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Warner music executive payments - music

 

"In human life, art may arise from just about any activity, and once it does so, it is launched on a long road of exploration, invention, autonomy to the confines of extravagance, interference to the point of frustration, at last discipline, scheming devoted alteration and growth. " Susanne Langer (1895-1985)

Commentary

In these times of major best label mergers, downsizing, the slashing of label rosters, and thousands of background business jobs being lost over the last three years--not to declare the gigantic sea alter and seismic shifts that know-how has wrought--comes one of the most disquieting hearsay we have come across. It advance reveals just how greatly out-of-touch a selection of companies TRULY are when addressing the troubles inside their own background divisions. The Pecuniary Times reported 'Warner Music, paid its top five executives more than $21m in salary and bonuses subsequent last year's $2. 6bn acquisition of the US music group by a classified fairness consortium. ' The condition continues that of the top management, Edgar Bronfman Jr, the Chairman who led last year's buy-out, established a $1M salary and $5. 25M bonus. Lyor Cohen, head of the US recorded music business, customary $1M and $5. 24M in salary and bonus, respectively. Paul Rene Albertini, head of Warner's intercontinental operations, was paid $1. 25M in salary and a $3. 15M bonus. Departure Warner/Chappell CEO, Les Bider, acknowledged a $2. 44M total payment. These payouts add in advance definite bonuses or adjust of be in command of payments. According to papers filed with the U. S. Securities and Altercation Commission, last year's total executive compensation was more than three times advanced than Warner Music's $7M working earnings for the 10 months to September 30th. The management payments consider Warner's hit in bitter costs next last year's sale of the Music Group by Time Warner. The ballet company expects to carry $250M of annualized savings by May this year, achieved essentially all the way through 1,600 job losses.

What is so truly distressing here is that it speaks volumes about the value classification of an owner of a ballet company that would pay its top-five Best ever Executives more than three times the quantity of in commission pay for a ten-month age while dismissing 1,600 employees.

What the condition futile to declare was that in adding to the worker layoffs, Warner Music Group also dropped 93 of the 193 artists signed to Warner Labels in the US, approximately 47% of the dancer list at some stage in this same period. If the economic shape of a business is truly so dire that it calls for these kind of dramatic and critical cuts for the economic well being of the company, how does one defend the kind of staggering bonus payouts to the top five executives in the company? Don't get us wrong, we have no badly behaved with executive compensation when it's tied to essentially pleasing performance, but in this case, one is truly hard hard-pressed to grasp or to be au fait with what is essentially being rewarded. The claim that the Warner Music Group will save $250M of annualized savings essentially all the way through the decimation of 1,600 jobs is not a little that we think ought to be financially rewarded.

On Feb 11th at the Grammy Foundation Entertainment Law Initiative luncheon in Los Angeles, WMG Chairman Edgar Bronfman spoke to the 460 attendees of the luncheon, "We must employ our creative mind - and we must resist the temptation to conduct affair as we continually have - by experimenting with new approaches, new structures and new relationships, so that we can move more cursorily and appropriately answer to the ever-changing marketplace. " He went on to appeal that music attorneys bring a new level of creativeness to the deals they forge. "Your compliance to join with us is crucial to the hit of our industry. "

If only he had "resisted the temptation to conduct affair like we at all times have" and not given so much to so few while so many went without. In business, as in life, you lead all the way through example. Mr. Bronfman, with all due respect, you need to have to have your own house in order ahead of you have the credibility to make a appeal like that to the creative and legal communities.

In an open epistle to Warner Music Chairman Edgar Bronfman, Carlos Anaia, a five-year Warner Music Group worker in London who was goodbye the band wrote, "We appreciate that you took on a huge task to turn about the ailing, beyond apportionment of AOL Time Warner, but informing the by now morale-drained staff (via a third party - The Fiscal Times) that the salary and bonuses that the top five executives took alone equal more than 20 times my total duration compensated earnings (assuming I in progress at 18 and retired at 60), is fairly more than insensitive. If you want to make us feel like maggots, you succeeded. Paul-Rene Albertini gets paid $4 MILLION in total ? Hello!!? The only deals we are all aware of have all LOST money. Walt Disney Records? It's still more than $15 million unrecouped. Milan Records? A French turkey. Need I go on? What deals has this guy done that essentially MADE money?"

