael Nash - Executive Vice President, Executive Vice President, Digital Strategy and Business Development

History

1950s and 1960s

WMG is the only one of the big four record companies that cannot trace its ancestry to either the Columbia Phonograph Company or Berliner Gramophone. WMG's roots date back to the founding of Warner Bros. Records as a division of the Warner Bros. movie studio in 1958, in reaction to one of its contracted actors, Tab Hunter, scoring a hit for Dot Records, a division of Paramount Pictures. In 1963, Warner Bros. purchased Reprise Records, founded by Frank Sinatra three years earlier so that he could have more creative control over his recordings. Reprise was operated in conjunction with Warner Bros. Records. With the Reprise acquisition, Warner gained the services of Mo Ostin who would be most responsible for the success of Warner/Reprise.

It opened its Canadian unit in 1967 as Warner Reprise Canada Ltd, now called Warner Music Canada Ltd.^[1]

After Warner Bros. was sold to Seven Arts Productions in 1967 (forming Warner Bros.-Seven Arts), it purchased Atlantic Records (founded in 1947), now WMG's oldest label.

In 1969, Warner Bros.-Seven Arts was sold to the Kinney National Company. Kinney (later to be known as Warner Communications) combined the operations of all of its record labels.

Although an earlier attempt by Warner Bros. Records to create an in-house distribution arm in 1958 had failed, during 1969 Elektra Records boss Jac Holzman approached Atlantic's Jerry Wexler with the idea of setting up a joint distribution network for Warner, Elektra and Atlantic, and an experimental branch was established in Southern California as a possible protoype for an expanded operation.^[2] In the summer of 1969, Atlantic Records agreed to assist Warner Bros in establishing overseas divisions, but rivalry between the labels was still a factor—when Warner executive Phil Rose arrived in Australia to begin setting up an Australian subsidiary, he discovered that only one week earlier Atlantic had signed a new four-year distribution deal with a local label, Festival Records.

During the 1970s, the Warner group built up a commanding position in the music industry. In 1970, it bought Elektra (founded by Holzman in 1950) for US$10 million, bringing in leading rock acts including The Doors, Tim Buckley, and Love and its historically significant folk archive along with the successful budget Western classical-music label Nonesuch Records. The same year, the group established its first overseas offices in Canada and Australia. By that time "Seven Arts" was dropped from the Warner Bros. name. By late 1972, US anti-trust laws had changed and the company was renamed WEA Corp. (from the first initial of each of the three main labels, Warner Bros., Elektra and Atlantic).

Atlantic, its subsidiary Atco Records and its affiliate Stax Records paved the way for Warner's rise to industry prominence. The purchase brought in Atlantic's lucrative back-catalogue, which included classic recordings by Ray Charles, The Drifters, The Coasters and many more, and in the mid Sixties, Atlantic/Stax released a string of landmark soul music recordings by artists including Booker T & the MGs, Sam & Dave, Wilson Pickett, Otis Redding, Ben E. King and Aretha Franklin. But the sale led to Stax leaving the Atlantic fold because the new Warner owners insisted on keeping the rights to Stax recordings. However, Atlantic also moved decisively into rock and pop in the late 1960s and 1970s, signing major British and American acts including Led Zeppelin, Cream, Crosby Stills & Nash, Yes, Average White Band, Faces, Dr John, King Crimson, Bette Midler, and Foreigner.

Atlantic exerts autonomy

It was soon apparent in 1969 that Atlantic/Atco president Ahmet Ertegun viewed Warner/Reprise president Mike Maitland as an antagonist. Maitland believed that, as vice-president in charge of the Warner-Seven Arts music division, he should have final say over all recording operations, and he further angered Ertegun by proposing that most of Atlantic's back-office functions (such as accounting and distribution) be combined with the existing departments at Warner/Reprise. In retrospect Ertegun clearly feared that Maitland would ultimately have more power than him and so he moved rapidly to secure his own position and remove Maitland.

