Why Warner Music and EMI Are Like Night and Day
-- There was a halfway interesting quote in an otherwise throwaway post at online music site Metronome. An unnamed senior executive at an unnamed company reportedly said of Warner, "the company is such a mess, the executives so impossible to manage or reform, this thing ends quickly and painfully." Metronome concludes the Warner acquisition "[will end] like the EMI saga - a lot of pain followed by another sale."
Let's set aside the allegation that Warner executives are unmanageable and inflexible, two adjectives not normally associated with the company's brass. The main thing here is that this claim isn't coming from a source known for its business coverage. Metronome is a web site that usually covers fairly standard music topics -- from both journalists and amateurs, according to its web site -- that happens to get some content syndicated at Business Insider. Aside from the occasional factual error (Time Warner is no longer Warner Music Group's parent company) and oddities (a discussion of the company's debt coverage that doesn't mention it never exceeded its debt coverage ratio), the post is mostly characterized by the kind of populist attitude that's common among music writers. Naturally, much attention is given to allegedly excessive executive compensation. It's as if decades of hearing musicians complain about their record labels has forever soured the music critic's impression of music companies.
But the post does bring up a very good discussion point: the Warner acquisition isn't much like the EMI acquisition. The differences between the two acquisitions are both many and obvious. Unlike former EMI owner Terra Firma, Warner owner Access Industries is not a private equity firm that acquires with the intention of selling in three to five years. Warner does not have EMI's debt load problems, which means there is far less reason to fret over the amount of Warner's interest payments. It helps that Access did not acquire Warner at the height of the credit bubble, as was the case with Terra Firma and EMI. Access did not suffer from the information asymmetry that plagued Terra Firma's acquisition of EMI. Whereas Terra Firma learned much about the company and the music industry after the acquisition, Access Chairman Len Blavatnik actually sat on the Warner board. The list can go on and on, really.
Both EMI and Warner are faced with the same industry challenges and macro trends. They will probably lay off more people as they diversify and transform their businesses (which means hiring some people, too). They are very similar in many ways, but the circumstances under which they were acquired are quite different. ( Metronome)
When Will Internet Radio Get in the Car?
-- Internet radio companies are hoping they'll soon make serious inroads into the automobile, but one analyst says it's currently more hype than reality.
The automobile is a natural target for Internet radio growth. Services can be personalized to deliver quite a different product than broadcast or satellite radio. And the potential market - all radio listening - is huge. For these reasons, Pandora has partnerships with a handful of auto manufacturers while Clear Channel, through its iHeartRadio service, and Slacker is actively working the auto market as well.
So are consumers ready for Internet radio in the car? Satellite Radio Playground quizzed retailers and found little consumer interest, although "some retailers say that the number of interested consumers is slowly starting to rise."
The post went on to say the Consumer Electronics Association expects 6% of the aftermarket car stereos sold this year will include a form of Internet radio, a figure that is expected to rise to 14% by 2015.
That forecast echoes a recent study by Strategy Analytics that found that aftermarket devices had more potential for Internet radio. Strategy Analytics found that just 3% of all new car buyers see Internet radio as a must-have feature and Pandora usage is less than 5% in new cars. The analyst believes aftermarket consumers are more tech-savvy and have greater interest in Internet radio, but overall he sees more industry expectation than consumer demand and says "the hype needs to be toned down." ( Satellite Radio Playground)
Vringo + Ziango!
-- Vringo has announced a $2.5 million investment from venture capital firms Benchmark Capital and DAG Ventures. The two firms acquired convertible notes with a 1.25% annual interest that will mature on January 1, 2012. In addition, the company has announced it has signed a letter of intent to acquire and merge operations with mobile messaging company Ziango. Vringo creates software platforms for mobile social and video applications. It has licensing deals with over 40 major carrier partners and has a library of over 12,000 video ringtones. ( Press release)
Jamie Thomas-Rasset Legal Smackdown
-- For good reading on the Jamie Thomas-Rasset case, head over to Copyfight to read Terry Hart's latest blog post and the discussion that follows in the comments. As a bit of background, a District Court judge recently ruled the jury-decided award violated the due process clause of the Constitution and reduced the jury's award. Thomas-Rasset's guilt was not in question and the trial was held only to determine damages. Congress has established a range for statutory damages, and jurors were instructed to award an amount within that range.
Even though the judge noted the public interest in copyright and the damages of piracy, he reduced the amount of the award because Thomas-Rasset is an individual not seeking commercial gain through piracy and the statutory damages far outweigh the labels' actual damages. Hart explains just how unique a decision it was:
"[T]his decision and last year's decision against Joel Tenenbaum represent the first time <i>in history</i> that a US court has found a substantive due process limit on damages set by statute. Regardless of how much one agrees with the result of the courts' decisions, one should appreciate the need for caution when those courts depart dramatically from historical practice and enter new constitutional territory."
And he concludes:
"The District Court of Minnesota has broken new ground and entered <i>terra incognita</i> in due process jurisprudence with this decision. It's difficult to see how a jury award for a willful violation of a law, within the range of damages that Congress has provided by statute, is so 'obviously unreasonable' to be unconstitutional." ( Copyhype)