The Bronfman deal for the Warner Music Group we discussed last Friday has gone through:

Time Warner agreed today to sell its Warner Music business to Edgar Bronfman Jr. and a group of investors led by Thomas H. Lee Partners for about $2.6 billion in cash.

The purchase creates one of the world's largest independent music companies, home to recording artists like Madonna, R.E.M. and Fleetwood Mac among many others.

Mr. Bronfman, a onetime songwriter for Celine Dion and others, will become the company's top executive.

Mr. Bronfman, who has lived in the shadow of a horrendous decision to sell his family's Seagram's liquor empire for shares of the French utility-turned-media company Vivendi, is expected to contribute about $250 million to the deal, buying himself a chance to repair his damaged reputation.

Mr. Bronfman, in a statement about the deal today, said "we have great faith'' in the company's "potential for growth as an independent company and in the long-term opportunities of this industry."

But the deal's success hinges in large part on Mr. Bronfman's contrarian conviction that the embattled music industry can tame online piracy and reverse a three-year sales slump. Like Mr. Bronfman's deal with Vivendi, the acquisition of Warner Music is in part another bet on an untested new Internet business, the sale of music online. This time, however, he has assembled a well-heeled cadre of investors that share his vision.

Despite the disastrous results of the deal with Vivendi, a company that nearly collapsed and took his family's fortunes with it, Mr. Bronfman has told friends he thinks he has nothing to prove. [NY Times]

I admire his tenacity and gumption, but unless the new Warner Music is willing to make radical changes to accomodate digital realities, the business is going to continue to shrink.

Others involved in the bid defended the deal, saying that cost cutting alone would increase profits at Warner Music. But some executives of the music unit wonder how much fat remains in its operations. Warner Music has laid off more than 2,000 of its 6,500 employees over the last three years.
page 1 | 2