Warner Music Group — home to Madonna, Linkin Park and just a few other top names — is now in a stock price free fall.
The WMG stock dropped below $10 this morning to $9.79 after chairman of the board Edgar Bronfman Jr. gave grim results in a quarterly report conference call to investors. The price may drop even lower as the afternoon proceeds.
To give some perspective on this, last year at this time, WMG chief Lyor Cohen sold about $18 million of stock to pay for his divorce. If he did it now, the stock would be worth less than half of that.
In the call, Bronfman tried to underplay some of the truly weird stuff that's gone on since he bought the company from Time Warner. He even told the investment bankers on the call that Warner Music pays very little in income tax in the U.S. Most of their taxes, he said, are paid abroad.
Bronfman's rep said on the call: "Substantially all of our income taxes are being paid outside the U.S."
What Bronfman didn't tell the investors is that while fire is burning out of control at Warner Music Group, he's invested in an entertainment company that's having trouble selling concert tickets for $3,000 apiece to well-heeled yuppies.
And there was more alarming news. While Warner's has cut hundreds of jobs and stopped putting promotional money into albums and artists, the company squandered $8 million on another failed attempt to buy EMI Music. EMI was eventually purchased by Terra Firma Holdings, a financial outfit on much steadier ground.
According to this morning’s financial report from WMG, the $8 million was all spent at the corporate level.
At the same time, the company had a net loss in the third quarter of $29 million. This is compared to net loss of $14 million in the same quarter a year ago. Revenue this quarter was $804 million compared to $822 million a year ago.
And all this includes a settlement payment they received from rival Bertelsmann over Napster regarding illegal downloading for $110 million.
The most major of all music companies, which once boasted best-selling artists like Fleetwood Mac, Aretha Franklin, Jimi Hendrix and REM, is now down to boasting about Linkin Park, Michael Buble and the White Stripes. If it weren’t for the music publishing division, and occasional breakout hip-hop artists from Atlantic Records, WMG would be out of business entirely.
One of my favorite notations in the quarterly report: international revenue was “off” 7 percent, they say, “largely due to market conditions.”
Not exactly: WMG fired Rhino UK chief Nick Stewart during the third quarter, possibly because he ran the operation like a private fiefdom and refused to put any marketing money behind the company’s releases.
The rest of WMG’s problems the company blames on downloading (blah, blah) which they say has eaten into their revenue.
They don’t explain, however, that Universal Music and Sony BMG continue to thrive, release hits and command the charts while Warner develops no new artists, releases very little and spends most of their time laying off remaining staff.
Here’s a low-end business theory: sales will be lower if you don’t put anything out there for sale.
At the same time, WMG finds unique new ways to spend money. Besides the $8 million spent on not buying EMI, Bronfman has found a new business to occupy his time. Sources say he recently made a heavy investment in Bulldog Entertainment Group. This is the firm that produces those $3,000-a-ticket concerts in the Hamptons.
So far, Bronfman has shown up diligently at each of the three shows — Prince, Dave Matthews and Billy Joel. He’s been a ready presence there ‘til the end of each show, too, monitoring everything that goes on from catering to celebrity seating. It’s drastically more attention that he’s given WMG in the three years since he bought the company from Time Warner and turned it into a sad loser.
Democratic presidential candidate Sen. Hillary Clinton, D- N.Y., is on the road to the White House and made a stop in the Hamptons this weekend.
I caught up with her at an East Hampton brunch hosted by longtime Clinton friends and supporters Alan and Susan Patricof. The couple welcomed a few dozen well-heeled donors to a pancake, eggs and bacon buffet complete with Chevy Chase flipping the flapjacks.
While Clinton and her effective husband, Bill, spoke to the crowd, we spotted "Rush Hour 3" director Brett Ratner and hip-hop entrepreneur Russell Simmons hobnobbing with Daily News publisher Mort Zuckerman, who himself was deep in conversation with Paul McCartney's brother-in-law and attorney, John Eastman.
Meanwhile, the crowds gathered around the Clintons after they spoke. Yours truly was corralled into taking a picture of trendspotter Faith Popcorn with Hillary and Popcorn's family.
"Senator, this woman predicts the future, you know," someone said to Hillary Clinton, who quipped: "Yes, I want her to tell me all about it."
Popcorn is famous for seeing trends and fads before they emerge, so her long interest in Hillary Clinton may be indicative of many things.
The Patricofs' event was one of many over the weekend in the Hamptons, where money flows like champagne and everything can be overpriced.
On Friday night, Hillary missed two events because of a Senate vote in Washington, D.C. Guests at the home of Jaci and Morris Reid had to satisfy themselves with just Bill. On Saturday, there was a small lunch for top fundraisers at a posh North Haven estate, followed by the big power stop at Revlon bigwig Ron Perelman's massive spread called The Creeks.
Many of The Creeks guests bowed out early, though, to catch Billy Joel's masterful show a half mile away.
At the brunch, both Clintons looked rested and ready to roll. Hillary, in particular, appeared in high gear. Before she spoke, the former president took a small jab at the current president, son of his new BFF, George Bush Sr.
"The greatest danger is drinking your own Kool-Aid," he said. "As the current residents of the White House know, the worst thing is becoming isolated."
President Clinton then told a story about playing golf at Donald Trump's club in Westchester. His caddy was a retired FDNY captain who was at Ground Zero after the Sept. 11, 2001, attacks.
"Your wife was the first one to help us," the captain told him while they putted around. "She knew what our lives would be like."
Hillary, for her part, proved to be a dynamic speaker as well. She hit her usual high notes on health care and education. She also talked about someone whom she cited as a major Republican donor who got trapped in New Orleans during Hurricane Katrina with his wife and daughter.
"He called everyone he knew in the Bush administration," she said. "But if you recall, it was Labor Day weekend and they were all away."
The punch line was that he found all the people he knew in the senator's office, and they provided him with solace if not powdered beignets.
John Lennon's former girlfriend, May Pang, is publishing a book next March of photos she took of the former Beatle.
"Instamatic Karma" contains 150 pictures, Pang says, which she took of Lennon in 1973 and 1974. Among the shots are John with Paul McCartney and Ringo Starr and of Lennon at work recording his "Walls and Bridges" album.
May has just put up a Web site, too. It has accompanying music, but don't worry, none by Lennon.
One thing that's guaranteed: May's relationship with Lennon will never be acknowledged by Yoko Ono. And that's ironic, since May was Yoko's assistant, and it was Yoko who sent Lennon off with her in 1973.
In case you don't know: Instamatic was the name of the most popular Kodak camera of that era. It was a name as big as iPod is today.
You say it's no more? Hmmm, you're catching on. The iPod will be like the gramophone one day, trust me.