hypebot

Axe Yields Sony BMG Profits. Are Cuts The Only Way Forward?

IS CUTTING COSTS ENOUGH?

Sales at SonyBMG dropped almost 4% in the fiscal year that ended March 31st, but before tax profits nearly doubled rising from $135 million to $257 million. The company report also hinted that higher restructuring costs and more job cuts ahead.

The NY Post is making its usual doom and gloom predictions based on a few facts wrapped on a bunch of rumors. What is clear is that Sony BMG and the other three major label groups are desperately trying to find new structures that are both profitable and designed to fit new industry realities. Thus far, however, none of the big four have offered any grand plans beyond cost cutting.

Early next week Hypebot will offer Sony BMG, Universal, EMI and WMG a few suggestions.  Until then: What drastic moves and bold initiatives do you think the four remaining majors need to embrace?

UMG Ramps Up Bravado Merch.

As part of an ongoing effort to diversify beyond recorded music sales, UMG has promoted Tom Bennett to global Chief Executive Officer of Bravado, its global merchandising division. Bennett had been the North American CEO.

Bravado develops and markets licensed merchandise world-wide...

WMG Loss Widens, Cancels Dividends

Warner Music Group representatives had a difficult time sounding optimistic this morning as the reported quarterly earnings:

• A loss of $28 million or $.23 per diluted share increased from a loss of $.19 in the prior year quarter
• "In an effort to increase its financial flexibility" WMG has suspended its previous policy of paying a regular quarterly dividend.
• Digital revenue was $164 million, or 21% of total revenue, up 16% sequentially from $141 million in the first quarter of fiscal 2008 and up 48% from $111 million in the prior-year quarter.
• Total revenue of $800 million marked a decline of nearly 4% on a constant-currency basis

MORE: Silicon Alley Insiders asks if WMG will have trouble servicing its large debt, WMG press release.

WalMart Adds WMG MP3's. Napster Next?

The Warner Music Group family of labels has widened its full catalog mp3 offering to include WalMart.com.  Previously Amazon was the only North American based download provider with the catalog.

Hypebot reported yesterday that WMG was about to broaden its DRM-free program to include other sites. Last month WalMart drop all tracks from WMG, Universal and Sony BMG and took its digital store DRM-free.  EMI and a limited number of indies provided content until this morning when WMG effectively doubled WalMart.com's catalog.

As it does at brick and morter, WalMart is...

WMG Set To Broaden DRM-Free Offering

EXCLUSIVE: As Digital NARM opens in San Francisco today, sources are pointing towards Warner Music Group broadening its DRM-free mp3 offering beyond Amazon. Variable pricing appears to have been a major reason for the hold-up including demands by WMG, Sony BMG and Universal for higher prices for new and hit product.

With WMG dropping demands that most download stores would not agree to, plus mp3's from EMI and the indies, a tipping point should be near that forces Sony BMG (who are rumored to be close to following WMG's lead) and Universal (whose offering is unpredictably selective) to follow.

WMG To Test Variable Pricing

WMG will soon begin experimenting with variable download pricing.  Few details have been shared, but the trial will be powered by Digonex and technology already in use by Nettwerk, Naxos and PassAlong.

Using Digonex’s patented DigitalOnlineExchange, a dynamic commerce engine that suggests changes to prices based upon behavioral principles, consumers can actively help set prices for select digital albums from WMG’s artists as part of the program.  DOE will work with digital retailers to continuously identify the ‘sweet spot’ where prices follow perceived market value and generate the maximum economic return while providing fair prices for consumers.

Universal And Sony BMG Invest In MOG

Universal and Sony BMG have joined The Angels Forum 74 in a $2.8 million investment in music social networking site MOG. The major labels are desperately trying to broaden their failing business model; and part of that strategy has meant investing in Music 2.0 companies including Buzznet and now MOG.

COMMENTARY: There's a lot to like about MOG including a nice player and some deep user generated content.  But I've never been a fan of the part of their interface which requires that you let MOG look at the music you store on your computer.  Will Sony BMG and Universal now be able to see that copy of Bowie Live in Berlin that I grabbed from Pirate Bay? And if so, what will they do about it? 

Big Changes At EMI's Capital & Virgin

Down-sized:

• Virgin VP Promo Dave Reynolds
• Virgin DR of Promo Operations Jordan Rosenblatt
• Virgin Boston Regional Promo James MacDonald
• Capitol Chicago Regional Promo Amy Kaplan
• Capitol Florida Pegional Promo Ric Austin
• Several assistants in LA including Jen Kelly

Promoted:

• Greg Thompson, EVP of Promo. He will oversee a consolidated promo staff that will work all Capital Music Group label releases except Christian

More: FMQB, Billboard

Clive Down, Jive's Weiss Up At SonyBMG

PLUS A COMMENTARY

The legendary Clive Davis has been replaced by Zomba/Jive's Barry Weiss as Chairman and CEO of the BMG Label Group. Davis, who is 74, has been named to the newly minted post of Chief Creative Officer. Charles Goldstuck, Davis' close associate and President and COO of the BMG label group as well as Tim Bowan, Sony BMG's COO have also departed in the shake-up.

Clive Davis's career reaches back to signings from Janis Joplin to Bruce Springsteen through Witney Houston and Alicia Keys.  In his new roll, Davis will continue to work creatively with some of the company's top talent. Weiss came to prominence as part of the team that built the Zomba Jive group from the ground up into a hit making powerhouse that includes Britney Spears, Usher, Justin Timberlake and T-Pain.

MEET THE NEW BOSS. SAME AS THE OLD BOSS.

Commentary: Most early reaction from the music press dubs this a change of the guard; and generationally, they are correct. Weiss is 25 years younger than Davis.

But Clive still has a place a the table. And both men are creations of label machines that manufactured hits by throwing big money and massive resources at select releases. Now money and manpower are in far shorter supply; and the wisdom as well return on investment of expensive campaigns have diminished in an era of short attention spans, fractured media, and falling sales.

Sony BMG may have a younger man at the helm, but this is not the seismic shift that they need.

Nick Gatfield Joins EMI As VP A&R From Universal Island

In a move designed to strengthen its struggling A&R operation, EMI has appointed former President of Universal Island Nick Gatfield as President of A&R EMI Music Labels, North America and UK. All the company’s label heads in those territories will report directly to him.

Gatfield has been known as an agent of change at Universal Island where he organized a  turnaround for the label and oversaw one of the UK's most successful domestic repertoires selling 32 million albums worldwide since 2002 including five million in the US. Artist signings since he became head in 2001 include Amy Winehouse, Keane, Mika, The Fratellis, McFly, Busted, Sugababes, The Feeling, Robyn and Sam Sparro.