Warner Music Group

Warner Music Group Corp.

Industry	Music, entertainment
Founded	1958 (1958) (as Warner Bros. Records) 1971 (1971) (as Warner Elektra Atlantic)
Headquarters	New York, New York, United States
Key people	Stephen Cooper (CEO)
Revenue	US$2.87 billion (2013)[1]
Number of employees	3,550 (2012)
Parent	Warner Communications (1972–1990) Time Warner (1990–2004) Independent (2004–2011) Access Industries (2011–present)
Website	www.wmg.com

Warner Music Group (abbreviated as WMG, commonly referred to as Warner Music or WEA International) is an American multinational entertainment and record label conglomerate headquartered in New York City. It is one of the "big three" recording companies and the third largest in the global music industry, next to Universal Music Group (UMG) and Sony Music Entertainment (SME), being the only American music conglomerate worldwide. Formerly owned by Time Warner, the company was publicly traded on the New York Stock Exchange until May 2011, when it announced its privatization and sale to Access Industries, which was completed in July 2011. With a multibillion-dollar annual turnover, WMG employs in excess of 3,500 people and has operations in more than 50 countries throughout the world.^[2]

The company owns and operates some of the largest and most successful record labels in the world, including its flagship labels Warner Bros. Records, Parlophone and Atlantic Records. WMG also owns Warner/Chappell Music, one of the world's largest music publishers.

History

1950s and 1960s

The film company had no record label division at the time and one of its contracted actors, Tab Hunter, scored a hit song for Dot Records, which was a division of rival Paramount Pictures. In order to prevent any repetition of its actors recording for rival companies, and to also capitalize on the music business, Warner Bros. Records was created. In 1963, Warner purchased Reprise Records, which had been founded by Frank Sinatra three years earlier so that he could have more creative control over his recordings. With the Reprise acquisition, Warner gained the services of Mo Ostin, who would be mainly responsible for the success of Warner/Reprise.

The Canadian unit was opened in 1967 as Warner Reprise Canada Ltd, now called Warner Music Canada Co.^[3]

After Warner Bros. was sold to Seven Arts Productions in 1967 (forming Warner Bros.-Seven Arts), it purchased Atlantic Records, founded in 1947 and WMG's oldest label (until WMG completed its acquisition of Parlophone in 2013), as well as its subsidiary Atco Records. This acquisition brought Neil Young into the company fold, initially as a member of Buffalo Springfield. Young would become one of Warner's longest-established artists, recording both as a solo artist and with groups under the Warner-owned Atlantic, Atco, and Reprise labels, as well as making five albums for Geffen Records during that label's period of Warner distribution. The Geffen catalogue, now owned by Universal Music Group, represents Young's only major recordings not under WMG ownership.

In 1969, two years after being purchased by Seven Arts, the Warner Bros.-Seven Arts company was sold to the Kinney National Company. Kinney (later changing its name to Warner Communications) combined the operations of all of its record labels, and Kinney CEO Steve Ross led the group through its most successful period until his death in 1992.

An earlier attempt by Warner Bros. Records to create an in-house distribution arm in 1958 didn't materialize. So in 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. An experimental branch was established in Southern California as a possible prototype for an expanded operation.^[4]

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. In the mid 1960s, Atlantic/Stax had 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, Emerson, Lake & Palmer, Average White Band, Dr John, King Crimson, Bette Midler, Roxy Music, and Foreigner.

Atlantic exerts autonomy

It was soon apparent in 1969 that Atlantic/Atco president Ahmet Ertegün viewed Warner/Reprise president Mike Maitland as a rival. Maitland believed that, as vice-president in charge of the Warner Bros.-Seven Arts music division, he should have final say over all recording operations, and he further angered Ertegün by proposing that most of Atlantic's back-office functions (such as marketing and distribution) be combined with the existing departments at Warner/Reprise. In retrospect Ertegün 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 Ertegün with an effective means of undermining Maitland. When Wexler—now a major shareholder—found out about the contract issue he and Ertegün began pressuring Eliot 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 Company purchased Warner Bros.-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.

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 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^[5] – 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 Maitland's days were numbered and that he, Ertegun, was about to take over the recording division.

Unlike the Warner/Reprise executives, Atlantic's execs the Ertegun brothers (Ahmet and Neshui) and Wexler owned stock in Kinney.^[6]

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.^[7] 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. Ertegun was given the formal title of executive vice-president-Music Group.^[6] Maitland moved to MCA Records later that year and successfully consolidated MCA's labels, which he couldn't do at Warner.

