Monday, January 24, 2011

Major Shakeups at Warner, Universal and Sony

Last week, the Times reported that Warner Music Group was, as expected, pursuing a bid for EMI, reaching out to the troubled label's debt holder Citigroup. But what was surprising was that Warner had also hired Goldman Sachs to seek potential buyers for itself, a strange "double or nothing" strategy. It appears that Warner's investors, who bought the company from the huge Time Warner conglomerate in 2004, are becoming impatient. They either want the label to expand, likely targeting EMI's lucrative publishing arm, or they want to dump the investment.

On Friday, the Times reported that the other two majors, Sony and Universal, are in a dance of their own. Universal hired Larry Jackson, who will join the Interscope Geffen imprints, after Jackson left Sony last October. At the same time, Universal cut 60 lower-level employees, citing the economy.

In other Sony news, Bloomberg reports that the label will begin rolling out the U.S. version of its Music Unlimited service, seen as an iTunes alternative that will allow the majors to gain a greater share of the profits. The move is compared to the successful video distributor Vevo, which runs off advertising, but Music Unlimited will have a subscription model, rather than advertising. “Free doesn’t make any money,” Sony executive Thomas Hesse tells Bloomberg.

He's wrong. The Vevo model works because it relies on attracting eyeballs, rather than wallets, giving viewers the minor inconvenience of sitting through ads for a relatively painless viewing experience. (Vevo is also pretty integrated with YouTube, a huge traffic booster.) But a product like Music Unlimited has to compete with rampant piracy, and charging a subscription is a big hindrance. If the majors instead explored an ad-driven, streaming service, similar to the television networks and Hulu, they would have a much better chance of reaping a profit. But they're pretty stuck in their ways, and no amount of personnel or branding changes is likely to change that.

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