Throughout my own career in the music business, and exceptionally in the last ten years, I've at all times been fascinated by the exceptionally top-heavy sum of money paid to CEOs in the Entertainment Business. Being in the music affair for twenty-five years, we've seen Major Label CEO salaries/benefit correspondence go from $200,000. 00 - $500,000. 00 in salary and bonus payments in the mid 1980's to factually ten-times that amount, and more, just eight to nine years later for the same job. During the 1990's, the sum of money and compensation paid to CEOs and other top executives at film studios and major labels continuous to reach new levels of fiscal absurdity, exceptionally in the area of partition parcels (the part of their bond that kicks in if they are fired or "leave the circle for any other reason"). You want to know how absurd it's gotten? It's to the point now where if you especially stop and think about it, there's no real incentive for CEO's to try and be successful anymore, other than ego (which we do not underestimate as an exceptionally athletic and dynamic force in this business). Why? Since today, we live in an era where more often than not, the penalty of closure for a CEO have befit far too financially lucrative! If you don't deem me, look back over the last ten years and think about all of the labels that have had regime changes such as when EMI made Charles Koppelman CEO of its music apportionment only to have the full EMI label close down a few years later with over 135 employees bringing up the rear their jobs (many with just a two week notice) while Koppelman exited with well over $30M along with other contractual compensation. Care about also the rotating door of CEOs appointed by Gerald Levin (then CEO of AOL Time Warner) to run Warner's music allotment in the mid 90's. Concerning 1994 and 1998, Warner hired, promoted and fired Doug Morris, Bob Morgado and Michael Fuchs to run the Music Division. Each outgoing executive cost them among $15M - $25M. Danny Goldberg also clashed with Warner's brass when he was Head of Warner Bros. Report all through this time and exited the label after only few years on the job. Goldberg went on to form Artemis, which he then just exited three weeks ago.

Of course, let's not disregard the very well-documented hiring (and very civic exiting) of Michael Ovitz, who after eighteen months as Leader of The Walt Disney Co. (on a multi-year contract) left with over $96M in compensation and stock options - a affair that became a very community campaign last year when the stock holders took Disney to court over this giant payout to Ovitz). Think about it - this works out to about $533,000 a month, or maybe only $213,000 a month after taxes. Not bad for eighteen months' work, if you can get it.

Finally, who among us could ever disregard the all-time greatest, most stunning classy CEO hirings in the description of Hollywood? How stunning, you ask? So stunning that a three-hundred page book has been printed about it called Hit & Run: How Jon Peters &Peter Guber Took Sony for a Ride in Hollywood. This non-fairy tale involves the powers that be at Sony Corporation, who were committed by then-CEO of Sony Music Walter Yetnikoff that Peters and Guber were the only executives in the world who could run Sony Pictures, although the bother of Warner Bros. having both men under contract. Sony HAD to have them and ONLY THEM! The opening cost was someplace in additional of over $100,000,000. 00; for the reason that in accumulation to the over-the-top executive compensation correspondence that both Peters & Guber received, Warner Bros. was able to get a extensive ownership percentage of Sony's Background Club (Columbia House) as part of the deal to announcement Guber & Peters from their contracts. By the time both Peters and Guber left Sony Movies only a few years later, after a long chain of futile movies and dear studio cost overruns, Sony would write off hundreds of millions of dollars (if not more) in one of the most astoundingly dear hires ever made by an entertainment company.

So what is it that drives if not comparatively bright and rational big business citizens to make these irrational gripping and often insane decisions about executive compensation at entertainment companies? It's a distrust we've been fascinated with for years. In 1982, I asked that cast doubt on to then-CEO of Warner Contacts Steve Ross. I've never beyond his answer; he said, very assuredly, "In corporate leadership, what you're especially being paid for is your capacity to make the right decisions for the bearing and advance of the company. " To a 21 year old kid just ingoing the music business, that seemed to be a very simple, yet logical, come back with that made accurate sense. The rejoinder has doubtless been imbued with a better sense of magnitude over time, chiefly since it came from such a legendary chief of conscientiousness in the entertainment business. Dazzling on that discussion twenty-four years later, I'm saddened by how distorted and truly destructive executive compensation has befall at many of the major labels and the very destructive personal property it has had on the companies. It's distorted for the reason that it stops being about compensation at a a selection of point and becomes a misguided sense of power where, more often than not, there's agreed no end result for any economic losses to the circle as a consequence of the CEO's performance. Today, more often than not, this is a touch contractually allowed by the corporation. It's destructive, I believe, for the reason that as we've seen over and over, in particular in the last four years in other industries, the penalty of these types of compensation parcels DO NOT promote any sense of commitment, attachment or allegiance to a company, its growth, fiscal well-being or even in the most excessive cases (e. g. Worldcom, Enron) its very survival.

So what could probably be the central analyze corporations carry on to do this? It's driven, we believe, by a core yet absolutely misguided fear that no one else is clever of doing the job -- NO ONE!! Consequently, these executives have to be given anything they ask for! Nonentity reflects this mentality more evidently than the often-obscene partition correspondence you see CEOs shipping away when exit or being fired from a company.

A additional manifestation of this mentality in the affair is reflected in the hiring of the same CEOs and executives over and over again anyhow of their track proceedings or past carrying out levels. As we constantly say "the names in this affair never change, just the addresses below them. " This custom of rotating top executives auxiliary creates the very athletic perception that there are very few colonize who can in point of fact do the job. In 25 years of being in this business, we've never said this, yet this acutely held belief is very challenging to change, above all at the chief levels of a company.