1970s

During the 1970s, the Kinney group built up a commanding position in the music industry. In 1970, Kinney bought Elektra Records and its sister label Nonesuch Records (founded by Jac Holzman in 1950) for $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 purchase of Elektra-Nonesuch brought a 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.^[8] The same year, the group established its first overseas offices in Canada and Australia. By that time the "Seven Arts" moniker was dropped from the Warner Bros. name. Warner Bros. also founded the Casablanca Records subsidiary, headed by Neil Bogart; but several years later Casablanca would become independent of Warner Bros.

Worldwide distribution

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 becoming 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 Record Group International.^[9][10] By late 1972, US anti-trust laws had changed and the company was renamed Warner-Elektra-Atlantic, WEA for short, which was renamed Warner Music in 1991 (the word "group" was added after the formation of AOL Time Warner).

WEA was an early champion of the heavy metal rock music. Several such bands, including the three major pioneers Led Zeppelin, Black Sabbath, and Deep Purple, were all signed to WEA's labels at least in the United States. Among the earliest American metal acts to be signed to WEA were Alice Cooper, Montrose, and Van Halen.

Up to this point the Kinney-owned record companies had relied on licensing deals with overseas record labels to manufacture, distribute and promote its products in other countries; concurrent with the establishment of its new distribution arm, the company now began establishing subsidiaries in the other major markets, beginning with the creation of Warner Bros. Records Australia in 1970,^[11] soon followed by branch offices in the UK, Europe and Japan. In July 1971, the new in-house distribution company was incorporated as Warner-Elektra-Atlantic Distributing Corp. (WEA) and branch offices were established in eight major US cities; Joel Friedman a one-time Billboard writer who had been the head of Warner's advertising/merchandising division in its early years, was appointed to head WEA's US domestic division, and Ahmet Ertegun's brother Nesuhi was appointed to oversee its international operations. Neshui Ertegun, originally a Turkish native like his brother, displayed a global perspective and independence from its U.S. counterpart by successfully promoting international acts in their target markets worldwide. Ertegun headed WEA International until his retirement in 1987. A de facto committee of three senior marketing executives—Dave Glew from Atlantic, Ed Rosenblatt from Warner Bros. and Mel Posner from Elektra—oversaw the integration of each label's marketing and distribution through the new division,^[10] but each label continued to operate totally independently in A&R matters and also applied their own expertise in marketing and advertising.^[12]

On July 1, 1971, following the pattern set by similar joint ventures in Canada and Australia, the Warner labels entered into a partnership with the British arm of CBS Records to press and distribute Warner-Reprise product in the United Kingdom, although this was undertaken as a cooperative venture rather than a formally incorporated business partnership. The Billboard article that reported the new arrangement also noted that, despite their intense competition in the US market, CBS continued to press Warner-Reprise recordings in the USA. However the new UK arrangement was a major blow to Warner's previous British manufacturer Pye Records, for whom Warner-Reprise had been their largest account. With the scheduled addition of the UK rights to the Atlantic catalogue, which would revert to Kinney in early 1972, Billboard predicted that the Warner-CBS partnership would have a 25–30% share of the UK music market.^[13]

In April 1971, thanks mainly to the influence of Ahmet Ertegun, the Kinney 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 British Decca (then separate from the American label) and the acrimonious end to their business relationship with their 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.^[14]

One of Kinney'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 single "Rhiannon" and consolidated with the best selling albums Fleetwood Mac, Rumours and Tusk.

Warner Communications

Due to a financial scandal involving price fixing in its parking operations,^[15] Kinney National spun off its non-entertainment assets in 1972 (as National Kinney Corporation) and changed its name to Warner Communications Inc..

In 1972, the Warner group acquired another rich prize, David Geffen's Asylum Records. The $7 million purchase brought in several 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 rumored 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.^[16]

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.^[17]

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 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.

In 1977, Warner-Elektra-Atlantic formed Pacific Records for their composers and distributed (appropriately) by Atlantic Records. Alan O'Day was the first artist signed to the label, and the first release was "Undercover Angel". The song, which he described as a "nocturnal novelette," was in February 1977. Within a few months it had become #1 in the country, and has sold approximately two million copies. It was also a hit in Australia, reaching #9 on the Australian Singles Chart. "Undercover Angel" also landed O'Day in an exclusive club as one of only a handful of writers/performers to pen a #1 hit for themselves and a #1 for another artist.^[18][19]

New signings in the late 1970s placed WEA 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 punk rock and 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. In 1975, WEA scored a major coup by signing a distribution agreement with Island Records, which only covered the United States and select other countries. For the next 14 years (initially with Warner Bros. until 1982, then with Atlantic afterward), WEA would distribute such artists as Bob Marley, U2, Robert Palmer, Anthrax, and Tom Waits. This relationship ended when Island was sold to PolyGram in 1989.

