Warner Music Group CEO Stephen Cooper has forecast that the major labels' acquisition drive hasn't finished yet - and that more independent music companies will be swallowed up in the coming months.
Speaking last night, Cooper also indicated that Warner's own spending power wouldn't end at the £487m buyout of Parlophone Label Group last week - but was careful to clarify that the company won't simply swoop for companies in order to boost its market share.
Parlophone Label Group was itself an enforced divestment from Universal Music's £1.2bn buyout of EMI Music last year. When asked if he saw more consolidation now coming to the independent sector, Cooper said:
"I think it’s likely that we’ll see some level of activity entered into. But frankly many of the [independents] are capital-constrained, so I think that it is more probable that the majors will end up acquiring independents here and there, as opposed to consolidation among independents themselves. That’s just [my] point of view."
Parlophone Label Group is comprised of the Parlophone label and Chrysalis and Ensign labels as well as EMI’s recorded music operations in Belgium, Czech Republic, Denmark, France, Norway, Portugal, Spain, Slovakia and Sweden.
Responding to a question over whether WMG could acquire more assets following its PLG buyout, Cooper added: "[Yes], to the extent that like all of our acquisition activities, they have to have the appropriate assets – by that I mean high quality with good longevity. [Assets] have to be able to add the right value and it has to fit within our strategic and tactical plans for the future, whether that be directly in core music space or in complementary spaces around our business.
"We are not in the mind to acquire solely to get bigger and acquire market share if in fact those business don’t have the right aggregation of intellectual property or intellectual capital at the right valuation. We’ll continue to maintain very good financial discipline around all of our activities, including M&A."
If the PLG acquisition is approved by EC regulators this summer, Warner will inherit artists and catalogues including Tinie Tempah, Pink Floyd, Kylie Minogue and Duran Duran.
When asked if the artist reaction to the PLG news had been positive, Cooper said:
"I think that there has been, in general, amongst that artists, managers, independents and others, a generally positive reaction. There’s obviously in the next few months given the regulatory process, there’s always some uncertainty and the two businesses through this process remain separate and as competitors. Obviously, that puts as appropriate restraints on what we can and can’t do. I have not gotten any indication that there’s been anything other than good news about this hopefully-[soon]-to-be-consummated transaction."
Adding that the PLG acquisition "underscores our commitment and the commitment of our owners to make Warner the world’s premier Music company, by actively and thoughtfully investing in artists, catalogues, executive count and state-of-the-art systems", Cooper also made an observation on recent activity in the US that has seen Universal Music Publishing and Sony/ATV/EMI withdraw digital rights from societies ASCAP and BMI.
"EMI was the first to pull out of ASCAP a couple of years ago, then Warner/Chappell followed suit," he explained. "Sony/ATV and EMI have now done that from a BMI perspective. They’re looking at their ability to enter into more direct licensing relationships with the digital services; not to weaken the societies – the publishers are still very much believe in the strength of collecting societies and their ability to license on [our] behalf, but to bring some flexibility from a licensing perspective around digital rights as these services emerge."
Warner Music Group has obtained commitments to finance this transaction through a new term loan facility provided through Credit Suisse, Barclays, UBS, Macquarie and Nomura.
The company announced an $80m loss in its Q4 fiscal results yesterday, but digital revenues continued to rise.