It was just a few months ago that Len Blavatnik and Lyor Cohen -- the global billionaire industrialist and the hip-hop-to-A-list record-label executive -- commanded the most noticeable seat in a media fishbowl several months ago. Huddled at Table 1 in the oval-shaped window of Michael’s, media's power-lunch spot.
Did they spend time time chewing the fat over the music industry’s crummy state? That seems likely.
With Blavatnik’s purchase of Cohen's Warner Music Group on Friday, the duo - along with company chairman Edgar Bronfman Jr., just raised their visibility in a business where the disruption of the digital media age is most vividly on display.
Now all eyes are instantly on their anticipated next big act: combining No. 3 Warner Music (Bruno Mars and Cee-Lo Green) with No. 4 EMI Music (Katy Perry and Lady Antebellum).
Also Read: Access Industries to Acquire Warner Music Group for $3.3B
EMI currently is on the sales block, with owner Citigroup hoping to recover billions of dollars of a bad loan it made to the previous owner, Guy Hand’s private equity firm, Terra Firma. A back-to-back deal by Blavatnik would appear to be fated, especially with EMI and Warner each more vulnerable as the industry's smaller giants. It would result in massive cost savings and bolstered profits.
From four music giants the industry would consolidate to three, leaving Warner-EMI to battle No. 1 Universal Music Group and No. 2 Sony-BMG.
One of the more intriguing triumvirates ever to come together on the business scene will try to prevail in an industry under siege. They see themselves positioned to capitalize on any promise on the industry's horizon.
“The music industry is at an inflection point where digital adoption is rapidly gaining momentum,” Jorg Mohaupt, head of media at Blavatnik’s Access Industries, said in the statement. “Warner Music, as one of the most progressive forces in the music business, is well positioned to capture this opportunity for music creation and distribution.”
When or if they pull off an EMI deal, which will likely be their first order of business, it will fulfill what seems to fated. Warner Music and EMI have flirted with marriage for a decade or longer, before and after Time Warner sold the music company to an investor group assembled by Bronfman. Regulat ory and financial barriers thwarted each effort.
And now each is more desperate for a union that will be an economic salvation for both in an industry with sales melting away for more than a decade. As sales of 99-cent digital downloads have soared, the demand for CDs that yield labels $10 wholesale have steadily plunged. All the while, acts and staffs have been on the label chopping block, while iTunes-iPod parent, Apple, emerged as music’s most powerful company.
Various estimates put a cost-savings from a potential Warner-EMI merger at no less than $300 million.
Ironically, Bronfman may have pulled off the last easy money from the recorded music business through his purchase of the Warner Music in 2003.