Maitland had put off renegotiating the contracts of Joe Smith and Mo Ostin, the presidents of the Warner Bros and Reprise labels, and this provided Ertegun with an effective means of undermining Matitland. When Wexler—now a major shareholder—found out about the contract issue he and Ertegun began pressuring Elliot Hyman to get Smith and Ostin under contract, ostensibly because they were worried that the two executives might move to rival labels—and in fact Ostin had received overtures from both the MGM and ABC labels.

In 1969, the wisdom of Hyman's investments was proved when Kinney National Services purchased Warner-Seven Arts for $400 million—more than eight times what Hyman had paid for Warner/Reprise and Atlantic combined. From the base of his family's funeral parlour business, Kinney president Steve Ross had rapidly built the Kinney company into a profitable conglomerate with interests that included comic publishing, the Ashley-Famous talent agency, parking lots and cleaning services. Following the takeover, Warners' music group briefly adopted the 'umbrella' name Kinney Music, because U.S. anti-trust laws at the time prevented the three labels from trading as one; once resolved, Kinney rebadged the film and music group Warner Communications Inc.

Ross was primarily focused on rebuilding the company's ailing movie division and was happy to defer to the advice of the managers of the company's record labels, since he knew that the they were generating most of the group's profits. Ertegun's campaign against Maitland began in earnest that summer. Atlantic had agreed to help Warner Bros in its efforts to establish its labels overseas, beginning with its soon-to-be-established Warner Bros subsidiary in Australia, but when Warner executive Phil Rose arrived in Australia, he discovered that just one week earlier Atlantic had signed a new four-year distribution deal with a rival local label, Festival Records (owned by Rupert Murdoch's News Limited). Mike Maitland complained bitterly to Kinney executive Ted Ashley, but to no avail^[3] -- by this time Ertegun was poised to make his move against Maitland.

As he had with Hyman, Ertegun urged Steve Ross to extend Mo Ostin and Joe Smith's contracts, a recommendation Ross was happy to accept. Ostin however had received overtures from other companies including MGM Records and ABC Records and when he met with Ertegun in January 1970 and was offered Maitland's job, he was unwilling to re-sign immediately. In response, Ertegun broadly hinted that that Maitland's days were numbered and that he, Ertegun, was about to take over the recording division.

Ostin was understandably concerned that, if he accepted the position, the Warner Bros staff would feel that he had stabbed Maitland in the back, but his attorney convinced him that Maitland's departure was inevitable, regardless of whether or not he accepted the post (succinctly advising him, "Don't be a schmuck"). On Sunday January 25, Ted Ashley went to Maitland's house to tell him he had been dismissed, and Maitland declined the offer of a job at the movie studio. One week later, Mo Ostin was named as the new President of Warner Bros Records, with Joe Smith as his Executive Vice-President.^[4] Ertegun nominally remained the head of Atlantic, but since both Ostin and Smith owed their new positions to him, Ertegun was now the de facto head of the Warner music division. Maitland moved to MCA Records later that year and successfully consolidated MCA's labels which he couldn't do at Warner.

1970s

In 1970, Kinney paid $10 million for Jac Holzman's Elektra Records and its sister label Nonesuch Records, and they eventually assembled the labels into a group known as Warner-Elektra-Atlantic, also called WEA for short, which was renamed Warner Music in 1991 (the word "group" was added after the formation of AOL Time Warner). With the Elektra acquisition, the next step was forming an in-house distribution arm for the co-owned labels. By this time, Warner-Reprise's frustrations with its current distributors had reached breaking point; Joe Smith (then Executive Vice-President of Warner Bros) recalled that The Grateful Dead were breaking as a major act but the distributor was constantly out of stock of their albums. These circumstances facilitated the full establishment of the group's in-house distribution arm, initially called Kinney Records Distributing Corporation.^[5]

