Monday, April 11, 2011

Does Buying A Music Company Make Financial Sense?

Bids are coming in for the Warner Music Group.  The sale includes the publishing arm, which is profitable.  The other half is the record label and we all know record labels do not make a sound financial investment or could they?  It all depends on the price you pay for it.

The NY Times is reporting that bids are around $3 billion.  Richard Greenfield, an analyst at the financial services company BTIG is quoted in the article as saying,  “Warner hasn’t traded to a $3 billion valuation since 2007 and as far as I can tell, the music environment is getting worse and worse, not better. So assuming the price talk is real, why is somebody willing to pay that much?”

That money doesn't make sense.  If the stakes were lower, it would not be that crazy to turn the assets into gold.  I've been trying to get a music project off the ground, which in simple terms would be a music database.  If someone or company was willing to put the Warner assets (and they are extensive and credible) to good public use, I'm sure they would see financial rewards.   People would love access to the archives as well as good new music.  Warner had a reputation for being the artist friendly label.  They cared about their acts. 

Whoever buys this company should not hire the men who've been running the business for too long now.  Hire those who believe in the integrity of the music, who have passion, not just big eyes for a way too big paycheck.  The business has lost it's sparkle and I believe it can regain it.   It all depends on the price paid and the people running it.

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