As major music labels weighed whether to follow the lead of Universal Music Group — the first to shut down its operations in Russia this week — Warner Music Group faced a more challenging road than its competitors.
The label has taken the biggest gamble on Russia’s potential as an emerging market for the music industry, buying two indie labels since 2013 that expanded its footprint to almost 100 employees in the country.
And the public company’s major shareholder and owner, Access Industries founder Len Blavatnik, is a Ukrainian-born billionaire with long ties to at least two oligarch allies of Russian President Vladimir Putin. Blavatnik, a dual U.S.-UK citizen, has taken pains to distance himself from the Kremlin since he made his fortune buying industrial assets in Russia in the 1990s and 2000s.
Sources say he did not advise Access or Warner executives on whether to pull out of Russia (Deezer, which Access controls, was one of the first streaming services to exit the market) and he has not made any public statements directly denouncing Putin for the invasion of his former homeland. Blavatnik, who rarely gives interviews or makes statements to journalists, did not respond to a request made to Access for his personal comment, but Access did describe its position as a business.
“What is happening in Ukraine is unimaginable,” a spokesman for Access said in a statement sent to Billboard early Thursday (March 10). “We all hope and pray that the conflict ends quickly and that all Ukrainian citizens are once again able to live their lives in peace.”
Hours after sending the statement — and a day after bloody images of a maternity ward in Ukraine bombed by Russian planes shocked the world — both Warner Music and Sony Music Entertainment said they were joining UMG, which has just under 40 employees in Russia, in suspending their label operations in the country and closing their offices there. The labels were among the last Western music companies to pull out, after streaming companies Spotify, YouTube, Deezer and Chinese video app TikTok all said in the past week that they would shutter operations on the ground in the increasingly isolated country.
Warner Music and Sony, which has about 35 employees in Russia, are both effectively placing their employees on paid leave for the time being, according to people familiar with the situation. In a statement, Warner Music said its pullout included suspending investments in and development of projects in Russia, along with promotional and marketing activities and manufacturing of all physical products. “We will continue to fulfill our agreed upon obligations to our people, artists, and songwriters as best we can as the situation unfolds,” the label said.
All three labels are helping with humanitarian efforts involving Ukraine, including by making donations to international aid groups and those based in Poland, which has received the bulk of the more than 1.7 million refugees that have left Ukraine so far.
U.S. and U.K. officials have not targeted Blavatnik for sanctions nor said they would seek to freeze any of his fortune, estimated by Forbes to be $31 billion, in the current conflict with Ukraine or in the previous Russian invasion of Crimea in 2014. On Thursday, the U.K. government announced a new round of sanctions against seven Russian oligarchs, collectively worth £15 billion ($20 million), which included a former business partner of Blavatnik.
The British government said it was freezing the assets of Chelsea soccer club owner Roman Abramovich and his one-time business partner Oleg Deripaska, a leading industrialist with whom Blavatnik, along with Viktor Vekselberg, made his fortune acquiring aluminum and oil assets in Russia.
For both Deripaska and Abramovich, the government is prohibiting transactions on U.K. individuals and businesses, and imposing a travel ban and sanctioning transport.
“There can be no safe havens for those who have supported Putin’s vicious assault on Ukraine,” British Prime Minister Boris Johnson said in announcing the new sanctions.
Deripaska was placed under sanctions by the U.S. Treasury Department in 2018. He is one of the few oligarchs to talk about the war, saying on Twitter on Monday (March 7) that “we need peace as soon as possible, as we have already passed the point of no return.” (Deripaska has taken legal action to challenge the sanctions imposed on him by the U.S. authorities over his alleged links to the Russian government.)
Born in Odessa, Blavatnik and his Jewish family of Refusenik refugees (Soviet citizens who were denied permission to emigrate) left the former Soviet Union and moved to New York when he was 21 years old. He earned a master’s degree in computer science from Columbia University and an MBA from Harvard.
Blavatnik’s childhood friend Vekselberg, who was also born in Ukraine, recruited him do business deals for formerly Soviet-owned assets that were being freed up during the years when Boris Yeltsin was Russia’s president. The two later also worked with Deripaska to purchase aluminum-production assets. Both Deripaska and Vekselberg are reported to be close to Putin, who has been president of Russia, on and off, since 2000.
In 1986, Blavatnik formed Access Industries, a New York-based holding company that he has used as an investment vehicle to amass assets in natural resources and chemicals, media and telecom, biotech and real estate.