The purchase of Elektra-Nonesuch brought in more prestigious additions to the Warner catalogue including The Doors, Judy Collins, The Stooges and Elektra's rich back catalogue of folk music as well as the renowned Nonesuch catalogue of classical and world music. Elektra founder Jac Holzman ran the label under Warners for two years, but by that time, he was by his own admission 'burnt out' after twenty years in the business. Kinney president Steve Ross subsequently appointed Holzman as part of a seven-person 'brains trust' tasked with investigating opportunities presented by new technologies, a role Holzman was eager to accept.^[6]

In 1971, Atlantic executive Nesuhi Ertegun founded WEA's global subsidiary WEA International. The WEA name was also used as a label outside the U.S., opening its first international offices in Australia, Britain and Japan in 1971, followed by branches in Germany, France and Canada.^[7] Ertegun, a Turkish native, displayed a global perspective and independence from its U.S. counterpart by successfully promoting international acts in their target markets world wide. Ertegun headed WEA International until his retirement in 1987.

In April 1971, thanks mainly to the influence of Ahmet Ertegun, the Warner group announced a major coup with its acquisition of the worldwide rights to The Rolling Stones' new label Rolling Stones Records, following the expiration of the band's contract with Decca Records and the acrimonious end to their business relationship with controversial former manager Allen Klein. Under the terms of the deal, Atlantic subsidiary Atco would distribute the Stones' recordings in the USA, with other territories mainly handled by Warner Bros international divisions.^[8]

One of the Warner group's wisest investments was Fleetwood Mac. The band signed to Reprise in the early 1970s after relocating to the USA and the label supported them through numerous lineup changes and several lean years during which the band's records sold relatively poorly, although they remained a popular concert attraction. Ironically, after their transfer to Warner Bros in 1975 and the recruitment of new members Lindsay Buckingham and Stevie Nicks, the group scored a major international hit with the breakthrough single "Rhiannon" and consolidated with the blockbusting albums Fleetwood Mac, Rumours and Tusk, becoming one of the most successful bands of all time.

In 1972, the Warner group acquired another rich prize, David Geffen's Asylum Records. The $7 million purchase brought in several very important acts who would prove crucial the Warner group's subsequent success, including Linda Ronstadt, The Eagles, Jackson Browne, Joni Mitchell and later Warren Zevon. On the downside, however, it was rumoured that Warners was soon concerned about their possible liability under the California State Labor Code because of Geffen's questionable status as both the manager of most of the Asylum acts and the head of the record label to which they were signed. The sale included the Asylum Records label and its recordings, as well as Geffen's lucrative music publishing assets and the interests in the royalties of some of the artists managed by Geffen and partner Elliot Roberts. Geffen accepted a five year contract with WCI and turned over his 75% share in the Geffen-Roberts management company to Roberts and Warners paid Geffen and Roberts 121,952 common shares worth $4,750,000 at the time of the sale, plus $400,000 in cash and a further $1.6 million in promissory notes convertible to common stock.^[9]

Although it seemed a lucrative deal at the time, Geffen soon had reason to regret it. Uncharacteristically, he had greatly underestimated the value of his assets—within Asylum's first year as a Warner subsidiary, albums by Linda Ronstadt and The Eagles alone had earned more than the entire value of the Asylum sale. Geffen's discomfort was compounded by the fact that, within six months of the sale, the value of his volatile Warner shares had plummeted from $4.5 million to just $800,000. He appealed to Steve Ross to intervene, and as part of a make-good deal, Ross agreed to pay him the difference in the share value over five years. Acting on Jac Holzman's suggestion that Kinney should take Asylum from Atlantic and merge it with Elektra, Ross then appointed Geffen to run the new combined label.^[10]

In 1976, Warner gained a brief early lead in digital media when it purchased the Atari computer company, and in 1981 it bought the Franklin Mint novelty company. WCI also blazed the trail in visual music with MTV, which it created and co-owned in partnership with American Express. In 1984-85, Warner rapidly divested many of these recent acquisitions, including Atari, Franklin Mint, Panavision, MTV Networks and a cosmetics business.

