Lyor Cohen's imminent departure from Warner Music Group sent a tremor through the music industry on Monday and sparked speculation on the inevitable management shuffle around the industry to replace the colorful hard-nosed executive.
Cohen, recorded music chairman and CEO, will resign effective Sept. 30, according to a company statement.
Lyor Cohen with Skrillex, Atlantic Records chairman/COO Julie Greenwald and Santigold at Warner Music Grammy party last February.
Cohen made his name in the music business as one of the highest profile hip-hop executives helping to grow WMG's share in the increasingly important R&B/Hip Hop market to around 14.5% from just under 10 percent when he joined.
"Lyor Cohen has built something very special here," WMG CEO Stephen Cooper said in a statement. "While we understand his desire to move on to his next challenge, the enduring success of our recorded music division will serve as a great testament to the progress we've made during Lyor's time at WMG. We are grateful for Lyor's contributions, and we wish him the best."
Cooper said, "I'm confident that given the strength of our talented management team in recorded music, we'll be able to drive further success."
But that's one of the key questions that emerge due to Cohen's departure. The key business executive running Warner Bros. Records and Atlantic Records, are, respectively, co-president/CEO Todd Moscowitz and group chairman/COO Julie Greenwald, both disciples of Cohen. If Cohen gets another key position in the music industry as seems likely, will they follow him when their contracts expire as they did when he moved over from Island Def Jam to WMG? And if they do wind up staying, for all their successes on their own, competing executives still regard Cohen as the key rainmaker at WMG.
Lyor Cohen, Atlantic Records chairman/COO Julie Greenwald and Jay-Z.
Even more intriguing is why Cohen is leaving, with the reasons unclear at press-time. While there have been rumors that Cohen was clashing with the new ownership of Len Blavatnik, who bought the company in May 2011, and could be leaving for greener pastures, those rumors previously have been labeled as nonsense by sources within the company. Yet, other sources said at the time that executive compensation was supposedly behind that clash. Cohen signed a five-year contract in 2008 worth at least $5 million a year including bonuses plus millions of stock options before the company was taken private in 2011.
Lyor Cohen with Access Industries founder/chairman Len Blavatnik.
With Cohen being promoted to the head of recorded music operation on a worldwide basis, a new contract that dealt with bonuses and his new position was needed, but the two sides could never agree on terms, according to sources. Some sources within the company said the reason why the contract issues wasn't resolved was simply due to how to structure incentives and bonuses in the absences of publicly traded stock. But other sources suggested that the disagreement centered on whether record industry compensation was out of line with what Access Industries was used to paying its senior management.
Other issues may also be involved with Cohen's resignation. As it is, sources say that while Cohen is a proven leader in building successful record labels and scoring hit records, Blavatnik and Cooper felt he came up short in articulating the financial and technological strategies and issues his team were navigating in the music industry's increasingly digital environment.
In turn, sources say that while Cooper was brought in to instill financial disciplines that Access Industries likes to have in place for its portfolio companies, now that he has accomplished that, he doesn't have the vision or skills to run a major record label which involves juggling relationships with egotistical artists and picking talented A&R executives as well as prudent financial management. Those sources see him as a caretaker until a new executive is brought in to run the company. Still, other sources suggest that Cooper would like to stay at the helm of the company.
LEADING CONTENDERS TO REPLACE COHEN
Against that backdrop, rumors have been circulating that EMI CEO Roger Faxon may be that executive, but there are also rumors that former WMG chairman/CEO Roger Ames may be coming back. Meanwhile, some consider Cameron Strang, who was appointed chairman of Warner/Chappell Music Publishing in January 2011, as a dark horse contender to take over for Cohen. Ironically, some say Cohen was instrumental in recruiting the New West label owner to WMG, but ultimately their relationship became strained, according to sources. While Strang appears to have the A&R chops to be a senior executive, 21 months into his reign at Warner/Chappel, the jury is still out on whether he can command a large company, source say.
While the industry mill is working overtime in trying to figure out why Cohen is leaving and who will replace him, speculation has already begun on where he will show up next. Some suggest that the Universal Music Group would be happy to find a home for him, like maybe Capitol Records. Given his track record, sources within the company dismiss that suggestion, saying there is no room for him.
While Sony Music Entertainment CEO Doug Morris, who previously helmed the Universal Music Group, is said to have felt betrayed when Cohen left UMG to join WMG, others suggest that time has healed that wound, and Morris would hire him if he became available.
But would Cohen be content to be a major label head, instead of the head of a major? Or will he go back to artist management or look for a private equity partner and chase Parlophone and the other catalogs coming up for sale as part of UMG's acquisition of EMI? Only time will tell.