1980s

A proposed 1983 international merger between PolyGram and WEA was forbidden by both the US Federal Trade Commission and West 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.

WEA signed with MCA Records a distribution agreement of this disco-graphic house outside US in 1983, which lasted until 1990.

WEA formed WEA Manufacturing in 1986.^[20] In 1988 WEA took over the German classical label Teldec and the British Magnet 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. Following the merger, 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^[21] and by 1995 its music division dominated the US music industry with a 22% share of the domestic market.^[22] Acquisitions and corporate changes within the Warner group of labels continued after the Time Warner merger—in 1990 WEA purchased French label Carrere Records, WEA was renamed Warner Music Group in 1991, leading French classical label Erato (1992) and in 1993 WEA bought the Spanish DRO Records, Hungary's Magneoton label, the Swedish Telegram Records, Brazil's Continental Records and Finnish label Fazer Musiiki. Also Miguel Tomas Lucio was signed to the label.

Atlantic launched two new subsidiary labels in the early 1990s: East West Records and Interscope Records. In 1995, East West absorbed Atco Records and was eventually folded into Elektra Records. In 1996, Interscope was purchased by MCA Music Entertainment.

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 Warner, 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 H. 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 furor 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.^[23]

Also in 1992, the Rhino Records label signed a distribution agreement with Atlantic Records and Time Warner bought a 50% stake in the Rhino Records label. The distribution agreement allowed Rhino to begin reissuing recordings from Atlantic's back catalogue.

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 that would bring huge profits into the Warner Group thanks to content assets like Seinfeld and the highly successful The 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 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".^[24]

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.^[22]

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 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.^[22] 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 December 31, 1994. There was more negative publicity the following month, when leading 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 he would not be taking up the position; he initially said that he would remain as President of WBR^[25] but by this time there was already widespread speculation that he would leave, and he did so soon afterwards. The following year he re-joined Ostin and son Michael as joint head of the newly launched DreamWorks label.^[26]

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.^[22]

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".^[22] 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.^[27]

Morgado gave in to the demand that Morris be granted autonomy to run the North American operations and he was forced to upgrade Morris's 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^[28] and Levin also reduced Morgado's power to oversee Warner's mail-order record club division and its international operations.^[22] 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,^[22] 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's authority and damaging Warner's reputation among performers.^[28] 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's 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's 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 gangsta 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 late in the year TW sold its stake in Death Row back to co-owners Jimmy Iovine and Ted Field^[29] 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 Levin, leaving the company with a reported US$60 million "golden parachute",^[30] and Time Warner co-chairmen Robert A. Daly and Terry Semel took over the running of the music division.^[31][32]

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.

Also in 1998, Time Warner bought the remaining 50% of the Rhino Records label they did not own. The Rhino Records retail store in Los Angeles was not included. Rhino then began reissuing the back catalogues of the Warner/Reprise and Elektra/Asylum labels. In 1999 Rhino launched Rhino Handmade, which released limited-edition reissues of lesser-known but still-significant recordings from the WEA labels.

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 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.^[33]

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.^[34] WMG's current logo is the former Warner Communications logo (originally designed by Saul Bass) and is used under license by its former parent, which retains full ownership and control of the Warner trademarks.^[35]

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 manufacturing 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 Music 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.^[36] Then WMG offered to buy EMI and it also rejected the offer. In August 2007, EMI was purchased by Terra Firma Capital Partners.^[37] 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.^[38] 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.^[39] 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.^[40] In 2010, Fast Company magazine detailed the company's transformation efforts in its recorded music division, where it has redefined the relationships it has with artists and diversified its revenue streams through its expansion into growing areas of the music business.^[41]

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.^[42]

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.^[43] 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".^[44]

In 2009, Warner Music took over its South-East Asian and Korean distributions of EMI audio and video products, including newer domestic releases, which was announced in September 2008. The two companies already enjoyed a successful partnership in India, the Middle East and North Africa, where EMI marketed and distributed Warner Music's physical product from 2005.