New signings in the late 1970s placed the Warner group in a strong position for the 1980s. A deal with Seymour Stein's Sire Records label (which Warner Bros. Records later took over) brought in several major New Wave acts including The Pretenders, The Ramones and Talking Heads and, most importantly, rising star Madonna; Elektra signed The Cars and Warner Bros. signed Prince, giving WEA several of the biggest-selling acts of the decade.

WEA's labels also distributed a number of otherwise independent labels. For example, Warner Bros. distributed Straight Records, DiscReet Records, Bizarre Records, Bearsville Records, and Geffen Records (the latter was sold to MCA in 1990). Atlantic Records distributed Swan Song Records.

1980s

A proposed 1983 international merger between Polygram and WEA was forbidden by both the US Federal Trade Commission and Germany's cartel office, so Polygram's half-owner Philips then purchased a further 40% of the company from its partner Siemens, and bought the remaining shares in 1987. The same year, Polygram divested its film and publishing operations, closed Polygram Pictures and sold Chappell Music to Warner for US$275 million. In 1988 WEA took over the prestigious German classical label Teldec and the UK Magnet Records label.

In 1989, it was announced that Warner Communications was to merge with Time Inc. to form Time Warner, a transaction that was completed in 1990.

Also in 1989, WCI's fortunes changed dramatically when the group was purchased for US$14 billion by the Time-Life media empire, creating Time Warner. Following the takeover, WEA continued acquiring independent labels, buying CGD Records (Italy) and MMG Records (Japan) in 1989.

1990s

Through the 1990s, Time Warner was the largest media company in the world, with assets in excess of US$20 billion and annual revenues in the billions of dollars; by 1991, Warner's music labels were generating sales valued at more than US$3 billion, with operating profits of $550 million^[11] and by 1995 its music division dominated the US music industry with a 22% share of the domestic market.^[12] Acquisitions and corporate changes within the Warner group of labels continued after the Time Warner merger—in 1990 WEA purchased French label Carrere Disques, WEA was renamed Warner Music in 1991, leading French classical label Erato (1992) and in 1993 WEA bought the Spanish DRO Group, Hungary's Magneoton label, the Swedish Telegram Records, Brazil's Continental Records and Finnish label Fazer Musiiki.

Atlantic launched two new subsidiary labels in the early 1990s: EastWest Records (which absorbed Atco Records) and Interscope Records. The former was later absorbed into Elektra, and the latter was also sold to MCA in 1995.

During 1992, the Warner Music Group faced one of the most serious public relations crises in its history when a major controversy erupted over the provocative Warner Bros recording "Cop Killer" from the self-titled album by Body Count, a heavy metal/rap fusion band led by Ice-T. Unfortunately for Warners, the song (which mentioned the Rodney King case) was issued just before the controversial acquittal of the police charged with King's beating, which sparked the 1992 Los Angeles Riots and the confluence of events put the song under the national spotlight. Complaints escalated over the summer—conservative police associations called for a boycott of Time Warner products, politicians including President George W. Bush denounced the label for releasing the song, Warner executives received death threats, Time Warner stockholders threatened to pull out of the company and the New Zealand police commissioner unsuccessfully tried to have the record banned there. Although Ice-T later voluntarily reissued Body Count without "Cop Killer", the furore seriously rattled Warner Music and in January 1993 the label made an undisclosed deal releasing Ice-T from his contract and returning the Body Count master tapes to him.^[13]

In 1994, Canadian beverage giant Seagram bought a 14.5% stake in Time Warner, and the Warner publishing division—now called Warner/Chappell Music -- acquired CPP/Belwin, becoming the world's largest owner of song copyrights and the world's largest publisher of printed music. In 1996, Time Warner made another dramatic expansion of its media holdings, taking over the Turner Broadcasting System, which by then included the Turner cable TV network, CNN and the screen production houses Castle Rock Entertainment and New Line Cinema, acquisitions which would bring huge profits into the Warner Group thanks to content assets like Seinfeld and the colossally successful Lord of the Rings film trilogy.

