An investor group led by Seagrams heir Edgar Bronfman Jr. is buying
Warner Music for $2.6 billion, a cash deal that propels Bronfman back into the
forefront of the entertainment business and gives Time Warner the cash it needs
to begin growing again.
In an interview, Bronfman said he will play an active, day-to-day role
in running Warner Music. Even though he anticipates cost cutting will be
necessary in the short run, as the music industry struggles with free online
music swapping and piracy, he is optimistic about future prospects.
"We don't believe the music industry is going away forever," Bronfman
said. "The industry has, and always will, find new means of distributing its
content. Whether that takes a short time, or a long time, which is what we are
planning for, we think we know how to run this business."
Bronfman said Roger Ames, the chairman and chief executive officer of
Warner Music, will continue to play a senior leadership role. He also said that
he will be a hands-on investor.
"I expect to be here full time and devoting all my energies to working
with Roger," Bronfman said. "Roger and I have had many good conversations and
are looking forward to working with each other."
For Bronfman, the deal marks a fresh chance for success as a music
mogul. His stewardship of Universal Records ended with the sale of that business
for stock to Vivendi, a French firm which has teetered near bankruptcy under the
weight of too much debt and other problems.
Time Warner CEO Richard Parsons said in an interview that the sale of
Warner Music will give the world's biggest media company enough cash to begin
investing in the growth of Time Warner Cable and other divisions that are
growing, rather than sticking with the music business, which has been
contracting for several years due to free online music swapping and falling CD
sales.
Parsons said Time Warner is about one year ahead of schedule in
reducing its debt to target levels, which was its top priority, and will shift
its focus to growth once the sale closes within 60 days.
"We will be looking to maximize the value of this flexibility for our
shareholders and that probably will entail investment inside and outside the
company, and possibly doing other things," Parsons said. "Cable is one."
The deal, announced this morning, gives Time Warner the right to buy
back 15 percent to 19.9 percent of Warner Music over the next three years, which
Parsons said would give Time Warner the ability to participate in future growth
if there is a turnaround in the music business.
The transaction includes not only Warner Music's stable of more than
800 artists -- including Linkin Park, Sean Paul, Madonna, Metallica, R.E.M. and
Kid Rock -- but also its highly profitable music publishing arm, Warner/Chapell
Music, which owns more than one million copyrights.
"I am very, very happy," Bronfman said.
