Major Warner Reshuffling Actually Makes Sense

It was reported last week that Warner Music Group was restructuring following the departure of their former music chief Lyor Cohen. Usually these types of reorganizations are more about consolidating power into new fiefdoms for the remaining or incoming executives, but this one actually seems to make sense.

According to an article in CMU:

Under the new structure, Warner in the US will have three divisions, frontline recorded music, publishing and catalogue, and label and artist services. The first division will consist of Warner’s record labels, principally Atlantic, Warner Bros and Warner Nashville, and will handle current talent and new releases. The second division will replace the Warner/Chappell publishing company, and also include catalogue marketing and the major’s catalogue label Rhino. The third division will bring together distribution operations and those Warner units working outside records and publishing. 

The second of the new divisions is the most interesting, with the major allying the marketing of its sound recording catalogue with its music publishing operations. 

A couple of things here are interesting. First is that Warner/Chappell is being replaced, which is hard to believe, since it's such a powerhouse brand. OK, brand aside, the fact that they're now combining publishing with catalog is huge, since they're now thinking more in terms of licensing, rather than sales. Licensing can be a much more profitable way to do business, since the overhead is far lower and manufacturing costs are essentially nil because the licensor does it all.

Many have predicted that this would be the business model for the next generation major label. Now it seems that we'll get to see the prototype in action and can evaluate whether those predictions are really valid.

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What Sony/ATV's Direct Negotiation With iTunes Means

In a move that may signal a change in the way business is done in the music industry, music publisher Sony/ATV Music will soon negotiate directly with iTunes, Amazon and every other online music distributor directly. In effect, they're cutting out the traditional performing rights organization middlemen of ASCAP, BMI and SESAC.

Sony/ATV with begin this new policy with The Beatles catalog, which obviously carries considerable leverage; so much so that The Beatles now have their distribution deal directly with iTunes that bypasses their record label EMI (let's see how long that lasts now that EMI is owned by Universal Music).

It should be noted that the direct negotiation is only for online distribution and doesn't apply to broadcast performance or physical product mechanical royalties.

By bypassing the PROs, Sony/ATV sets a precedent that the PROs should be very wary of. One of the things about online music distribution online is that the detail of information is high. You know exactly where every sale is coming from and can easily have that info at your fingertips. The PROs have a stranglehold on the analog world in that they do blanket deals directly with the broadcasters then pay out to publishers and songwriters by their own complex formulas, since the royalty data is a lot more nebulous.

While it seems a bit far-fetched that any publisher would even dream of cutting a PRO out of the picture, you have to believe that at some point the airplay info will become granular enough that they may begin to wonder why they need a PRO in the middle of everything.

Then again, The Beatles are such a unique case that they still warrant special handling. Regardless, keep an eye on this since it may be a harbinger of things to come down the road.

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Help support this blog. Any purchases made through our Amazon links help support this website with no cost to you.

You should follow me on Twitter for daily news and updates on production and the music business.

Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.