By the early 1990s, senior Warner staff like Ostin and Waronker had remained in their positions for several decades—a highly unusual situation in the cutthroat world of the American music industry—but the death of Steve Ross destabilized the Time Warner hierarchy, and over the next few years the music group was increasingly disrupted by internal power struggles, leading to a string of major executive upheavals in 1994-95 which The New York Times described as "a virtual civil war".^[14]

The central conflict was between Mo Ostin and Warner Music Group chairman Robert Morgado, who had joined the Warner group in the late 1980s. Because of his political background (he had been the chief-of-staff to former New York Governor Hugh L. Carey) and his lack of music industry experience—especially compared to the widely-revered Ostin—Morgado was viewed as an outsider at Warner. Nevertheless, he gained favour with Ross and Levin and was promoted in 1985 to oversee the Warner international music division after helping the company slash costs in its computer game sector.^[15]

Since his appointment as head of WBR, Ostin had always reported directly to Steve Ross and Ross's successor Gerald Levin, but in late 1993, when Ostin's contract came up for renewal, Morgado asserted his authority, insisting that Ostin should now to report directly to him. The tensions between them reached boiling point in July 1994 when Morgado appointed former Atlantic chief Doug Morris to head the Warner Music Group in the USA, a decision that many saw as a deliberate move to hasten the departure of Ostin and Elektra head Robert Krasnow.^[16] Morgado's new structure was announced in August 1994 and Bob Krasnow resigned from Elektra the next day. Within days, after more than 30 years with the Warner music group and more than 20 years as President and Chairman of Warner Bros. Records, Ostin announced he would not renew his current contract and would leave Warners when it expired on 31 Dec. 1994. There was more negative publicity the following month, when top Elektra act Metallica launched a lawsuit against the label, seeking a release from their contract and ownership of their master tapes, and claiming that Morgado had refused to honour a deal they had worked out with Krasnow before he quit.

Ostin's departure marked a seismic shift in the corporate culture at WBR and the news was greeted with dismay by industry insiders and the many artists whose careers he had helped to nurture. Lenny Waronker had agreed to take over as WBR Chairman and CEO but in October 1994 he announced that would not be taking up the position; he initially said that he would remain as President of WBR^[17] but by this time there was already widespread speculation that he would leave, and he did so soon after. The following year he re-joined Ostin and son Michael as joint head of the newly launched DreamWorks Records label.^[18]

Beginning in August 1994, Morgado alienated Morris by his clumsy handling of Warner's relationship with Interscope Records, the successful label founded by Ted Field and Jimmy Iovine and part-owned by Warner. Morgado had resisted making a decision about increasing the Warner stake in Interscope, which encouraged other companies to make overtures to the label; in response, Morgado threatened to send cease-and-desist notices to executives at several record companies, demanding that they stop approaching Interscope with buyout offers, a move that reportedly infuriated Iovine.^[19]

By late 1994, Morris was gaining the upper hand over his rival and media reports claimed that Morris had moved to settle with Metallica, offering a deal that was reportedly even more generous than the one they had worked out with Krasnow. Morgado now faced a showdown with Morris, who felt he was not being allowed to run WMG as he saw fit. In October 1994, Morris and 11 other Warner executives "staged an unprecedented insurrection that nearly paralyzed the world's largest record company".^[20] This led to a climactic meeting between Morris and Gerald Levin in late October, at which Morris reportedly threatened to quit if he had to continue to report to Morgado^[21].

Morgado gave in to the demand that Morris be granted autonomy to run the North American operations and he was forced to upgrade Morris' position from Chief Operating Officer to Chief Executive of Warner Music Group (USA); Morris promptly named Danny Goldberg, former president of Atlantic Records, to run WBR in defiance of Morgado, who had a different candidate in mind^[22] and Levin also reduced Morgado's power to oversee Warner's mail-order record club division and its international operations.^[23] Morris then brought in Sylvia Rhone and Seymour Stein to stabilize Elektra, settled the Metallica lawsuit and persuaded Levin to purchase an additional 25% of Interscope,^[24] although this initiative proved short-lived.