2010s

Warner formed a partnership with MTV Networks in June 2010 that allowed MTVN to exclusively sell ads on WMG's premium content; in turn, views of WMG videos would be counted as views for MTVN. As a result of the alliance, MTV Networks overtook Vevo as the top online music video-sharing network.^[45]

In May 2011, the company announced its sale to Access Industries for US$3.3 billion in cash.^[46] The price represented $8.25 a share, a 34% premium over the six-month-before average price and a 4% premium over the day-before price but a drop of 70+% since 2007.^[47] Access is a conglomerate controlled by Ukrainian-born billionaire Len Blavatnik. "The deal cap[ped] a three-month sale process in which as many as 10 bidders vied" for the company, according to the Wall Street Journal. Blavatnik was a former board member and still-substantial shareholder of WMG at the time of the purchase announcement. Runners-up in the bidding were Los Angeles-based brothers Tom and Alec Gores.^[48] Another report valued the sale at US$1.3 billion plus the assumption of US$2 billion of debt, for the same total. This report said cash of US$320 million would change hands in the transaction and that, while further job cuts were likely, CEO Bronfman would continue in his post. The investment group, which has owned the company since 2004 was said to have received a profitable return on its investment, and that Blavatnik's current stake in the company was about 2%. Other unsuccessful bidders included Ron Burkle and No. 2 music company Sony Corp., and Sony and Vivendi SA's Universal Music Group, ranked No. 1, were said to be prospective buyers of parts of WMG going forward.^[49] The purchase was completed on July 20, 2011 and the company became private.^[2]

In August 2011, Stephen Cooper became CEO of Warner Music Group replacing Edgar Bronfman Jr., who became Chairman of the company.^[50] Edgar Bronfman stepped down as Chairman of the company on January 31, 2012.^[51]

It was announced on October 31, 2011 that Warner Music Group was once again in talks to acquire EMI's recorded music business, according to The Washington Post. The goal of WMG was to combine with EMI and form a company that would effectively compete with the two other largest music groups: Universal and Sony Music Entertainment. Bloomberg News was reporting that Warner Music had submitted a bid of around $2 billion. However, Universal ended up being the one buying EMI. In 2013, Warner acquired longtime EMI division Parlophone, along with EMI Classics and some regional EMI labels, from UMG for £487 million (around $764.54 million US).^[52] Parlophone succeeded Atlantic Records as WMG's oldest unit upon completion of the sale. CEO Stephen Cooper announced plans to launch a classical label, just as American and Brazilian feds approved of the PLG acquisition.^[53] The European Union approved the sale in May 2013.^[54] After Warner closed on Parlophone, it was announced that the EMI Classics roster was absorbed into Warner Classics and the Virgin Classics roster was absorbed into the revived Erato Records.^[55]

In November 2013, WMG paid Universal an additional €30 million; as part of a deal with IMPALA and the Merlin Network, Warner Music is required to auction off a third of the Parlophone acquisition's value.^[56] By March 2015, over 140 independent labels had placed bids on over 11,000 Warner Music artists.^[57] In April 2016, the first confirmed sale of a Warner Music artist was the back catalogue of English band Radiohead to XL Recordings.^[58] Around the end of May 2016, WMG sold the catalogue of Chrysalis Records to Blue Raincoat Music, where Chrysalis' co-founder Chris Wright is now a chairman.^[59] In September 2016, Warner Music sold the rights to three of its artists (Guster, Airbourne, and The LeeVees) to Nettwerk.^[60] In April 2017, Warner Music agreed to sell the independent distributor Zebralution back to its founders.^[61] On June 1, 2017, WMG divested some more artists, including the catalogues of Hot Chip and Buzzcocks to Domino Records, Tom Waits to Epitaph Records; and Mel & Kim, Be Bop Deluxe, Curved Air, Howard Jones, and Kim Wilde to Cherry Red Records. Cosmos Music Group has also acquired a selection of artists.^[62] On July 6, Because Music acquired the rights to over 50 London Records artists, including J.J. Cale, Bananarama, Happy Mondays, All Saints, and 10 French artists.^[63][64] while Concord Bicycle Music picked up the rights to albums by Jewel and Sérgio Mendes.^[65] Warner Music expects to complete its divestment of artist catalogues by the end of the third quarter of 2017.