Over two decades, Blavatnik pulled more than $14 billion out of Russia’s natural resources industries, the largest financial gain of any individual foreign investor in Russia, the Financial Times reported.
But around 2014, when Putin invaded Crimea in the south of Ukraine, Blavatnik pulled his remaining money out of Russia, removing some leverage the Russian leader might have had over him.
Using his fortune originally made in Russia, Blavatnik’s Access has diversified its holdings into entertainment and music. He was an early investor in Beats Electronics’ streaming platform (codenamed Daisy), which later became Beats Music. In 2016, he created Access Entertainment, which has invested in films, television and theatre.
Blavatnik first became a director at Warner Music in 2004 when Seagram heir Edgar Bronfman Jr. led a private equity buyout of the company from Time Warner Inc. Although he stepped down from the board in 2008, Blavatnik retained a 2% stake in Warner Music.
The Ukrainian billionaire is close to Bronfman Jr. and his father, and he reportedly purchased Bronfman Jr.’s house in Manhattan in 2007 for about $50 million.
In 2011, Blavatnik beat out other bidders when he acquired Warner Music for $3.3 billion in an all-cash deal and took the then-public company private again. It came at a time when the music industry was coping with plummeting record sales and the transition to digital listening dominated by piracy.
Warner Music’s Bets on Russia: Gala Records and Zhara Music
Russia was thought to be an attractive emerging market for music’s rebirth. In 2013, Warner Music acquired Gala Records, the first privately owned record label in Russia and WMG’s first wholly owned local presence in the country.
At the time of the acquisition, Gala was a record label, distributor and publisher, and had interests in the live sector. Gala CEO Alexander Blinov, who founded the company in 1988, was made General Director of Warner Music Russia. (For almost 20 years before, Gala had represented EMI’s international catalog in Russia and countries of the former Soviet Union.)
After going public in 2020 again, WMG expanded its footprint in Russia last March by acquiring Russian indie label Zhara Music, which it immediately rebranded as Atlantic Records Russia.
In 2021, Atlantic Records Russia released albums from HammAli & Navai, new albums by EMIN, Jony, Idris & Leos, LSP, Morgenshtern, Rauf & Faik and Slava Marlow, as well as a special collection dedicated to the launch of Atlantic Records Russia.
ADA Worldwide also expanded into Russia last year with an office in Moscow headed by Alexander Kasparov.
With the acquisitions, Warner Music has at least twice as many employees in Russia as Sony or UMG, which did not respond to requests to clarify their staffing level.
Until Putin’s invasion, Warner Music’s early bet seemed well-timed. In 2020 Spotify launched in Russia, Ukraine and 11 other emerging markets in Europe, bringing the service to 250 new listeners.
That year, Russia, the world’s 16th-largest music market, saw its revenues grow by 30% to $199.2 million. Along with China, the country logged the fastest growth of users of subscription streaming services across the top 10 markets for subscribers, according to IFPI’s “Global Music Report.”
The rapid pullout by labels and streamers, and the ongoing conflict with sanctions and economic fallout, “is a pretty deep wound for the music industry in Russia,” says one source at a major label.
As of Wednesday, Access had 73.6% of WMG’s economic interest, according to Securities Exchange Commission filings. Access and Blavatnik, who along with his younger brother Alex Blavatnik are on the WMG board, control 99.8% of the voting power in the music company.
Blavatnik, meanwhile, has become a major global philanthropist. His Blavatnik Family Foundation says it has given more than $900 million to over 250 charitable organizations around the world, including a $200 million gift to Harvard Medical School, the biggest in its history; a £50 million ($65 million) gift to London’s Tate Modern; and a £75 million ($98 million) donation to Oxford University to set up a school of government.
He has also donated generously to campaigns for Republican and Democratic candidates alike, including $1 million to Donald Trump’s inauguration committee.
While Blavatnik has yet to comment on the conflict himself, some of the institutions he supports are condemning Putin’s invasion. Last week, the Blavatnik School of Government at Oxford called for a “special tribunal to prosecute the crime of aggression committed against Ukraine.”
While he has tried to keep a relatively low profile, Blavatnik has not shied away from occasionally flaunting his great wealth. He famously celebrated his 60th birthday in London in 2017 at his stately English home, which sits on Kensington Palace Gardens, a private road near the Russian and Israeli embassies, dressed up as Victorian British Prime Minister Benjamin Disraeli, while Bruno Mars sang, as the Financial Times described.
Days after the party, Queen Elizabeth II knighted Blavatnik for his philanthropic efforts, seven years after he became a British citizen. He is now the richest man in the U.K.