The power struggle between Morgado and Morris reached a dramatic climax in May 1995 when Morgado was asked to resign by Gerald Levin, following a welter of complaints from executives at the three major Warner Music labels, who said that Morgado was undermining Morris' authority and damaging Warner's reputation among performers.^[25] Morgado was immediately replaced by HBO chairman Michael J. Fuchs but the corporate upheavals did not end there; in late June 1995 Fuchs abruptly dismissed Doug Morris, saying that Morris had been "leading a campaign to destabilize Warner Music in an effort to seize control of the company". As Morris' strongest ally, Danny Goldberg was also under threat; he was initially told that he could stay on as President of WBR as long as he refrained from office politics and concentrate on the day-to-day management of the label, but he resigned as President of Warner Bros. Records soon after to pursue "other interests", and was replaced by WBR Vice-Chairman Russ Thyret.

Despite early success with Dr Dre and Snoop Dogg, and Morris' decision to increase Warner's stake to 50%, by the mid-1990s Interscope Records was being seen as a liability for the Warner group. Time Warner's board and investors had already been bruised by the damaging 1992 "Cop Killer" controversy and now they were faced with renewed criticism about the gansta rap genre, in which Interscope's associate imprint Death Row Records was a key label. In mid-1995, Time Warner refused to distribute the Interscope album Dogg Food by Tha Dogg Pound, forcing the label to seek outside distribution, and in late in the year TW sold its stake in Death Row back to co-owners Jimmy Iovine and Ted Field^[26] and soon after it sold off its share in Interscope to MCA Music Entertainment.

The upheaval at Warner was beneficial to its rivals, who picked up valuable executives who had left Warner. Goldberg moved over to Mercury Records; Morris joined MCA Music Entertainment Group and led its reorganization into Universal Music Group, now the world's largest record company. In November 1995, Fuchs was himself sacked by Gerald Levin, leaving the company with a reported US$60 million "golden parachute",^[27] and Time Warner co-chairmen Robert A. Daly and Terry S. Semel took over the running of the music division.^[28][29]

In 1998, Seagram boss Edgar Bronfman Jr. held talks aimed at merging Seagram's Universal Music, headed by Morris, with the venerable British recording company EMI, but the discussions came to nothing; Bronfman then oversaw Universal's takeover by Vivendi. WEA meanwhile continued to expand its publishing empire, buying a 90% stake in the Italian recording and music publishing group Nuova Fonit Cetra.

2000s

In 2000, Time Warner merged with leading American internet service provider AOL to create AOL Time Warner. The new conglomerate again tried (and failed) to acquire EMI, and subsequent discussions about the takeover of BMG stalled, with Bertelsmann eventually offloading BMG into a joint venture with Sony. In 2002, AOLTW further consolidated its hold over the publishing industry, buying 50% of music publisher Deston Songs from Edel music AG. By the early 2000s, however, the effects of the dot-com crash had eroded AOL's profits and stock value, and in 2003 the Time Warner board sidelined its under-performing partner by dropping AOL from its business name.^[30]

Looking to reduce its debt load, Time Warner—the corporate successor to Warner Communications—sold Warner Music Group in 2004 to a group of investors led by Edgar Bronfman Jr. for US$2.6 billion. This spinoff was completed on February 27, 2004. In the 2004 transition to independent ownership, WMG hired record industry heavyweight Lyor Cohen from Universal Music Group (the result of the merger between the PolyGram and MCA label families) to attempt to reduce cost and increase performance. Contrary to common belief, Time Warner no longer retains any ownership in WMG, though it had the option to re-acquire up to 20% of WMG for three years following the closing of the transaction.^[31] WMG's current logo is the former Warner Communications logo and is used under license by its former parent, which retains full ownership and control of the Warner trademarks.^[32]

The Warner music group currently trades as Warner Music Group and is structured in three main units: recording, licensing and publishing. It has thirty-seven affiliates and numerous licensees in over fifty countries, and operates on every continent (except Antarctica). Its major record labels include Atlantic, Bad Boy, Elektra, Erato, Lava, Maverick, Nonesuch, Reprise, Rhino, Sire, Teldec, Warner Bros. and Word. Its music publishing division, Warner/Chappell Music, is currently the largest music publisher in the world, with a catalogue of over one million song copyrights. As of October 2005 WMI had 84,000 employees, US$42 billion in annual revenue and a market valuation of US$82 billion.

