Sources: ‘Very Bad Things’ Ahead at Warner Music Group

Warner Music Group chairman Edgar Bronfman, Jr. appears to be departing on amicable terms; there’s even a seat for him on the Board!

But appearances can be deceiving: insiders are now pointing Digital Music News to a serious case of buyer’s remorse at Access Industries, and potentially lots of chopping and cost-cutting ahead.  “If Bronfman isn’t safe, nobody is,” one source inside the organization relayed.  “I’d expect some very bad things ahead.”

‘Apoplectic’.  The discussion surrounds a not-so-happy Len Blavatnik, the billionaire whose Access is now grappling with a tough purchase.  “He’s apoplectic over this acquisition,” one source noted, while pointing to “lots of blind spots” prior to the WMG acquisition for $3.3 billion in May that became apparent after contracts were signed.  That includes potentially overvalued recordings, ongoing legal threats from legacy artists, and dimmer prospects for digital formats.  “There’s some serious buyer’s remorse happening here, and [Blavatnik] will be trimming the fat just like [former EMI owner] Guy Hands did.”

The old guard.  And, there could be more blood in the posh executive suites, though departures at this level typically involve diplomacy and handsome payouts.  Regardless, a pair of sources noted that Blavatnik is planning to flush the old guard, an expensive clique accustomed to cushy paychecks and perks.  That introduces potential problems for high-fliers like vice chairman Lyor Cohen, though sources were unaware of any specific plans.

Marketshare. But there’s another problem: after losing the race to acquire the EMI Music, Warner Music Group now finds itself the marketshare laggard – by a longshot.  Or, as one source put it, “the new EMI,” which means less favorable negotiating power, smaller payouts from services, and less ability to leverage catalog.

Meanwhile, Universal Music Group is about to assume a near-50 percent chunk of the recording industry, according to recent Nielsen Soundscan stats.  That’s a position that makes it the default leader in most licensing negotiations, and a very powerful rival indeed.

The rank-and-file. Unfortunately, we’re having trouble getting a read on exactly what this means for WMG staffers.  Historically, labels have favored ‘drib-drab’ cuts to avoid attention and media coverage, though Blavatnik seems entirely untethered by tradition.  Let’s see.