A few years ago at a party, I asked a CEO of a major label why this attempt seemed so prevalent at the top executive levels of the music & film industries and the rejoinder was astounding. He said, "What you have to appreciate about the decisions to hire executives at that level, is that very often the boards of the band hiring them are much more comfortable with a big shot who's before now had the arrange and done the job apart from of their past track best ever than a big name they don't know anyway of their ability!" It was a sobering account to say the least from a celebrity who certainly unspoken this course of action and the mentality that goes into these choices. It also provided real insight into why so few companies today have any executives that go up all the way in the ranks. There are a few, such as Jason Flom, Sylvia Rhone and Jordan Katz, but not many.

So, the ask in the hall today needs to be, "How can we inspire a level of devoted dedication and responsibility in our top CEOs to grow the business we've made the cost of fault so financially lucrative?"

In this day and age, when so many of our definitely held beliefs about the way effects are in the music business are persistently being cracked apart and we're frequently being challenged by the cruelly sobering new monetary realities in the post-merger major label world now emerging: (Viacom's $18 billion cut on their radio class valuations; Sony and BMG merging their recorded music operations worldwide; the fracturing of source of power NYC law firm Grubman, Indursky & Schindler, once one of the biggest and most athletic law firms in the music business, who in recent times had one of its name partners, Paul Schindler, go away to a competing law firm as well as laying off numerous attorneys), it's a very athletic assertion of just how out of touch and destructive corporate principles like the monetary compensation correspondence at Warner Music are to even their own pecuniary well being and survival. The tragedy, and I use the classic clarity of tragedy as "a fall from eminence due to an unseen flaw in one's own character," (and labels truly don't get much larger than Warner Bros. , Elektra & Atlantic, historically speaking), is that the leadership at the Warner Music Group in the most profound sense just does not get it! They truly don't see it. They still believe, "this is the way our affair needs to be run. "

This isn't so much a case of "corporate greed," but moderately amazing that has befit much more pernicious, above all in the last ten years, and that's this invasive mentality of "I truly don't care as long as I'm taken care of. " The Enron & WorldCom scandals are certainly classic text book examples of this mentality on a grand scale in every respect!

Ultimately, this just illustrates how Warner Music (and the other labels who subscribe to this mentality in this day & age) still have a real allegiance to maintaining & care a broken, out of order affair in place instead than as what can be done to artistically re-invent it in a new way. Their elucidation is to cut down personnel and cut the total of artists of the roster, while abiding to pay themselves and their top executives as if they had just had the best year of their history. There's completely nobody creative about that! The real tragedy here is not that Warner Music spent $21M on five executive salaries and bonuses, (while leasing 1600 associates go as well as a drop a big percent of the Comedian roster), but that they felt they had to.

As Bob Lefsetz, a important music activity consultant and journalist so aptly said recently, "To be this out of touch is to display you must not be administration this enterprise. " And in a creative conscientiousness like music that has continually thrived on innovation (radio, TV, CDs, the Internet, iPods, satellite & internet radio), and in a time where such hurriedly increasing and emerging technologies are creating dramatic changes in the cultivation at an alarming pace as well as creating incredible opportunities and challenges, what great artists early their career in music would want no matter which to do with a business that cares more about itself and its own survival than it does about the artists and music on the label?

Is it any amazement the Major Labels Bazaar share continues to stagnate? Or that their aptitude to break new artists has reached an all time low? This is just why major labels in their flow state have no coming in this New World Order. If they are to be a part of it, they're going to have to reinvent themselves in a absolutely new way that reflects the world and times we live in today, not some fantasy of the past.

In closing, I'm reminded of a quote that a brilliant man named Breck Costin once said: "Always consider that your fantasies have to die already your dreams can come true. "

Ritch Esra 818-995-7458 ritch@musicregistry. com

Bio: Ritch Esra

Since 1992, Ritch Esra and Stephen Trumbull have been consecutively the Music Affair Registry which includes The A&R Registry, The Publisher Registry, The Music Affair Attorney Registry and The Film and TV Music Guide. "The directories give all vital, perfect and the most up to date in sequence they need to acquaintance the complete A&R, music, publishing, legal and film/TV music communities," says Ritch. "Each almanac tells you how to reach these conscientiousness veterans by conventional mail, E-mail (including web sites), aim dial call and fax. Additionally, we bestow the exact title, boulevard address, the name of their helper and the style of music that each executive deals with. Due to the dangerous description of A&R, the A&R Registry is entirely rationalized and reprinted every eight weeks and often has over 100 changes in a free issue. There's no encyclopedia of this kind everywhere in the world. " Ritch says that among the subscribers are best ballet company executives, music publishers, managers, agents, attorneys, studios and other a choice of music big business professionals.


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