There you have it. A hard statistic as to how one of the biggest record labels in the world is doing in the digital age of music. The answer: not very well at all. To expand upon the woes of WMG, securities analyst SmarTrend has pointed out that WMG is now $1.9 billion in debt and has the worst debt-earnings ratio in the entire entertainment industry.The fact that one of the big labels is suffering this badly is, in and of itself, a glaring indicator to the fact that the old ways are coming to an end.
If you need another, that same report mentioned that Wall Street analysts are expecting to hear any moment now that Warner Bros. is selling off WMG. And why wouldn’t they? $1.9 billion in debt? Almost a decade of bleeding money? We’re talking about the same company that couldn’t wait to sell World Championship Wrestling for losing a tenth of that total inside of less than two years!
And to add insult to injury, Amazon.com sent out a letter to all of the labels regarding licensing for Amazon’s recent launch of Cloud Drive and Cloud Player. The letter...well, Digital Music News’s headline for the story sums it up as: “Dear Labels, Go F**k Yourself. Love, Amazon.”
The letter, in part, read:
There has been a lot of discussion as to whether Cloud Drive and Cloud Player require licenses from content owners. Here's why they do not:
(1) Cloud Drive is a general online storage service for all digital files, not unlike Google Docs, Microsoft SkyDrive and any number of other internet file backup services. It's your external hard-drive in the cloud. It requires a license from content owners no more than those other internet file back-up services do and no more than makers of external hard drives for PCs do.
(2) Cloud Player is a media management and playback application not unlike Windows Media Player and any number of other media management applications that let customers manage and play their music. It requires a license from content owners no more than those applications do.
Article comments
1 - Da Maya
Contrary to your blog, Warner Bros. does not own Warner Music Group. Neither does Time-Warner. Warner Music Group has been an independent company since around 2005.
Warner Music has been signing more and more artists to "360 deals" where they take a percentage of the artists' touring, merchandising, endorsement and other revenue. This is probably why so many people are interested in bidding for WMG. So basically I disagree with you because the business model has changed on the recording side, and that is far from a "nail in the coffin".
WMG's other business - publishing, is a money printing machine, by the way.
2 - Michael Melchor
Fair enough. Thank you for the info; that will certainly come in to play next week.
3 - Da Maya
Thanks for responding, Michael.
You can find many articles on the web indicating that sources said Warner Music Group received offers to buy it in January. IMHO the reason the company is having an auction to sell itself, may be due to "the Revlon Rule", which you can read up on Wikipedia.
Warner Music is a Delaware corporation, and once it becomes clear to the board of directors that the company is in play, they must hold an auction to sell the company to the highest bidder, based on my interpretation of the rule.
4 - Brian aka Guppusmaximus
It's a shame only because these companies could have taken the bull by the horns, did the necessary research (including education) and offered the consumer what they wanted (Mp3s) until the bandwidth was cheaper for most consumers (which it is now). Then they could have started to offer lossless formats right along side those Mp3s to maintain a diverse option for all of their consumers. Let's not talk about 24 Bit - 96kHz flac files which are not all that much bigger in size.
But, they still haven't learned their lesson because I haven't been seeing them make any strides to offer HD concert downloads by using .mkv and H.264 methods of compression.
Sorry, just a bit of a rant because all these record companies care about is money and now that their hurting, we're supposed to care??
5 - Simon Daniel
If you thought Warner Music Group was owned by Warner Bros. then you're obviously not qualified to write an article about it.