Once free of Time Warner, WMG began cutting costs by offloading loss-making or low-earning divisions. Like its rival EMI, Warner reacted to the growth of the digital music market by making a historic change, moving out of record production by closing or selling off disc-pressing plants, particularly in territories such as the USA and the Netherlands, where production costs are high. The US manufactuiung operations were sold to Cinram in 2003, before the purchase from Time Warner.

In 2005, the Miami-based Warner Bros. Publications, which printed and distributed a broad selection of sheet music, books, educational material, orchestrations, arrangements and tutorials, was sold to Alfred Publishing, although the sale excluded the print music business of WMG's Word Music (church hymnals, choral music and associated instrumental music).

On May 3, 2006, WMG apparently rejected a buyout offer from EMI.^[33] Then WMG offered to buy EMI and it also rejected the offer. In August 2007, EMI was purchased by Terra Firma Capital Partners.^[34] Talk of a possible WMG acquisition of EMI was fanned once again in 2009 after WMG executed a bond offering for $1.1 billion, which brought to light WMG's relatively strong financial position, which was contrasted with the weakened and debt-laden state of EMI.^[35] The same year WMG acquired Rykodisc and Roadrunner Records.

On December 27, 2007, Warner announced that it would sell digital music without Digital Rights Management through AmazonMP3, making it the third major label to do so.^[36] In 2008, the New York Times reported that WMG's Atlantic Records became the first major record label to generate more than half of its music sales in the U.S. from digital products.^[37]

In 2007, Warner/Chappell sent a Cease and Desist letter to Walter Ritter, the creator of a freeware program called PearLyrics that was used to find lyrics of songs using the internet. In response to wide negative publicity, it subsequently apologized and offered to cooperate with him on the application. However, no subsequent overtures seem to have been made, and the software remains unavailable.^[38]

WMG was the first major media company to form a strategic relationship with YouTube, effectively embracing a business model around user-generated content. The arrangement with YouTube required that royalties be paid based on the number of views that videos featuring music from WMG artists received. However in December 2008, negotiations between the two companies broke down, and as a result, clips on YouTube featuring WMG music recordings have had their audio removed or blocked completely and replaced with a message indicating copyright infringement.

In 2008, WMG, Universal Music, Sony BMG, EMI, and several Indies (via Merlin) together with the Orchard licensed their full back catalogs to the new concept of Spotify in order to fight piracy with a legal way of music streaming.^[39] However, in February 2010, WMG announced that it would no longer be licensing music for Spotify and other free streaming services, claiming that they were "clearly not positive for the industry".^[40]

Music publishing

Warner/Chappell Music dates back to 1811 and the creation of Chappell & Company, a sheet music and instrument merchant in London. In 1929, Jack Warner, president of Warner Bros. Pictures Inc., founded Music Publishers Holding Company (MPHC) to acquire music copyrights as a means of providing inexpensive music for films and, in 1987, Warner Bros.' corporate parent, Warner Communications, acquired Chappell & Company. Its printed music operation, Warner Bros. Publications, was sold to Alfred Publishing on June 1, 2005.

Among the historic compositions of which the publishing rights are controlled by WMG are the works of Cole Porter, Richard Rodgers and Lorenz Hart. In the 1930s and 1940s, Chappell Music also ran a profitable orchestration division for Broadway musicals, with house arrangers of the caliber of Robert Russell Bennett, Don Walker, Ted Royal and Hans Spialek. Between them they had orchestrated 90 percent of the productions seen up to the war years.^[41]

