Access-Warner Music Investor Documents Reveal New Roles for Edgar Bronfman Jr., Lyor Cohen
Access-Warner Music Investor Documents Reveal New Roles for Edgar Bronfman Jr., Lyor Cohen

While insiders don't expect many major operational changes stemming from Access Industries' acquisition of the Warner Music Group, the move certainly means less transparency in the music industry and the loss of the only publicly traded, pure-play music company.

Because Access Industries is a privately held company, the details of Warner's financial performance will no longer be public: No more earnings calls during which listeners can meticulously parse the carefully worded statements of executives; no more quarterly and annual reports; no insight into executive compensation. No comments and critique from the equity analysts that follow the company.

Some positive results could come from being privately held. Music executives, artists and onlookers often bemoan the fact that music companies are publicly traded companies. Pursuing quarterly financial goals is anathema to the long-term process of artist development, they say. The lack of transparency and shareholder accountability could be good at this point in the music industry's arc. Publicly traded companies that are taken private can have more freedom to make fundamental, long-term changes.

But being public offers a great deal of transparency into a company. It gives stakeholders, the media and competitors valuable insight into a company's performance and strategy. Whereas statements by executives can be interpreted a hundred different ways, numbers tell a clearer story. An executive can say "All is well," but a series of income statements could paint an entirely different picture.

The number of publicly traded companies in music has dwindled over the years. EMI was acquired by Terra Firma in 2007. Best Buy acquired Napster in 2008. Last year, BMG Rights Management acquired Chrysalis and Dimensional Associates acquired the remaining stake in the Orchard. In addition, RealNetworks stopped disclosing financial details of its Rhapsody music subscription service after last year's spin-off.

Of course, being part of a public company does not mean full transparency. Parent companies of Universal Music Group and Sony Music Entertainment, both publicly traded companies, do not release details financial information on their music divisions. The music companies' general performance - revenue and operating income, generally - are included in financial statements along with the parent companies' other divisions.

Although instances are rare, privately owned companies may release details of their financial information. On occasion, privately-owned EMI released its financials during the Terra Firma years. And just last month, the Orchard gave to Billboard some numbers from its first quarter.

In the meantime, Warner is still a public company - for a few more months. The deal is expected to close in the third calendar quarter, and the company will release its latest earnings next week.