On October 29, 2012 Google announced that it had added Warner Music's portfolio to its Google Play Music offerings.^[66]

In June 2013, WMG acquired Russian label Gala Records, best known as the longtime distributor of EMI.^[67]

In July 2013, WMG closed on its acquisition of Parlophone Label Group.^[68] On November 25, 2013, Warner Music announced that it would provide distribution for Disney Music Group in Russia and the CIS.^[69]

In September 2013, WMG closed a deal with Clear Channel Media that will see Warner artists paid for terrestrial radio play for the first time. On the other hand, Clear Channel will get preferential rates for streaming songs through its iHeartRadio service and other online platforms. The agreement giving Warner artists special treatment is likely to put pressure on the other big labels, Sony and Universal, to reach similar deals.^[70]

On November 14, 2013, Warner Music's releases in the Middle East will now be distributed by Universal Music as a result of the integration of EMI's branch in said region.^[71] Sony Music India will assume distribution of WMG in India, Sri Lanka, and rest of SAARC countries except Bangladesh.^[72] In Turkey, Warner Music's releases continue to be distributed by EMI Music Turkey, a Universal Music Group Company.

In December 2013, Warner Music began operating the wholly owned South African subsidiary after acquiring the Gallo's stakes that they did not own.^[73]

In April 2014, WMG announced that it had acquired Chinese record label Gold Typhoon.^[74]

In April 2016, WMG agreed to distribute most of BMG Rights Management's catalogue worldwide through Warner's ADA division, though a few frontline releases will remain distributed by other labels.^[75] In March 2017, Warner Music and BMG extended their distribution deal to add the worldwide rights to roughly 8,000 albums.^[76]

Warner Music UK launched The Firepit in May 2016, a creative content division, innovation centre and recording studio located at their United Kingdom headquarters in London.^[77]

Around the end of May 2016, WMG acquired the Indonesian label PT Indo Semar Sakti.^[78] Also in 2016, WMG sold its 80% ownership share of Word Entertainment (excluding Word Music, the print music division of Word Entertainment) to Mike Curb (who had previously held a 20% stake in Word Entertainment).

In July 2017, Warner Music acquired the concert discovery website Songkick.^[79]

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 L. 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 about 90% of the productions seen up to late 1941.^[80]

List of Warner labels

Controversy

CD price fixing

Between 1995 and 2000 music companies were found to have used illegal marketing agreements such as minimum advertised pricing to artificially inflate prices of compact discs in order to end price wars by discounters such as Best Buy and Target in the early 1990s.^[81] A settlement in 2002 included the music publishers and distributors; Sony Music, WMG, Bertelsmann Music Group, EMI Music, Universal Music. In restitution for price fixing they agreed to pay a $67.4 million fine and distribute $75.7 million in CDs to public and non-profit groups but admitted no wrongdoing.^[82] It is estimated customers were overcharged by nearly $500 million and up to $5 per album.^[81]

YouTube

In December 2008, negotiations between WMG and YouTube broke down.^[83] 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 a number of artists were not signed with the label. 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.^[84] The issue and opinion of WMG worsened when they began removing and muting songs that are covers rather than just recordings, but 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,^[85] and 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.^[86][87] In January 2010, there were new reports of the site's accounts containing covered songs being completely closed due to intervention by WMG,^[88] and it appears that an end solution has not been found as of February 1, 2012.

Music streaming services

In February 2010, CEO Edgar Bronfman Jr. said that WMG will stop licensing its songs to free music streaming services. He said that the focus will be on services that require payment, creating an increase in boycotts of the label.^[89] The label also drew criticism for refusing to put its music on Google's music site Google Music, but relented a year after the public release of Google Music with an announcement on October 29, 2012 that it had added its music portfolio to Google's offerings.^[66]

See also

• List of record labels
• List of Warner Music Group artists

References

Bibliography

• Fred Goodman (1997). The Mansion on the Hill: Dylan, Young, Geffen, Springsteen and the Head-on Collision of Rock and Commerce. Jonathan Cape/Random House. ISBN 978-0679743774. 

External links

Official websites

• Warner Music Group
• Warner Bros. Records
• Warner Music Italy
• Warner Music Latina
• Warner Music China
• Warner Music Korea
• Warner Music Indonesia
• Warner Music Japan

Other resources

• 44437738-ab2a-4c4e-b5f5-65d3e9d735a2 Warner Music Group publishing catalog at MusicBrainz
• Warner Music Group company profile at Yahoo Business
• SEC filings at the U.S. Securities and Exchange Commission
• Warner Nashville A&R team contact list