List of Warner labels

Controversy

In December 2008, negotiations between WMG and YouTube broke down.^[42] As a result, Warner Music Group has continuously blocked or muted videos on YouTube that feature music recordings belonging to its labels or to its publishing arm, Warner/Chappell Music, citing copyright infringement. Although the majority of the blocked videos are not official content of WMG, they include WMG recordings in a minor way normally covered by Fair Use. Many of these claims to copyright violation not only affect artists who are under record labels owned or distributed by WMG, but also to artists who have songs published and controlled by Warner/Chappell, regardless of label. This makes the association between non-WMG artists and WMG much less apparent to YouTube users as music publishers, unlike record labels, generally do not brand themselves to their recordings. Muting also occurred to clips featuring people covering a song by a WMG artist or of a song controlled by Warner/Chappell. The response from YouTube users on affected videos has been overwhelmingly negative towards WMG.^[43] Notably, Seattle band Death Cab for Cutie was affected when music videos streamed on their website from their Atlantic Records albums Plans and Narrow Stairs were removed by WMG.^[44] The issue and opinion of WMG has since worsened when they began removing and muting songs that are covers rather than just recordings.

With the rise of music video games, CEO Edgar Bronfman Jr. complained that "The amount being paid to the music industry, even though [these] games are entirely dependent on the content we own and control, is far too small", and he concluded that "we will not license to those games." However, if they found new and better ways to promote music and new ways to make profit, this would not be a problem.^[45] A Wired magazine article claimed that Rock Band publisher MTV Games has boycotted WMG as a result, but both parties have claimed this to be untrue. WMG has not made any new content deals with MTV Games since August 2008.^[46] This had led to a backlash against WMG by fans of these games.

Many anti-Warner videos have been popping up on YouTube from users with outrage over videos being blocked by WMG. There has even been provisions by these disgruntled YouTube users to boycott any material owned by Warner Music Group.

On September 21, 2009, CNET reported that Warner Music Group had possibly struck a new deal with YouTube and WMG videos may start appearing back on YouTube within weeks.^[47] It was confirmed on Warner Music Group News and the YouTube Blog on September 29, 2009 that YouTube and Warner Music Group were in a multi-year deal with the two.^[48][49] In January 2010, there have been new reports of YouTube accounts containing covered songs completely closed due to intervention by WMG.^[50][51] This following a contest by Red Hot Chili Peppers bass player Michael "Flea" Balzary to cover their songs. An end solution seems not to have been found as of January 26, 2010.

In February 2010, CEO Edgar Bronfman Jr. said that Warner Music Group will stop licensing its songs to free music streaming services. He said that the focus will be on services that require payment.^[52]

Back catalogue

Of the big four labels, WMG has been the most remiss in attending to back catalogue. Sony has its long-standing Legacy Recordings sub-division, mounting comprehensive remastering campaigns for the work of Leonard Bernstein, Miles Davis, Bob Dylan, The Byrds, and many other catalogue artists. Universal Music Group has its Deluxe Edition series and Hip-O Records imprint, while EMI selected choice items from its classical backlog for its Great Recordings of the Century series, with its subsidiaries Blue Note Records offering the Rudy Van Gelder reissues and Capitol Records remastering The Beatles and The Beach Boys exhaustively. Warner Music Group has intiated such programs sporadically, often as part of comprehensive multi-label overhauls initiated by the artist or artists' estate, such as those for Frank Sinatra, The Grateful Dead, and Neil Young. Many of its significant catalogue artists from the 1960s, 1970s, and 1980s such as Van Morrison, Ry Cooder, Little Feat, Tom Waits, Prince, The Pixies, and others are still represented on the market by poor quality first generation compact discs.

See also

• List of record labels
• List of Warner Music Group artists
• Time Warner Cable and AOL - other former TW subsidiaries recently spun-off

References

External links

• WMG.com – Warner Music Group official site
• WBR.com – Warner Bros. Records official site
• [2] – Warner Music Italy official site
• miWML.com – Warner Music Latina official site
• Reprise Records.com – official site
• Rhino.TV – official site
• Sire Records.com – official site
• Warner Music Group company profile at Yahoo Business
• SEC filings at the U.S. Securities and Exchange Commission

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