Danny Tse

Warner Music to layoff 20% of its workforce

BBC has an article today about Warner Bros. laying off 20% of its workforce and consolidating the business divisions of Atlantic Group and Elektra labels. Doesn't sound good.

Paul.S

Particularly eyebrow-raising, disappointing, but not entirely surprising is the ouster of Val Azzoli and Sylvia Rhone.

Azzoli was instrumental in bringing Rush to Atlantic after the band left Mercury. It will be interesting to see who releases their next record after this year's tour.

Rhone was the highest-ranking black female exec in the music biz.

I surmise we'll be seeing more news on the Madonna negotiations regarding the disposition of Maverick soon.

And of course this does not bode well for DVD-Audio.

As the stomach turns . . .

-p

Lee Scoggins

At the risk of sounding unsympathetic, I think this was not only anticipated (after all a private equity firm bought WMG) but probably a good thing in the long run.

I'll explain. By managing down the workforce, Warner will be able to employ a better cost structure that is more in line with its cash flow generation. There has been a long history of poor management, too many labels, and runaway costs not only at Warner but most major labels. Now that the download genie has been let out of the bottle, Warner needs to be creative is sustaining revenue and bringing costs in line with that revenue.

In summary, by improving costs Warner has made it more likely to be around for years as a major label.

As for hirez, I am not sure this is bad for DVDA. Warner may decide to support Super Audio or not. While I would personally prefer that the industry would get behind one standard and market the daylights out of it, I doubt that the DVDA mastering at Warner was costing any real money (think percent of expenses) given the lack of title releases.

Who knows...Edgar Bronfman may decide to support the format if they feel that there is a growing niche of hirez fans under-served (maybe) and under-marketed (definitely).

no fears alone at night she's sailing through the crowd
in her ears the phones are tight and the music's playing loud
~skateaway

Paul.S

"No comment."

-p

Lee Scoggins

No reply.

no fears alone at night she's sailing through the crowd
in her ears the phones are tight and the music's playing loud
~skateaway

Michael St. Clair

This could even be a boost for DVD-A. Warner has Intellectual Property in the format and the new owners may decide that the IP had not been leveraged properly.

Then again, maybe not.

News like this doesn't make me feel concerned or optimistic. Only time will tell.

John Kotches

The fact that MLP has been chosen as a mandatory supported codec (along with DD and DTS) for HD-DVD players cannot hurt.

I agree, it is far too early to say what effect (if any) this will have on DVD-Audio. Given that the mixing/mastering is done on a contractual basis I wonder if it will have any effect at all.

Cheers,

Surround Music Enthusiast / Curmudgeon in Training
Opinions are my own, not representative of the publication I write for.

LanceJ

I'm not good at business theory: does this mean Warner is now a private company? As in, no profit-minded shareholders to answer to?

If so, the company could take chances on more new/unproven artists and audio formats that may not make HUGE amounts of money, but despite this make itself more financially stable in the long run.

Or is this all just pie-in-the-sky dreaming?

LJ

Paul.S

Lance, the company is indeed privately-held now (although press reports frequently posit him as being in charge, Bronfman actually answers to Thomas H. Lee's Scott Spurling; the other investment banks who ponied up include Bain Capital and Providence Equity). Yes, no shareholders . . . and their absence has caused many a private company to behave in unaccountable ways.

This was the feel good thrust of many of Bronfman's early press conference comments. I think it remains to be seen if WMG A&R and R&D become more adventurous/less risk-averse just because its a private firm now. Getting rid of the top execs who know both the company and the industry better than Edgar or investment bankers does not augur that happening in my estimation. But one thing Edgar did get a lotta props for was his helming of UMG. I guess we'll see what the future holds but, viscerally, I'm not elated by news such as 1,000 people losing their jobs.

John, even if the (re)mixing/mastering for hi rez is done on a contractual basis, I'm more concerned with issues a little further upstream, namely marketing expenses.

If it doesn't pencil out that a certain hi rez title is going to move enough units to justify the marketing expense (and I think most of us would agree that Warner marketing in particular heretofore has not been stellar--perennially missed street dates, the abandoning of their own DVDAudioPreview.com Website, and arguably missing the hottest time to strike the iron with LOtR score DVD-As being just three examples), then it seems unlikely to me that those one-off deals with engineers to remix/master for hi rez would even be inked.

On a practical, non-financial tip, it's very possible that the people most ardent about DVD-A at WMG just got pinkslipped. This would be akin to what I saw happen firsthand shortly after working for PolyGram Filmed Entertainent, right before its parent PolyGram was acquired by Universal: asking questions of the woman who dealt with form long form music programming getting released on DVD-V (then, as now, I was interested in Rush DVDs), she bluntly told me, "all my contacts at Mercury Records in New York just got fired."

Although I understand that its largely speculative at this point, there's plenty of historical precedent for these kinds of "Corporate Olympics" impeding the kinds of progress consumers are interested in.

-p

Lee Scoggins

The thing that is interesting is that the HD-DVD standards group is actually supporting the minority player group, that of Toshiba-NEC versus the more powerful BluRay group of Sony, Matsushita, etc. I wonder how this is going to play out if the BluRay group holds their ground...



Historically however, private equity groups outperform by a wide margin their pre-LBO performance, since the LBO firms enforce real tough medicine, ie. cost controls. I think this will be a big positive for Warner, even though I feel bad for the people laid off. Perhaps they can take their skills to new music technology companies.



This is a really good point. WMG may decide that the invetsment is not paying off. I doubt that sales are high enough to offset the mastering costs on the near term. If they stand to get significant MLP royalties, they might weather slow sales. Maybe it is a pawn in the HD-DVD wars...

I do think it would be cool if WMG and Sony could get together and decide to market one format. That would deliver real value to consumers (more convenience, lower prices, etc.), retailers (easier selling, quicker adoption).

My fear on hirez is that we could be knocked about by the upcoming HD-DVD or BluRay formats. Maybe that would represent a different way to reintroduce hirez.

Even if that scenario, I could easily see jazz and classical labels surviving for years as a niche market.

One has to wonder how much abuse the consumer is willing to take, and what the long-term negative effects of confusing and poorly marketed formats are on the serious music lover.

no fears alone at night she's sailing through the crowd
in her ears the phones are tight and the music's playing loud
~skateaway

Michael St. Clair

How is BluRay more powerful when it uses the antiquated MPEG-2 codec?